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Where’s the Dollars? Alternatives for Commercializing Technologies, Element 1: Open Supply Computer software | Morgan Lewis – Tech & Sourcing


May 27, 2023

When the subject of technologies commercialization techniques comes up, the most frequent solutions ordinarily pointed out involve the sale of a technologies or constructing a enterprise about technologies by promoting items or supplying licenses or subscriptions to technologies-primarily based options.

In this series, we will appear at technologies commercialization solutions that are much less frequently discussed. In Element 1, we go over how organizations could be in a position to make use of open supply application (OSS) as a commercialization approach. In a forthcoming Element two, we will concentrate on the alternative to “white label” technologies as a commercialization approach.

WHY OPEN Supply?

We have highlighted challenges associated to OSS in a quantity of weblog posts: we spoke about trends in leveraging OSS, as properly as challenges to contemplate in the context of representations and warranties in M&ampA transactions. Our colleagues also discussed enterprise dangers related with the use of OSS.

In this post, nonetheless, we turn our concentrate to why a enterprise could pick out to pursue an open supply approach and how firms could nevertheless obtain industrial advantage from OSS. The central notion of OSS is to leverage the breadth and depth of the developer neighborhood, which assists in identifying and eliminating bugs and safety challenges, as properly as enhancing application attributes and user practical experience primarily based on user feedback.

This remains the core advantage of OSS-primarily based firms: as demonstrated by a RedHat report on the state of enterprise open supply, 89% of respondents saw enterprise open supply as much more safe or as safe as proprietary application. Nevertheless, open supply organizations have also proved that they can be lucrative firms, and a couple of current initial public offerings in the sector prove as substantially.


Prior to we appear into how OSS owners can make revenue, it is worth mentioning that the industrial accomplishment of OSS is mainly attributable to (i) the scale of interest in the solution from each the developer neighborhood and shoppers in order to make use of the core advantage of open supply as highlighted above and (ii) the credibility and reputation of the OSS owner, as cybersecurity challenges are normally leading priority for shoppers. Now, let’s turn to the solutions.

Open But Not Totally free

When OSS is normally perceived as a no cost application, that is not necessarily the case. The creator could publish the supply code beneath a license that would limit the use and modification rights or impose an revenue-sharing obligation on the licensee if a solution embedding the application is commercialized, which incentivizes possible industrial customers to enter into a separate industrial license with the creator.

This alternative is also referred to as restrictive licensing and has been criticized by the open supply neighborhood as departing from the original intent of OSS. Note that converting to a restrictive license just after a solution was initially marketed without the need of any restrictions could not be properly received by customers (see our coverage of the Dungeons and Dragons case earlier this year).

Totally free vs. Paid Versions

This alternative is from time to time referred to as dual licensing, as the application owner could let no cost use of the application with standard solutions but will charge a charge for the versions that involve more functionality or are intended particularly for enterprise use. This pricing approach is from time to time referred to as “freemium.”

Open Core

A variation of the dual licensing model is identified as the “open core” model. In the open core model, the developer open-sources the majority of the code and enables it to create as an ordinary OSS, but keeps particular attributes and functionality proprietary and obtainable for industrial licensing.

For instance, envision a browser or mobile operating program that comes with a marketplace of add-ons and extensions developed by the owner as properly as independent developers, exactly where some of these add-ons and extensions are obtainable for a charge.


Since not all firms have the important capacity to deploy and run OSS, some vendors could pick out to supply a remote server to run the OSS with added functionality such as backups and upgrades of the OSS.

Nevertheless, offered that remote servers usually are the territory of cloud vendors, there could be competitors amongst OSS developers and cloud vendors supplying OSS as a service without the need of further expense to the client. This competitors has resulted in some OSS providers such as limitations in their licenses to protect against promoting their application as a service without the need of paying royalties.

Help and Consulting

OSS creators could make use of their knowledge and supply shoppers paid help in relation to OSS deployment, configuration, integration, instruction, or troubleshooting. There are distinctive views as to irrespective of whether this is a sustainable operational model lengthy term, as quite a few would claim that OSS ought to strengthen more than time, and shoppers will not be inclined to continue paying just after the initial deployment stage. As a outcome, some providers pick out to use this function with each other with proprietary attributes compatible with OSS or with open core.

In addition to the above, there are much more approaches to raise revenue, such as certification costs, crowdsourcing, branded distribution, or hybrid licensing, e.g., a so-referred to as franchising model exactly where the OSS owner certifies chosen partners to grow to be “authorized” vendors of the OSS and they make use of one particular of the commercialization techniques and spend a charge to the OSS owner.

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