Just a reminder, these posts are not legal advice. This site is the personal blog of Mark Radcliffe and the opinions expressed are those of Mark Radcliffe and not those of his clients, DLA Piper or the clients of DLA Piper.

About Me:

Mark Radcliffe

I have been practicing law in Silicon Valley for over thirty years assisting startups and global companies develop and market innovative products and services. I have participated in multiple business cyles in Silicon Valley from hardware to software to internet to cloud. My projects have included developing the dual licensing business model for open source startup, developing the original domain dispute resolution policy for NSI and assisting Sun in open sourcing the Solaris operating system. Recently, I served on the US Japan Innovation and Entrepreneurship Council (one of ten members) to develop a plan to encourage the innovation in Japan and the United States. I have been working with the same attorneys since 1986 although we have merged with other law firms several times. I am now a partner at DLA Piper, a (relatively) new global law firm formed in 2005 from the merger of three law firms. The firm now has 4200 lawyers in 31 countries and 77 cities. My experience in corporate securities (particularly venture capital) and intellectual property enables me to assist companies structure the financing and intellectual property strategy for developing ane exploiting a new product or service. I and my team work with fifty startups at one time as well as Global Fortune 100. I have been fortunate enough to work with companies in software, cloud computing, semiconductor, health care IT and Web 2.0.

Business models in open source continue to evolve. We are seeing a very interesting dialog on this issue, started by Matt Aslett in his post last week  He notes that David Rosenberg’s described the dominant business model for commercial open source products is the “open core” model which he describes as follows:

“Typically we now see an “open core” freely available with “exclusive” or proprietary features only available when you pay. If you are trying to build a commercial business on top of an open source project, this is likely the right answer.”

In the past, this model has been called “dual licensing” and has been the basis for the successful open source businesses built by Zimbra and SugarCRM.  It is not the only business model: as I noted in my post about the confusion on open source and business models, Marten Mickos found over thirteen different business models for open source companies.

Business models for open source companies are continuing to evolve. However the “open core” model poses the very significant challenge of deciding where to draw the line between the functions in the community edition and the “commercial” edition.  This issue was the most interesting to the audience at the presentation to the Silicon Valley Chapter of the Association for Corporate Growth last Thursday by John Roberts on “Open Source and the Future of Software.”  We set up the presentation as a dialog and my question to John about business model brought the most comments from the audience. The discussion reminded me how new “commercial open source” industry is: SugarCRM started in 2004.  We should not be surprised that the model is still evolving.

Matthew also makes the point that many traditional proprietary companies are adding open source elements to their business model.  I have assisted a number of proprietary companies on these issues and I expect this trend to accelerate in 2009.

He has followed up this week with a post this week about the importance of the community in any open source business  I think that the management of communities is one of the core differences between open source companies and proprietary companies.  Communities provide open source companies many of their core advantages and their management is critical to the success of open source companies. Yet as more open source companies adopt the “Open Core” strategy, they need to ensure that their communities remain active and engaged.

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  1. [...] Open Source Business Models: Thoughts on 2009 Mark Radcliffe [...]

    Pingback by 451 CAOS Theory » 451 CAOS Links 2009.01.13 — January 13, 2009 @ 10:39 am

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