The open source volume myth

Open source businesses don't have to depend on the volumes we've traditionally associated with success.

There's a belief rampant in the industry that open source only works (as a business) in volume. That is, as Simon Phipps has pithily stated of Sun,

What matters to us is to create volume, and when we create volume, we'll create revenue.

This is true, so far as it goes, but it turns out that it doesn't necessarily go as far as we sometimes think.

The thinking goes that open source = cheap and lots of it. I prefer to think of it as higher value at lower cost, and generally more of it. But you don't have to have millions of downloads to churn out millions (or hundreds of millions) of dollars of sales.

Much depends on the application you're selling. Much depends on the kind of customer to which you're selling. All depends on the particular business behind the project: the people, the experience, the ambition.

My company sells to the Global 2000 with a fairly high ASP. MuleSource is much the same. Some of our open-source peers have built excellent businesses with lower ASPs focused on the SMB market. In fact, I'm aware of companies in the same markets, that started at roughly the same time, with very different customer and deal size profiles. Open source clearly is not one revenue model/business model. It supports many.

Even companies that have built open-source businesses on the high volume/low cost model, like JBoss, have not remained the same over time. JBoss, as I've shown elsewhere, didn't have linearly increasing downloads (volume) leading to linearly increasing revenues. Rather, the downloads tapered off but revenues accelerated against them (based on a superior brand, product mix, and company maturity).

In sum, you don't have to have tens of millions of downloads to build a viable, vibrant open-source business. You need an excellent product and clear value to sell to a customer. How you do that will determine your customer demographics and deal profile, not open source by itself.