Over at Socialized Software, they have posted an interesting article arguing that open source developers are better marketers than other developers. They use sites like Twitter and Automattic (Wordpress) as these types of companies. I agree that both of these companies are driven by excellent marketing strategy. However, I have a disenting opinion when it comes to having a profit maximizing business. At the end of the day, it is all good and well to have a site the community enjoys because it does not cost anything. The problem becomes when you want to expand your brand, the company needs some capital in order to execute the expansion. Where do they get this money from? Well the typical strategy is to turn it into a Free / Pro structure and hope people feel obligated to upgrade their account. By doing this however, the company is no longer considered “open source” because they offer a pay product. Usually these transitions come with a little slight of hand and most users still consider them an open source product when in fact they technically are not.

Another issue that arrises from developing open source businesses is the elimintation of the 80 / 20 rule. For those unfamiliar with the 80/20 marketing rule it says that, 80% of your products are bought by 20% of your customers. In order to sell the most product, you need to market to the broadest area of your consumer base. When it comes to open source software, most are developed as replacements to current enterprise software because of the outrageous costs associated with competing products.

Now if any of you have been in the IT department of any medium/large business you may notice that they tend not to run things like Ubuntu Server or Fedora (for the sake of example). They do run Red Hat Linux. Now why would they spend close to $200 for Red Hat when you can get the other options for no cost? It comes down to walking on a tight rope with no net to catch you if you fall. If your running Ubuntu Server on mission critical systems, if it breaks a business wants someone to call and fix it as soon as possible. “Ubuntu Server sells support for business applications, so that isn’t an arguement?” Yes, you are right that many open source applications sell support and that is the main way they make their money. However, this is just one of the arguements businesses have against open source. Another major arguement is if the software has no large profit margin then they have a higher likely hood of disappearing due to market shifts and dropping customer base. No business wants to pick up an open source application then a few years down the road be stuck with a now unsupported legacy application.

I could go on forever arguing against open source software. In all honesty, I love the idea of open source because I like free as much as the next guy. I would prefer to pay a nominal fee (something reasonable for the application, see any indie mac software) to help insure the application will be around when I need it. The open source business model may work for a select few (much as communism works for Cuba), but in the majority it still has the same, if not more, likely hood to fail. If your considering a business, do not rely on the “community” to drive your business model using the open source approach. A more reliable model is to price your software aggressively and undercut the market if possible (see Walmart).