Anderson identifies four business models for the free economy. The first, Nonmonetary, Goodwill or Reputation markets, is the foundation for the free open source movement. In a goodwill market, the “producer” makes available free goods for consumers with no expectation of direct monetary reward. Instead, producers benefit in reputation or brand enhancement that can in turn be invaluable for other endeavors. The developer of an open source ETL tool, for example, might make money consulting with the product, or even as a contractor for the COSBI vendor. Writers for BI media such as Dashboard Insight benefit from the brand exposure they receive when their articles are posted. Commercial Open Source BI is driven extensively from the limitless pool of goodwill market participants.
Freemium or Open Core models are central to today's commercial open source BI. By and large, COSBI is a software model, with annual subscription fees but no upfront licensing. The freemium model distinguishes between community editions of the software available for free, but with restricted functionality and onerous open source usage licensing, and commercial versions available for a price with added functionality, less restrictive licensing and dedicated, professional support. The expectation is that prospects will download community editions of the products for free, with a percentage then upgrading to commercial editions with annual subscription costs. This model has been modestly successful for COSBI. Downloads of community editions have more than met expectations, but conversion rates of community to commercial versions have been lower than anticipated. OpenBI affirms that experience with OSBI services: an overabundance of inquiries, but a much smaller percentage of qualified buyers. Perhaps, as behavioral economics suggests, the difference between inexpensive and free is irrationally larger than expected. Regardless, COSBI vendors are now starting to consider other options.
The Three Party Market, for which products are subsidized to consumers by third parties such as advertisers, holds promise for COSBI. As Anderson notes, the Web facilitates the extension of media business models to other industries. Google search marketing is, of course, the archetype, as are free credits cards subsidized by transaction fees from merchants. Savvy COSBI vendors are starting to offer complete business solutions by partnering with experienced services firms. The vendors use their sales and marketing clout to sell development projects driven by their platforms, mitigating the spikey risk of consulting business by working with strategic partners. At the conclusion of a successful engagement, the COSBI vendor sells a software subscription and collects a premium from the consultancy.
Finally, Anderson's Direct Cross Subsidies market offers potential for COSBI as well. With this model, the producer gives away product one for a paid annuity of product two. Gillette's low cost razors with profitable blade refills and ATT's subsidy of Apple's iPhone for profitable multi-year contracts are illustrations. COSBI vendors can now leverage the modest startup costs and almost limitless capacity scaling of the Cloud to promote cradle-to-grave BI solutions that bundle infrastructure, software, services and support into a single annuity contract. Rather than subscribe to software, the consumer instead subscribes to a complete solution in which “free” software helps to hold down costs. No doubt a variant of BI as a Service, this is more a lease than a purchase model, and could be appealing to those companies who cannot afford significant upfront costs, but still wish to have “BI their way.” We wouldn't be surprised if Cloud vendors Amazon and Google started offering OSBI platform capabilities for free to customers contracting for their servers and storage.
After three and a half years of immersion in the OSBI market, OpenBI continues to be bullish on commercial open source BI. We've experienced the considerable magic of OS community development with the attendant innovation that's been a boon for BI. We've also seen the products improve dramatically over that time frame and shared significant successes with our customers. Moreover, we think that progressive COSBI vendors will advance beyond freemium software subscription and experiment with other models that will steepen the trajectory of COSBI adoption. As we continue to grow our business, OpenBI is excited to write the next update on the progression of COSBI in the BI marketplace.
About the Authors:
Steve Miller is President of OpenBI, LLC, a Chicago-based services firm focused on delivering business intelligence solutions with open source software. A statistician/quantitative analyst by education, Steve has 30 years BI experience. His charter – and OpenBI's – is to help customers manage performance through optimal deployment of intelligence and analytics. Steve is a columnist for Information Management and the B-Eye-Network. In addition to R, OpenBI specializes in the Pentaho and JasperSoft open source BI platforms and Weka data mining. Steve can be reached at steve.miller@openbi.com.
Dave Reinke is a co-founder of OpenBI, he has over 20 years of business technology services experience, the majority spent delivering BI solutions across a broad range of industries and company sizes. Dave's most recent positions were as a Partner for TUSC, Vice President for Fair Isaac and Senior Vice President for Braun Consulting. Dave is an expert in the Pentaho and Jaspersoft open source BI platforms, as well as the Vertica and Infobright analytical databases. He is an in-demand speaker on the emerging BI in the Cloud. Dave holds a Master of Science degree in Computer Science from the University of Illinois. He can be reached at dave.reinke@openbi.com