[dpark]

Not coincidentally, those are also areas where there's basically no longer any profit to be made. No one makes money selling web servers or compilers for Unix, because it's not possible to compete on price with "free".

The businesses that make money from open source typically do so by selling something else on top. Google doesn't sell open source. They sell services. Red Hat doesn't sell open source. They sell support to large businesses. ISPs sell bandwidth. Etc.

[einhverfr]

Well, here's the approach my business is taking:

1) You can bill up-front for major features development. If someone wants a major feature they can may for it. This reduces the risk of software development because much more of the development is being paid for up front. However the revenue doesn't scale and it's subject to boom/bust problems. This being said it's a great strategy to mitigate financial risk in product development.

2) You can find areas where #1 doesn't work and come up with some sort of customer agreement that does scale. The nice thing is that if that area really doesn't work (updates to payroll for example) for reasons inherent here, then you won't have someone else release something like it fully on an open source model and have to compete with free.

So the way I look at it is that I get some things for free (financing for development), my customers get some things for free(software, upgrades on main packages), and this then creates a market for services I can charge more for because the overall package is less expensive.

ERP is huge business but the thing about it is that going with an open source approach brings benefits to smaller businesses that are currently reserved for huge businesses. A multi-pronged approach to revenue here (consulting, subscriptions, support contracts), allows you to take advantage of network effects between these things, cut risk, and still maintain general scalability of revenues.

If others want to do this with LedgerSMB I would generally advise against competing with core, long-term members of the community. You are more likely to succeed if you carve out a niche for yourself in an area that's not being done or is underdeveloped (MRP would be a good example with LedgerSMB).

[dredmorbius]

Too: proprietary solutions cannot (at a sustainable price point) compete with the quality of free.

As someone noted -- there's a development model which shares the load among many eyes, and produces higher quality work as a result.

There are a few other mechanisms at work, but the upshot is that for utility, and even a fair amount of specialized software, there's no longer a marketplace for the software itself.

[Karunamon]

>Too: proprietary solutions cannot (at a sustainable price point) compete with the quality of free.

That depends entirely on the community behind the free solution, and what class of software it is. For instnance, I'm not aware of a FOS document management system which would compete with, say, Paperport or DevonThink (Windows and Mac systems, very proprietary).

[dredmorbius]

I didn't say in all cases. Specialized, very high-value, and vertical tools particularly.

But generally the trend is that, starting with OS, development and management tools, and commodity software, Free Software is taking the financial value out of software sales.

For your example, OpenKM and LogicalDoc turn up for searches on "document management open source", though I couldn't say how they compete on functionality, scale, ease-of-use, stability, and/or management.

To shift spaces slightly: there's a pretty small market for proprietary Wiki software. Atlassian and Microsoft Sharepoint would be two that I'm aware of, though alternatives, especially MediaWiki, are very widely used (internal to the CIA even).

What's becoming more common is a service model based on free wiki software. Jimmy Wales has a startup based on offering MediaWiki pages, there's a similar offering based on TWiki that I'm aware of. I'm sure there are others. Similarly, blogging engines as-a-service. The software's free, but the service offering drives revenue.

Could be a way into the docs management market as well.

[cabalamat]

> No one makes money selling web servers or compilers for Unix, because it's not possible to compete on price with "free".

That may or may not be the case. However, it certainly doesn't stop high-quality compilers and web servers being written for Unix.

[dpark]

I never said it did.