Open source business models are booming in the software industry, a
rapid rise that has some experts wondering if it's a bubble that will burst.Venture capital firms are pouring more money into start-ups that adhere to open source practices, such as giving away technology for free. That rush could result in an investment bubble, similar to that seen in the early days of the Web, several industry executives cautioned at the Open Source Business Conference last week.
For an open source business to work well, a start-up needs a number of attributes that a closed-source software company doesn't, executives said.
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In particular, they have to combine their pursuit of profit with active involvement in a vibrant "community" of open source users, some of whom are not paying customers. Not all open source companies are hitting the right balance between commerce and community, analysts and executives said.
"Too many of these companies [now forming] are being funded without a community," said David Skok, a venture capitalist at Matrix Partners. "If a community doesn't form and form fast, then they're going to burn through their venture capital, and they're going to be disasters."
Open source companies typically give away their software with source code to potential customers and either charge for a more functional version or charge for ongoing support services.
Over the past two years, a number of companies have chosen variations on that business model to try to unseat incumbent software providers. The pace of investment in those start-ups has also picked up.
Until the end of September this year, the amount of venture money that went to companies with "open source" in their business description was $144m (£81.8m). That's more than double the total for the whole of last year, according to research from the National Venture Capital Association, PriceWaterhouseCoopers and Thomson Venture Economics.In addition, a conservative estimate is that there have been at least 18 open source companies funded in the first three quarters of 2005, compared with 12 last year, a NVCA representative said. Among this year's top investment recipients were XenSource, which landed $23m, and SugarCRM, which got third-round funding of $18.7m last month.
Demand for open source
That pull toward open source is fuelled in large part by corporate customers, said Kim Polese, chief executive...
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Talkback
These are not right. Let the minds free.
Microsoft is supporting and instigate ZD.Net and other to open minds. Microsoft and others are all against the technology and humanity. They just suck our bloods and so our money.
If open-source code project develop very well(it seems as it) the IT technology will go further.
Microsoft INTEL AMD and the all others are against the technology, they are just thinking about the money. while doing this they exploit the open mind and smart people in are of poor countries such as turkey, indian, china .
Open your mind & Open your source
Recai, try to take it easy right!
Open source is still confusing... Who is supporting? Who is back of it? Tell me about this. Microsoft is still the giant of software and/or op.systems. They do their best. I think you should get all info, and forward your opinions here last...
Yeah! They do their best to suck your money from your beatiful country.
Microsoft is a micro soft.
Nothing is better than open sources. Never will be.
this is childish!!
microsoft is a company that has made huge sucess out of the computing world, such huge profits boil down to one thing the correct organisation and planning ,
Sucess is made at the work desk not at at high street shops or the like but if you have got sucess at the desk you'll have outcome of sucessful profit
microsoft have not thing agains't the use of Opensource software or so I belive..
futhermore on the note of questions being posed about opensource software.
who is in control?
everyone and anyone, instead of companies it is the public that write the programs, it the public who manage the opensource nework.
it the public people like you or me, it the public fix the bugs and write the fixs.
Opensource is movement for free software.
not free in the sense of cost but bing able to modify and expand the programs to your needs.