Open Source Third Party Product Trends and Models

We have been using open source software for over six years now. We generally classify them into two main categories for our convenience:

1. Core System Products: This includes the key software we need for developing solutions for our clients. Some of these core system products are Linux Operation System, PHP, MySQL, etc.

2. Third Party Products: All products that take care of a technology business need are grouped here. Some examples of these are WordPress for blogs, Magento for eCommerce Shopping Carts, PHPBB for forums, OpenX for serving advertisements, OpenOffice for business communication needs, etc.

In the past two years, we are noticing a trend where these third party products are gaining attention with investors, due to the significant adoption of open source, as a result of which these open source products are beginning to adopt innovative models which are different from what they used to have before.

A few of these models are listed below:

1. Enterprise Edition:
Maintain a open source community edition and at the same time have a enterprise edition which comes for a price. Eg. Zimbra for email and messaging collaboration, Magento for ecommerce shopping carts, KnowledgeTree for Knowledge Management Systems.
This is the most common model as it leverages the term ‘Freemium’ which is commonly used in such situations where some features are free and some are available only for a premium price.

2. Hosted Solutions:
Provide a open source solution as well as a hosted solution. Eg. OpenX for advertisement serving – these folks have a OpenX Marketplace also which enables ads from OpenX market to be showed even in the downloaded community version. WordPress also does the same with a hosted solution option along with their free community download.
This model is seen in products which have a dependency on hosted solutions where there is a huge demand from audience who do not have access to have their own in house hosting.

3. Reliable Support:
Provide a open source solution with an enterprise edition plus a reliable support team that is a part of the team that develops the product. Eg. Talend which is a data warehousing product which competes with the likes of AbInitio, Business Objects etc.
This model is more seen in open source products which are technically as good as the paid software, but have not been adopted by major Fortune 500 clients due to the lack of reliable support in the past.

There must be quite a few more models in this space, but these are the significant ones that are generally adopted by many of the leading open source products that have started attracting VC funding.  Due to the huge market need for such kinds of open source software, there will be much more venture funding that goes into similar products in the near future.

It is not quite sure if these models are good for the open source community, but the funding has definitely given a good amount of visibility and increased the adoption of these products.

It will be very interesting to wait and watch these trends and models in the next year or two.