4. 1  Characterising business models with free software

When we talk about business models based on free software, we are often referring to the new and ingenious ways of earning income that are being implemented, since the traditional model, the selling of a proprietary product, is no longer so clear cut. Companies, in contrast to individuals, need to consider an important factor when they take part in a free software project: how to obtain the economic return that will justify their investment.

In previous modules, we saw how the idea that the income generated by software is directly related to its sale is not an accurate picture of the reality. Most software is developed internally and the sale of software is only the main source of income for a handful of companies. In most cases, it is necessary to offer complementary services to ensure the continuity of income and the survival of the business in harsh times.

Moreover, in the article by Perens that we looked at in the second module ("The Emerging Economic Paradigm of Open Source"), we saw that free software offers much better economic prospects (cost and risk) than the proprietary alternatives for companies that need to develop non-differentiating software.

Recommended website

For more information on Perens:

http://www.uic.edu/htbin/cgiwrap/bin/ojs/index.php/fm/article/view/1470/1385

In all events, this module will show how different companies manage the intellectual property of their products, also generating mixed models in an attempt to reconcile the advantages of free models with the generation of direct financial returns based on intellectual property. In this case, the choice of licence will largely determine the range of business models that a company can implement.