Blog: Richard Hackathorn

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How Can You Make Money Selling Free Software?

I guess that I am traditional because I have believed that software only has value if you pay a lot for it. As a BI professional, you probably have similar feelings.

This morning I had a briefing by JasperSoft as part of the Boulder BI Brain Trust. Paul Doscher, CEO and Nick Halsey, VP Marketing, gave an overview of their company, product line, marketplace and competition – quite a fascinating tour. But throughout, I kept thinking to myself, “How can you make money selling free software?”

Their main product is the JasperSoft Business Intelligence Suite Professional 2.0, which consists of the typical tools for reporting, analysis, ETL plus a server for corporate administration. An unlimited all-you-can-eat subscription is currently $35,000 – which is about 10% of a limited license for major BI suites.

Quite a deal, but here is the mystery… You can download most of this software for free from JasperForge.org which is the open-source community. So, why don’t people do just that? Well, most do, especially if they are just getting started, trying to understand the tools, or evaluating whether it satisfies their company’s requirements.

The beauty is that this lengthy fiddling-around time does not burden JasperSoft, as it would in a traditional sales cycle. In fact, these fiddling-around folks often buy training and documentation. There have been over six thousand companies who have bought something from JasperSoft.

When these folks are finished fiddling around and get serious within their corporate setting, then that price tag looks very good for a supported controlled-released version with a few critical proprietary extensions. As Doscher puts it, “Our customers are ones who value their time more than their money.” In a way, the software cost is more like an insurance policy to avoid or minimize nasty situations in the future.

So at this point, I am starting to get it. But, there was more!

There is a certain power behind a viable open-source community. If I am a smart CIO, I realize that I am not buying into proprietary software from JasperSoft, but I am buying into open-source software from JasperForge. Therefore, I must examine carefully the viability of that community.

The community contributes code that continually extends functionality, tests the various releases of that code, reviews the quality of documentation, and creates localized versions in 35 languages – wow! Then, JasperSoft comes around quarterly and takes the stable versions of the various components, wrapping into their professional version. There have been over 50,000 developers who have registered with JasperSoft so that they can download source code, post comments, contribute code changes, and receive the newsletter.

There is a certain power behind future OEM customers. The open-source code is distributed under a GPL license, meaning that you can freely take anything you want. But if you redistribute it, you must do likewise by licensing all of it under GPL. For traditional software vendors, this is a curse upon their proprietary software, even if only a small portion of the code is GPL licensed.

The trick is that JasperSoft owns all rights to the open-source JasperForge code, which is not necessarily the situation with other open-source code. Therefore, JasperSoft can issue a clean OEM license, for a small fee, to permit redistribution by other vendors. Over time, the JasperSoft code has been embedded in many other BI tools.

By the end of the briefing, I got it! The first level of revenue comes from a diversity customer base for training and documentation. A second level of revenue comes from corporate or governmental customers who want to avoid unexpected hassles from free software. And, the three level of revenue comes from software vendors who will embed JasperSoft into their products.

I will watch closely to determine whether JasperSoft can build a sustainable business in open-source BI as companies in the Linux marketplace have. This could herald a new business model that would impact the entire BI market.

Posted by Richard Hackathorn on Friday, 10 August 2007 | Permalink