The FIA gave Michelin and the 7 teams several options, as outlined in the letter from the FIA to Michelin, that would enable them to race on Sunday at the US Grand Prix Formula One race at the Indianapolis Motor Speedway. Did they race with these options — No, they even made matters worse by lining up on the grid and taking the warm-up lap. Michelin clearly brought faulty, unsafe tires to the race. Instead of asking the 7 teams to drive slower through turn 13 or change tires every 10 laps, Michelin and the 7 teams asked for the race track to be changed. This change would have made the 7 teams running with Michelin tires more competitive and Ferrari and the other two Bridgestone teams potentially less competitive.

Can you imagine going to an Olympic downhill skiing event where two-thirds of the entries brought the wrong equipment and asked that the course be changed from a downhill to a giant slalom so they could be more competitive. Can you image the 24 hours of Daytona changed to the 20 hours of Daytona because two thirds of the teams brought cars whose engines would not last the entire race. 7 teams came to the US Grand Prix with faulty equipment and wanted the rules changed to accommodate Michelin’s mistake. What arrogance!

Now Michelin are blaming the FIA for the aborted race by not changing the track and adding a chicane before turn 13. Again what arrogance! This is about PR and politics — not racing as a sport. I blame the 7 teams for being bullied by their tire manufacturer and Michelin for having the arrogance to believe they have so much control.

You won’t see me buying Michelin tires for my current car or any future cars I may purchase.

Technorati Tag: Formula One

There are many open source business models. Perhaps the most notable are the following three: The services model, the product subscription model and the product dual license model. A recent article, How to make money from open source, published at the Australian web site Builderau, perpetuates the myth that the open source revenue model is only a service revenue model. Although services are fundamental to all open source business models, as they are with most proprietary software models, they are not the only source of revenue.

The Services Model
Many services business have been created around open source projects. Nagios, a well respected open source network and application monitoring application, list approximately 100 companies and several individuals offering support, implementation and other consulting services centered around their open source project. Cnet’s recent article, Open-source services field heats up lists several companies that have adopted this model.

The product subscription model
The product subscription model, simplifies delivery of the software. Companies using this model save customers time and effort by eliminating the need to download software, compile source and figure out how to install it. In this model, the open source project is packaged into a standard installable product that can be downloaded, delivered pre-installed on hardware, such as an appliance, or published on a CD. In addition to the standard packaging a set of support services are also packaged into a single SKU. An annual fee is charged for the combined package — including product and support services — along with guaranteed future deliverables, such as tested patches and updates provided during the subscription period. This is not unlike the 10%-25% annual maintenance fee charged by proprietary software vendors. Commercial Linux distributions such as Red Hat and Novell’s SUSE utilize the subscription model.

The product dual license model
This model only works when the commercial open source company owns all copyrights to their open source project. With this model there are two licenses. One is a free open source license, such as the GPL, offered with the standard product. The other, is a more restrictive fee based license which includes product guarantees, and is often associated with a more feature rich and robust product. MySQL and SugarCRM are examples of commercial open source companies that implement the dual license model.

Common characteristics
There are several common characteristics among viable commercial open source companies that implement either the subscription or the dual license model. The most important is that their open source project is ready for commercial success and has an existing base of users and a growing demand for support and other services.

All offer supplemental services in addition to those packaged with the product as additional revenue streams. These supplemental services offered by commercial open source companies are not unlike the services offered by proprietary software companies and may include:

• Multi-level support services including 8×5 email and forum support through 24×7 service level agreements
• Education and certification training with product discounts and incentives for fully certified or trained customer teams
• Standard professional services including installation and implementation services
• Custom projects.

Other characteristics include: giving back to the community through open source code drops, hiring developers and encouraging them to spend a percentage of their time working on other community based open source projects, and a strong advocacy of open source development and business models.

Technorati Tag: Open Source

Over the past few months there has been an upswing in venture capital funding used to establish commercial open source companies.

What makes an open source project a candidate for a commercial open source company? I see three key aspects.

A well established market
The current group of high profile commercial open source companies are all participating in market segments led by one or more dominant proprietary software vendors. MySQL and PostgreSQL are both participating in the relational database segment, well established by Oracle, IBM and Microsoft. Compiere participates in the ERP segment dominated by Oracle and SAP, while SugarCRM and Compiere both participate in the CRM segment, established by Siebel, Oracle and others. None have needed to create a market for their products.

Proven popularity and reputation
These open source projects initially built their brand, not in the traditional sense with multi-million dollar advertising and marketing budgets, but instead through grass roots customer acceptance models with downloads, use by developers and early adopters, interactive web sites and word of mouth as their main approach. They have established their initial reputation among developers and early adopters with high quality software licensed under the GPL, or a similar open source license. All have strong communities of contributing developers, testers and doc writers.

Need for commercial infrastructure elements
Once an open source project has enough downloads among developers and early adopters, it is poised to, or has “crossed the chasm” and is ready to be adopted by mainstream IT and end user organizations. However, most IT and end user organizations are risk averse and will not adopt open source software for business critical situations unless it is guaranteed by a commercial entity. Betting the business on an AS IS license guarantee is unacceptable, especially for more complex solutions such as relational database or ERP applications. Having the source code available doesn’t really help. Having an entity that will continue to exist, provide support, product releases as well as other services is a critical factor in the adoption of open source solutions among this risk averse segment of the market. Building the necessary infrastructure is expensive – this is where outside investors can fill the gap.

Open source projects with these three attributes are well positioned to transition to one of the emerging commercial open source business models and attract the interest of the venture capital community.

Technorati Tag: Open Source, Software, Venture Capital, Entrepreneurship