looking east

“What you say sounds great, but honestly, how can we make money with FOSS?” This is a question I have been frequently asked since I have come to China. It’s the kind of question which made think a lot about FOSS and it’s business model. It’s a question which seems crucial for China, and since I have been asked so many times, I have been trying to improve my answer by asking other people. However, none of these solutions seemed really satisfying, and whatever I said was met with strong resistance and further questions.

When reading the book Open Sources: Voices from the Open Source Revolution, I found the following answer to the question by Robert Young:

“That question assumes that it is easy, or at least easier, to make money selling proprietary binary-only software.

This is a mistake. Most software ventures, whether based on free or proprietary software, fail. Given that until very recently all software ventures were of the proprietary binary-only kind, it is therefore safe to say that the IP (Intellectual Property) model of software development and marketing is a very difficult way to make a living. […]

No one expects it to be easy to make money in free software. While making money with free software is a challenge, the challenge is not necessarily greater than with proprietary software. In fact you make money in free software exactly the same way you do it in proprietary software: by building a great product, marketing it with skill and imagination, looking after your customers, and thereby building a brand that stands for quality and customer service.” (chapter 9)

The fact that it’s very difficult to make money with proprietary software is probably even more true for China. In a country in which nobody is actually willing to pay for software, the question should not be: “How can we make money with FOSS?”, but rather: “How can we make money with software?”. But let’s first continue looking at the original question. As Robert Young puts it, in some cases using FOSS can even be a competitive advantage:

“Marketing with skill and imagination, particularly in highly competitive markets, requires that you offer solutions to your customers that others cannot or will not match. To that end Open Source is not a liability but a competitive advantage. The Open Source development model produces software that is stable, flexible, and highly customizable. So the vendor of open-source software starts with a quality product. The trick is to devise an effective way to make money delivering the benefits of open-source software to you clients.” (chapter 9)

This is exactly what I tried to say when I tried to answer the question. I told them that FOSS allowed them to start off with a high-quality source base rather than reimplementing everything from scratch, that open source made it easier (and affordable) to build highly customised products, I mentioned that in the West many businesses have been created because of the relative low cost of building software on top of FOSS. However, all these explanations were countered with more questions and strange looks.

Today, I believe that Robert Young does successfully answer the question of how to make money with FOSS. I also think that my answers were not totally wrong, though I simply missed one important fact: That making money with FOSS doesn’t have to be harder than making money with proprietary software. And thanks to Robert Young, I believe that the real question should be “How can we make money with software?”, and more specifically, “How can we make money with software in China?”.