• Wed. Jun 7th, 2023

Where’s the Funds? Selections for Commercializing Technologies, Aspect 1: Open Supply Application – Tech & Sourcing @ Morgan Lewis


May 26, 2023

When the subject of technologies commercialization approaches comes up, the most widespread solutions commonly talked about contain the sale of a technologies or constructing a small business about technologies by promoting merchandise or offering licenses or subscriptions to technologies-primarily based options.

In this series, we will appear at technologies commercialization solutions that are much less usually discussed. In Aspect 1, we talk about how organizations may possibly be in a position to make use of open supply software program (OSS) as a commercialization method. In a forthcoming Aspect two, we will concentrate on the solution to “white label” technologies as a commercialization method.

WHY OPEN Supply?

We have highlighted problems associated to OSS in a quantity of weblog posts: we spoke about trends in leveraging OSS, as properly as problems to take into consideration in the context of representations and warranties in M&ampA transactions. Our colleagues also discussed small business dangers linked with the use of OSS.

In this post, on the other hand, we turn our concentrate to why a small business may possibly pick to pursue an open supply method and how enterprises may possibly nevertheless acquire industrial advantage from OSS.
The central concept of OSS is to leverage the breadth and depth of the developer neighborhood, which assists in identifying and eliminating bugs and safety problems, as properly as enhancing software program characteristics and user encounter primarily based on user feedback.

This remains the core advantage of OSS-primarily based enterprises: as demonstrated by a RedHat report on the state of enterprise open supply, 89% of respondents saw enterprise open supply as far more safe or as safe as proprietary software program. Nevertheless, open supply organizations have also proved that they can be lucrative enterprises, and a couple of current initial public offerings in the sector prove as a great deal.


Ahead of we appear into how OSS owners can make funds, it is worth mentioning that the industrial results of OSS is largely attributable to (i) the scale of interest in the solution from each the developer neighborhood and clients in order to make use of the core advantage of open supply as highlighted above and (ii) the credibility and reputation of the OSS owner, as cybersecurity problems are frequently top rated priority for clients. Now, let’s turn to the solutions.

Open But Not No cost

Though OSS is frequently perceived as a free of charge software program, that is not necessarily the case. The creator may possibly publish the supply code beneath a license that would limit the use and modification rights or impose an earnings-sharing obligation on the licensee if a solution embedding the software program is commercialized, which incentivizes prospective industrial customers to enter into a separate industrial license with the creator.

This solution is also known as restrictive licensing and has been criticized by the open supply neighborhood as departing from the original intent of OSS. Note that converting to a restrictive license following a solution was initially marketed with out any restrictions may possibly not be properly received by customers (see our coverage of the Dungeons and Dragons case earlier this year).

No cost vs. Paid Versions

This solution is occasionally known as dual licensing, as the software program owner may possibly permit free of charge use of the software program with standard solutions but will charge a charge for the versions that contain further functionality or are intended especially for enterprise use. This pricing method is occasionally known as “freemium.”

Open Core

A variation of the dual licensing model is recognized as the “open core” model. In the open core model, the developer open-sources the majority of the code and makes it possible for it to create as an ordinary OSS, but keeps particular characteristics and functionality proprietary and obtainable for industrial licensing.

For instance, envision a browser or mobile operating technique that comes with a marketplace of add-ons and extensions made by the owner as properly as independent developers, exactly where some of these add-ons and extensions are obtainable for a charge.


Due to the fact not all enterprises have the essential capacity to deploy and run OSS, some vendors may possibly pick to provide a remote server to run the OSS with added functionality such as backups and upgrades of the OSS.

Nevertheless, offered that remote servers normally are the territory of cloud vendors, there may possibly be competitors amongst OSS developers and cloud vendors providing OSS as a service with out additional price to the client. This competitors has resulted in some OSS providers which includes limitations in their licenses to stop promoting their software program as a service with out paying royalties.

Help and Consulting

OSS creators may possibly make use of their experience and provide clients paid help in relation to OSS deployment, configuration, integration, instruction, or troubleshooting. There are distinct views as to no matter if this is a sustainable operational model lengthy term, as lots of would claim that OSS need to enhance more than time, and clients will not be inclined to continue paying following the initial deployment stage. As a outcome, some providers pick to use this function collectively with proprietary characteristics compatible with OSS or with open core.

In addition to the above, there are far more methods to raise funds, such as certification costs, crowdsourcing, branded distribution, or hybrid licensing, e.g., a so-known as franchising model exactly where the OSS owner certifies chosen partners to develop into “authorized” vendors of the OSS and they make use of 1 of the commercialization approaches and spend a charge to the OSS owner.

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