Comparing Commercial Open Source and Traditional Software company’s business models

The world of open source now has a host of players in different forms. Here is my attempt to classify the two different business models taking a style used earlier by Tim O Riely to describe Web 2.0.

My aim is really to compare Commercial Players. I consider Software Organizations like Apache and Eclipse as NGO’s in the open source world as the aim for these organizations is not to make money, it is really to benefit the industry by having common standards in the industry and leveraging shared development.

Yes it can be argued that IBM makes money from Eclipse via Rational Tools and that member organization benefit from Apache by reducing production costs in producing a commoditized product like a webserver. I still consider these examples as Not for Profit because the monetization on the product is not a guarantee for the company doing the contributions. As an example IBM has been able to monetize on Java more so then the founder of Java -Sun and that Apache Webserver is benefiting an entire industry as compared to a direct player like IBM.

	Traditional Software Companies	Open Source Commercial Companies
Some Names	Microsoft , ILOG , Chordiant	Red Hat and JBoss , mySQL , Sun(Solaris) , Spikesource
Supply Chain	Integrated. One integrated provider that creates the product, tests it , supports it , consults on it	Loosely coupled. Generally different entities creating the software , distributing the software , testing the software. Generally each layer has to have a value add or else will be removed
Marketing	Traditional Top Down Marketing	Bottom up Marketing
Sales Function	Commission based sales agents OR Distributors	No Sales function. Order processing and operations only. refer death of cold calling
People	Designations are important - Product Manager , VP Software development etc	Brand Name Individuals - Linus Torvalds , Rod Johnson
operations	Similarities to Manufacturing (where you do Market Analysis , Product Design , Develop the product and roll out in the market). Products have a low barrier to entry if coming from establised vendors like Microsoft	Similarities to Movie Studio's where the aspect of running the business is a very different function from creating the Intellectual Property. Movies run on Brand name individuals like Tom Cruise and not on studio name
Monetization	at the time of distribution and potentially each Customer / vendor interaction	Monetization : several models (advertising , Conversion , professional Services , several more) but not necessarily for each interation
Product Lifecycle	Market Analysis , Business Case around revenue potential, Product Design , Develop , Test , Marketing , Sales , Maintenance then Next Release	Personal Situation Analysis , (develop , Release , Test) , (develop , release , test ) , Market and Revenue Potential , Bottom Up Marketing