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Making money in open source e-commerce software

March 3, 2005

Computer software industry professionals at the EclipseCon 2005 conference in California this week gaged a tough question: How can you create revenue in an open source environment when the software is free?

The selling of support and services were two options noted, but panelist Mitchell Kertzman, a partner at Hummer Winblad Venture Partners, said a similar question about how to make money was raised when the computing paradigm shifted to the PC more than 20 years ago.

When the PC came out, everyone said there would be no software business anymore, no one will pay more than $100 for anything, and Microsoft (Profile, Products, Articles) could take away all the business, Kertzman said. "Maybe that last one was true," he joked.

Paradigm shifts, however, are like movements of tectonic plates, Kertzman said. "They create the greatest opportunities for startups because the large companies can't move, can't adjust," Kertzman said.

He added that he did not believe all software would become open source, but vendors who want to demand payment must offer something of incremental value, Kertzman said.

Still, Kertzman jokingly referred to his previous stint with Powersoft as the "good old days," since the question at the time was what a customer would pay for software, not whether he would pay for it at all.

How to build a large company based on open source remains a question mark, said panelist Tom Bogan, a venture partner with Greylock Partners. "We see a lot of opportunities that are very interesting and it's not clear that you can build a large company in this space," Bogan said.

Panelist Tim O'Reilly, founder and CEO of O'Reilly Media, noted that people are now less willing to pay for software. Open source is taking over infrastructure software niche by niche, he said.

"The biggest problem that I see in open source is that open source changes all the rules of the software game," he said. However, it is now easier to start a company through the use of free, open source software, O’Reilly said.

Source: Info World

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