The Trend Of Open Source And Proprietary Software Business Model

The Trend Of Open Source And Proprietary Software Business Model

Open source software has been there for a long time. Its popularity is increasing each and every day and has reached such a level that it’s hard to find a domain which does not have an open source presence. Companies are reluctant to buy proprietary software due to the cost involved. In most cases, open source software seems to be a viable option.

People often fail to realize that open source is not completely free. It has its own business model to generate revenue in order for the provider to remain financially viable. Some open source software providers gain revenue by offering two versions of their software. One of the versions is free but comes with limited functionalities. The other version is fee-based and has many additional features. Once the user gets accustomed with the free version, they can opt for the fee-based version. Open source software also gets revenue by providing service.

Companies providing proprietary software generate revenue by selling products. They gain profit not only by selling the software licenses, but also from providing additional services and support. Although this has been the trend of generating profits from proprietary software, the companies are looking for varying means to maintain market share in a highly-competitive environment.

Proprietary software is constantly losing ground due to intense competition from open source software. Like open source software, proprietary software is now offering a free version of their products to the customers. Companies selling proprietary software, like SQL Server, provide free versions of their software in the form of ‘express editions.’ The express edition does not have any services or support attached to it. It comes with a limit of 2GB of data that can be stored. It can be used by small companies to start with it and is replaced with the proprietary version as they grow. This model is the same as the open source model where free versions are provided while support and services come with a fee. Once the customer gets used to the free version, there is a potential that they will buy the fee-based version which has many additional functionalities.

The current trend shows rising popularity of open source which compels proprietary software to re-think their sales-based revenue model. The use of express edition and earning from support is a sign of this. The proprietary software will have to continuously come up with innovative ideas to maintain its grip on the market.

By Jake Rosenblum

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