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what is the open source business

model?It is often confusing to people to learn that an open source company

may give its products away for free or for a minimal cost.

How do open source companies make money?

While it is true that an open source business may not make money

directly from its products, it is untrue that open source companies do

not generate stable and scalable revenue streams.

In actuality, in the 21st century web technology market, it is the open

source company that has the greatest long-term strategic advantage.This is demonstrated by companies such as LINUX, Apache, and

Netscape, a host of web-specific technologies such as Java, Perl, TCL,

and a host of web-specific technology companies such as Sendmail.

The open source business model relies on shifting the commercial value

away from the actual products and generating revenue from the 'Product

Halo,' or ancillary services like systems integration, support, tutorials

and documentation.)

This focus on the product halo is rooted in the firm understanding that in

the real-world, the value of software lies in the value-added services of

the product halo and not in the product or any intellectual property thatthe product represents.

In actuality, the value of software products approaches zero in the fast-

paced, highly-customized, ever-changing world of information

technology.

But it is not simply an acknowledgement of the revenue streams

generated by the product halo that makes open source a compelling

business strategy.

Open source also cuts down on essential research and development

costs while at the same time speeding up delivery of new products.

This paradoxical situation arises from the fact that within an open

source project, the community members themselves provide free

research and development by contributingnewsolutions,features, and

ideas back to the community as a whole. The company that sits at the

center of any successful open source project may reap the rewards of

the work of thousands of highly-skilled developers without paying them

a cent.

A final strength of the open source business model lies in its ability to

market itself.

Because open source products are typically released for free, open

source companies that can produce quality products and generate a

good reputation can almost immediately grab huge shares of any

market based on the complex and far-reaching global referral networks

generated by users.

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In fact, in the web technology space, almost every global standard has

been based upon open source technology.

By using the open source technology model, we can create a superior

product, which immediately has a competitive advantage, and which

generates multiple scalable revenue streams while being freely available

throughout the community.

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