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J2EE Journal: Article

Open Source Business Models Examined

The Role of the Membership Model in the Open Source Movement

At LinuxWorld Expo in San Francisco, it occurred to me that I had overlooked a very important Open Source business model, the Membership Model. Confronted by a keynote speech by Stuart Cohen, the leader of the Open Source Development Lab (OSDL) (www.osdl.org), it became clear that I had jumped into the Advertising and Conversion Models too quickly and had to back up and deal with the membership phenomenon.

As a businessman, the Advertising and Conversion Models are more interesting, but from a raw power standpoint the Membership Model may be more important. So in the spirit of journalistic integrity, I have adjusted the Open Source Business Models graphic to correct this erratum.

Open Source Business Models

  • Donation
  • Membership
  • Advertising
  • Conversion
    - Brand Ownership
    - Media Kit
    - Maintenance
    - Support
    - Add-ons (Dual License)
  • Professional Services
    - Support
    - Integration
Open Source Development Lab
Clearly, the most important, or at least the most respectable, membership organization is the Open Source Development Lab. It boasts three of the top maintainers as employees: Linus Torvalds (he who needs no introduction), Andrew Morton (Kernel 2.6), and Andrew Tridgell (Samba). It can afford 48 full-time staff and contractors. It has offices in downtown Portland, Beijing, Tokyo, and Luxembourg. In venture capitalist parlance, it has a hefty "burn rate" of at least $750,000 per month or $15,000 per head - maybe more considering the celebrity staff.

OSDL describes itself as a "big tent [note the political metaphor for basically a political organization] for vendors and customers, where members are not in competition with each other, but instead there exists 'co-opetition' between players to solve shared problems" - read Microsoft. The idea is that shared costs lead to shared benefits. At the tactical level, OSDL is a lab or resource pool that provides equipment and infrastructure to large-scale Linux technology projects to support enterprise and telecom applications.

OSDL has more levels of membership than the Catholic Church.

OSDL Catholic Church
Individual {Laity
Bronze Priest
Silver Bishop
Gold Cardinal
Platinum Pope

Individuals join for free but have no voting rights. Academics can join for $1,000 per year, but can only vote in subcommittees. Observing members can join one "working group" for $6,000, but can't vote.

Finally, with $12,000 in cash you can join one working group as a Bronze member and you get to vote. The Silver, Gold, and Platinum levels are earmarked for larger companies - defined as those with revenue in excess of $1 billion per year - which is a pretty small group in the software industry, no more than 25 companies. At the Gold level, you get to nominate a member of the Board of Directors. At Platinum, you get to nominate five (5) members of the 12 member board - which begs the question: Do they have any platinum members? Membership fees for the Gold and Platinum levels are not disclosed on the OSDL Web site, so they are clearly out of the reach of us humble folk.

OSDL quantifies its value based on the total annual Linux-related revenues of its member companies. This figure totaled $9 billion in 2004 - one-third of which were clearly IBM and HPQ. ODSL also measures its importance in terms of the 1,890 Linux and 62 kernel engineers employed by OSDL member companies. Members include AMD, Cisco, Fujitsu, Hitachi, HP, IBM, Intel, NEC, Nokia, Novell, and Red Hat as well as 70 small and medium-sized businesses.

As Stuart Cohen stated in his keynote speech, the Open Source movement has beaten back the attack of SCO by the joint effort of its member organizations and now faces a new intellectual property threat, namely the "software patent," from the industry giant (he that shall not be named). In short, OSDL is the chamber of commerce of the Open Source community.

ObjectWeb is truly a Gallic institution with all the peculiarities of that wonderful nation of 200 different cheeses and the Ecole Polytechnique. It's not a transparent American chamber of commerce like OSDL but a model of incisive planning and government funding. ObjectWeb (www.objectweb.org) is basically funded and controlled by INRIA. INRIA translates from the French into National Institute for Research in Computer Science and Control. This institute has six locations throughout France and is dedicated to fundamental and applied research in information and communication science and technology. It is comparable to a national lab in the U.S., though without the emphasis on nuclear weapons development.

Francois Letellier, an engaging man who was nice enough to meet with me at LinuxWorld, is the leader of the organization. The ObjectWeb Consortium was established in 2002 "to build a full set of Open Source middleware technologies for industrial-strength distributed platforms." Its main technical goal is to define and implement a component-based, efficient, and scalable middleware architecture that can be easily configured and adapted to different application domains. Jonas is the most famous Open Source project to come out of ObjectWeb. Jonas is an application server that competes with BEA, WebSphere, and JBoss. Red Hat ships it with its application server and SuSE Linux includes it in the SuSE Linux Enterprise Edition.

To characterize ObjectWeb as a Jonas shop would be unfair though. It hosts more than 100 Open Source projects that range from J2EE architectural design to J containers. It views IBM's recent acquisition of Gluecode, one of the main sponsors of a competing composite application framework called Geronimo (hosted by Apache Software Foundation), as a threat to its basic mission.

More Stories By Paul Sterne

Paul L. Sterne is general manager, Americas, Open-Xchange Inc. (www.open-xchange.com), and managing partner, Sterne & Co. LLC, an M&A boutique specializing in technology deals. His most recent transaction: the acquisition of Protocom Development Ltd. by ActivCard Inc. He is a sponsor of openResource, a wiki about the Open Source industry (http://sterneco.editme.com/home).

More Stories By Nicholas Herring

Nicholas Herring is an associate, Sterne & Co. LLC, and a contributor to the openResource wiki. He has a Bachelors in Business Administration from The George Washington University.

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