Perspective on Open Source Software Business Models | FTI Consulting

A Perspective on Open Source Software Business Models

How to Develop a Value-Driven Business Model

Telecom, Media & Technology (TMT) | Corporate Finance & Restructuring

September 29, 2016

Globe Horizon

Open source software, where users have access to source code, has grown exponentially in the past decade and is driving a transformational shift in the software industry. With its origins rooted in the hacker community and free software principles, open source has become mainstream — disrupting existing business models for multi-billion dollar technology companies. Today, technology companies with open source business models are proving they can monetize their products and ancillary services, creating value through cheaper and improved technologies. Open source is here to stay and continues to create myriad opportunities for nontraditional players.

Open source changes the way enterprises perceive, purchase, and utilize software. In its early years, enterprises were attracted to open source software (“OSS”) because it was a lower cost alternative to closed source proprietary software. By 2011, however, the price tag was still a key consideration but the primary reason for adopting OSS was to avoid being locked into one software vendor. More recently, quality of software solutions ranked as the primary reason for OSS adoption.

As more enterprises moved to OSS, the entire culture and methodology around software development was disrupted. Traditional business models were threatened, triggering many merger and acquisition (“M&A”) events. Vendors and service providers who survived and flourished did so because they evolved the ways they developed, licensed, supported and monetized software.

Today, open source is foremost a development methodology; not a single product, technology, licensing scheme or business model. It is the strategic foundation on which software is developed, delivered and deployed.

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