Lately, the open source world has been in the tip of the tongue of every entrepreneur and venture capitalist out there who’s into the web as platform. This is due to the fact that the open source world and culture has grown to a point where its power is undeniable - it already supersedes the closed, proprietary platform software it was designed to improve and substitute.

I’ve also already talked about the fact that opensource has drastically reduced the cost of entry for any web-centered or web-based project and how this is helping innovation by creating a lot of new start-ups with small investment who still get their ideas out. What I haven’t talked, though and what seems to be one of the things people are the most scared about is how openness can actually make them sell.

If you’re in the IT world to make a living, there will come a time when you’ll think business. This may happen now, or may happen in a couple of years, but whenever you realize it is an intrinsic part of your life, you will think money - and you will probably wonder about how using opensource and open culture can actually benefit a business if everything around it means “free”.

Some background

I am a supreme believer in free culture. I’ve always believed information should be produced to be free and remain free whenever and for as long as possible. This is one of the reasons I share my knowledge with you who read my blog, and this is what makes it possible for you to actually read what I have to say.

As a believer in free culture, I’ve always been a believer and an active contributor to opensource - most recently by participating in the summer of code on which I’ll be developing for google and the gnome foundation. In the last year, though, and particularly in the last few months, I’ve been dealing with the business side of things - mainly because I feel I’ve come to an age when its important to start getting my ideas out there and also to make a living for myself. So how is it I see the two worlds of opensource and IT-business intersecting? In order to get the answer, we need to take a look at things from a different perspective.

Lets go abstract: 3 steps to an explanation

(1) Opensource isn’t necessarily about “free” but about “freedoms”. One of these freedoms is to allow for people to read and learn from the source of something (think a piece of software). Usually, one other freedom is to be able to use that same source for the development of something else - what’s been recently called the ability to “remix” an application.

These “freedoms” act as a catalyst for innovation. This is undeniable. It takes software from the closed labs into the mainstream, into the hands of not hundreds but thousands of developers who can actively contribute to something, and make of it something more. It makes software (and culture) evolve.

(2) Opensource creates awareness. By acting as a catalyst for innovation, it also increases awareness over a product - this is mainly because people have free access to trying it, developing on it, making it something more. Even though it’s not always the case, there are times when word of mouth (because its free, because its shareable) and people’s creative spirit alone can make it so opensource software replaces its proprietary counterparts. This creates an audience.

It makes it so people who normally would never use or even hear about a product are suddenly users and often active contributors to that product. This often creates the “cool” factor that decides the life or death of something (example: see Firefox and how it keeps taking share from IE).

(3) Awareness creates a window of oportunity. Even if you’re opening the source for something - or allowing people access into, say, an API in a web-app so they can build on top of your product -, you don’t need to give everything away for free. In fact, many users like to access and build upon free features but don’t mind cashing out for extra possibilities (see 3.a). This fact, allied to the larger audience created by open-ness gives you the window of opportunity to make a business out of something that’s mostly free. This, is why (and how) the Flickr business model works (I’ll go into more detail about this in a future post).

(3.a) Extra capabilities doesn’t always mean you should cripple a free product in order to stuff a paid version with features. It often means charging for as little as the costs of maintenance of the users data. This is something 90% of users agree with, because they understand you are providing them with a better service.

Still following? Lets put it together.

Opening something to contribution gives it activity, awareness and an audience. This creates two main things: a constant feedback/improvement cycle, and a much larger customer base. What scares most people (business people) is that giving things away for free cuts on their profit. This is incorrect.

An open attitude creates users. The share of those users who are willing to pay for better support beats the number of users paying for a base proprietary system. This means sales should actually be better on well marketed, well community supported open initiatives, than they are on closed-community efforts.

Open is the new happy. Happy business-men and happy users.

Discuss:

If you’re interested in this sort of thing, particularly if you’re an entrepreneur or a venture capitalist, I’d like to know your take on these issues. How do you view opening technologies in your business? What conscious efforts do you make to create an active user base of people who care and help your product develop itself? Feel free to add to the comments or email me your story.

I will post more about an other side of openness soon - how opening knowledge (through corporate blogs, knowledge logs and knowledge bases) increases the public interest on a company or brand. Stay put, and take care. I repeat, feel free to leave your comments or send me email about your views open culture, source and knowledge. I’d love to hear from you.