A Linux Business Model for VARS, Consultants and Start-ups That Works

Posted by tadelste on Sep 22, 2005 2:11 PM
Lxer; By Tom Adelstein

Many people wonder how to make a living selling Open Source Software. If you feel slightly stuck, here's an explanation that might make sense to you.

Back in the early days of the WEB, I ran across a business strategy that made sense to me. A young businessman had inherited a cheesecake bakery that had been around for several decades. I knew about it because one Christmas morning, I opened the door to get my newspaper and saw a FEDEX package that contained one of those famous cheesecakes.

I remember thinking about the potential innovation of using delivery services to change the paradigm of distribution. Of course, the cheesecake was remarkable. Not too long after that, HSN and QVC became big businesses immediately because they figured out how to sell merchandise over the television and use overnight delivery to get the product to the customer at little extra cost. Coincidentially, HSN bought my company in the late 1980's and sent me back into IT.

With HSN and QVC changing the landscape of retail marketing, I felt that the Internet would provide even a bigger shift in the economy and I became a webmaster and a specialist in e-commerce. That's where I ran into the cheese cake company again.

The cheese cake company had put up a web site and advertised their home delivery service. But upon checking, I discovered that they had not taken a single Internet order during the first year. But, the owner wasn't deterred. He published his family's secret recipe and put it on the web. Shortly afterward, he began taking monthly Internet orders in the $100,000 to $300,000 range. What happened?

This shouldn't be too hard to figure out. Search engines had just started showing up. Webcrawler was one of the first. So, people searched for recipes and found one for cheesecake. Only when they found the famous cheesecake, they realized it would be cheaper to order one from Philadelphia than to make one.

And What Does This Have to Do with Linux?

As I heard Eric Raymond once say, "Publish the recipe and sell the cake!" Naturally, this made total sense to me since I had seen it work. Putting it into practice seemed an interesting challenge.

I found my answer when asked to do contract work with one of the first Internet e-commerce design firms in Los Angeles. They had just won the first Cleo for an advertisement on the Internet and wanted an architect for a project they had at Disney. I spent time with them and learned their formula for what they called "web commerce". They wrote on a white board a simple formula: Content = Community of Interest = Branding = E-Commerce.

According to them, most web sites provided little more than a brochure. Without a community of interest, such web sites would do little if any business over the web. That made such sense.

This Has To Do With Linux

During the fall of 2002, a state senator asked me to explain why I thought Open Source Software could save the state money. So, I went down to visit him in Austin and made my presentation. I used an example of reusing software instead of every agency buying it over and over.

He understood the model immediately. He drafted and filed a bill that spring to compel the state to use Open Source Software as a first option when acquiring products. I received some publicity as a result of the effort.

Afterward, people approached me from a number of states and local governments wanting to know if a common repository existed where they could donate their code. One didn't exist and so I registered Governmentforge.org. Later, that effort wound up going elsewhere, but the business model stayed with me.

With 80,000 municipalities in the US, a repository could exist where each government unit could download and use Open Source versions of their key infrastructure needs. For example, Texas has a workable LAMP application called the Emergency Response Network System (ERNS) that could have come in handy when the hurricane hit Louisiana. If that system was available to every community in the US, imagine how many lives it could save.

When asked by the VP of Research at the University of Southern Mississippi in Hattiesburg about the business model for such an application, he also understood immediately. Give the software to the government units and let VARS and local consultants sell, install and maintain the system. Publish the recipe and sell the cake.

The developers of ERNS gave the software to the Dallas FBI during an outreach program. It went into service in May 2001. That fall, it proved vital in managing the disaster called 9/11. It also helped when the Shuttle crashed over Texas.

You don't have to come up with a new application and give it away. Certainly, JBOSS was able to do that. But, plenty of other commercial quality Open Source applications exist. One example is Request Tracker. Someone could specialize in this product, bundle it and have a competitive product unmatched in the industry.

The idea of taking an Open Source Software application such as Asterisk, Request Tracker, one of many Content Management Systems, etc. and giving it away could help a cash strapped startup get going. This seems so obvious to me, that I can't imagine why people haven't pursued it.

Perhaps, VARS, Consultants and Startups wanted someone to write about it before they jumped into the water. Penguins do the same thing. They all gather around a hole in the ice and wait for the first one to jump. If the penguin that jumped comes back to the surface, then that means an Orca wasn't down there. Then they all jump into the water and catch their fish.

So what are people waiting for?

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