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Why the open source business model is a failure

Paul Rubens | July 7, 2015
Most open source companies can't thrive by selling maintenance and support subscriptions. But the cloud may be the key to revenue generation.

That's because these low-cost alternatives necessarily make the market for proprietary software smaller even if proprietary companies have higher revenues that they can use to innovate, differentiate their products, and market them.

This could help explain why some proprietary software companies are moving their products to the cloud, or at least creating SaaS alternatives. A mature product like Microsoft's Office suite can largely be functionally replicated by an open source alternative like LibreOffice, but Microsoft's cloud-based Office 365 product takes the base Office functionality and adds extra services such as file storage, Active Directory integration and mobile apps on top.

That's much harder for anyone to replicate, open source or not. And it suggests that in the future it will be all software companies, not just open source shops that move to the cloud to offer their software as a service.


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