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Old 05-19-2006, 10:03 AM   #1
calande
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Business model for a Linux distro


Hello guys,

I'd like to know how a company, that plans to develop its own open-source Linux distro, can be self-sustainable and be profitable. I did some research on the Red Hat and Novel web sites. They both offer paid support, but I guess this is not enough for a company that needs to pay bills and salaries. Any idea?
Thanks,
 
Old 05-19-2006, 10:44 AM   #2
Vagrant
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They offer consultancy services. Mostly the model is based on selling to big business rather than consumers.
 
Old 05-19-2006, 12:15 PM   #3
calande
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Thanks. I was reading an article that was talking about "maintenance revenue", what do you think they mean by "maintenance" regarding Linux? Do they go on site and fix Linux for you in your office?
 
Old 05-19-2006, 02:31 PM   #4
pixellany
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The business model that I like the best is Canonical/Ubuntu. They have committed to keeping the SW free--even to the point of sending CDs in the mail at no cost.
Canonical offers support for a price. I last saw them in the news with a contract with the province of Andalusia in Spain.

Are they making any money? I have no idea--and I doubt that they will share that with us anytime soon...
 
Old 05-19-2006, 03:35 PM   #5
calande
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Business model is all about making money: http://en.wikipedia.org/wiki/Business_model
That's why to date, for me, Canonical doesn't have any business model, AFAIK.
 
Old 05-19-2006, 03:45 PM   #6
dukeinlondon
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Cool

Quote:
Originally Posted by calande
Thanks. I was reading an article that was talking about "maintenance revenue", what do you think they mean by "maintenance" regarding Linux? Do they go on site and fix Linux for you in your office?
Maintenance revenue exists also in the proprietary world. It's what you pay on enterprise software for the continued delivery of security patches and version upgrades.

Since these software are destined to be used over many years, virtually no large corporate buys them without also purchasing maintenance. SUN,IBM, SAP, Oracle make a large part of their money on maintenance when they sell software licence. Maintenance can be as high as 20% per year of the licence price. Given that some of these licenses on large sites are in million dollars, this is not unsignificant.

Redhat makes money like that. No large corporate IT manager will install Linux for production systems without one of these maintenance contracts. And Redhat doesn't sell maintenance that much cheaper than SUN and HP used to do. Cheaper but still ;-)

Microsoft, Apple and most end user oriented distros offer security patches and bug fixes for free. But Apple and Microsoft sell their OSes. What nobody has cracked yet is how to make money out of a consumer oriented linux that you give away and still maintain for free. I think they have to sell maintenance. Small fee maintenance but still. And sell compatible hardware. That's what Mandriva is trying to do. But even if it works, it's not a done deal : if ONE distro became let's say as big as Apple in market penetration, then you can expect that some hardware vendor will start offering compatibility and thus undermine the distro companies revenue source (now you are starting to understand Apple). And since it's completely opensource, there is always the danger that a competitor forks your code, and starts competing (why MacOSX will never be opensource). So with each release you have to be the best.

It's easier to understand why consumer oriented software makers are NOT interested in going opensource. The solution is non trivial, if existent at all.

Last edited by dukeinlondon; 05-19-2006 at 04:00 PM.
 
Old 05-19-2006, 03:58 PM   #7
calande
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But tell me: Red Hat sells maintenance that releases patches for its customers, and Centos releases the same patches a few hours later for free, is that it?
 
Old 05-19-2006, 04:24 PM   #8
dukeinlondon
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Redhat guarantees to a certain extent they will. not centos. Just imagine you are the guy at BigCorp that convinced his bosses that it was a good idea to save money by hosting the ecommerce application using piggyback OS. Then a security issue is found. Redhat issues the patch and then for some reason piggyback OS, for the first time in years doesn't follow suit. You find yourself on your own. If shit happens, you know you are heading for the cupboard or for the door.
 
Old 05-19-2006, 04:51 PM   #9
pixellany
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Quote:
Originally Posted by calande
Business model is all about making money: http://en.wikipedia.org/wiki/Business_model
That's why to date, for me, Canonical doesn't have any business model, AFAIK.
I don't understand what you are saying. If you look at what has been published by them, their business model is pretty obvious. You can perhaps argue whether they are actually making money, but you are unlikely to get any facts in that area.
A business model is a postulate as to how one hopes to profit from what they are doing. Obviously, many such postulates go nowhere.
 
Old 05-19-2006, 05:08 PM   #10
calande
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Originally Posted by pixellany
If you look at what has been published by them, their business model is pretty obvious.
Could you point me there please? I thought they yet had to decide how they would build their business plan until recently...
 
Old 05-20-2006, 05:21 AM   #11
pixellany
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Quote:
Originally Posted by calande
Could you point me there please? I thought they yet had to decide how they would build their business plan until recently...
I am not sure we are talking about the same thing here. The MODEL is that a company can make money selling support services. A company is not going to share their total business PLAN, but we can certainly infer it from what we read.

Here is one link:
http://www.ubuntu.com/support/suppor...ns/paidsupport

And for the Canonical mission statement:
http://www.canonical.com/Welcome

clearly, their business plan includes offering support for a price.
 
  


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