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Does making source code available affect your ability to generate revenue?

Initially I was going closed-source all the way, or at least until we have a good reputation, and open-sourcing will only improve that rep.

Recently though, I've been thinking about open-sourcing the entire solution.

Various popular SaaS solutions have open-sourced under AGPL and are generating revenue. For instance, Gitorious (http://gitorious.com/subdomain) is AGPL but they make profit. OpenERP makes profit using the same sort of mechanism as Gitorious, advertising that they maintain the servers and keep servers online.

I am building an ecommerce solution, and am considering offering free use of part of the system, pay per/month to use the entire system.

By making the solution open-source, couldn't a competitor just download my project and offer it at a cheaper fee per/month? If I open-source, will that increase or decrease my revenue?

  • Please stop adding irrelevant tags and formatting to your question: they are not needed. – user8 Jan 16 '12 at 8:55
  • This isn't an exact duplicate. Please reopen. – A T Jan 16 '12 at 9:04
  • Can you please edit your question to make it clear that it's not a duplicate. At the moment I can't see what it's covered by the other question. – ChrisF Jan 16 '12 at 10:40
  • I wrote an improved, more detailed question here. Please migrate below answers to that question. – A T Jan 16 '12 at 10:45

If your product is novel, and you believe that you will be able to profit greatly from each innovative step that you take early in the process, then open source doesn't make much sense. There's no entrenched player that you're trying to catch up to, so you don't need to enlist the help of others.

The only reason to open source something when you are in a position to profit off each and every investment in the code base would be that it is not part of your core competency, and you know that it will not evolve and grow with other advances in technology. This is basically how Unix became dominant when produced by AT&T (Unix's license and the market was in such a state that it was basically like open source for the time, which is why for instance BSD Unix evolved out of said code base), because they did not want to be in the OS business. If they had productized it, some other OS would have made the necessary innovations to bring cross-platform computing and the resultant benefits to the computing world.

If, however, the advantage that you have over your competition is access to data in a timely manner, or extremely high caliber service, and you need to differentiate yourself from your competition, then it makes some sense to open source the bits that you want your users to be able to improve for themselves.

Personally I think in the SaaS world, this is often better accomplished through having a strong, well documented public API. Look at the success of Amazon's Web Services as a perfect example for that.

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I am personally an open source advocate however when it comes to a product you wish to profit from I would not release source. However, still allow the users to interact with your application via hooks or an API so that they feel the flexibility and customisation factors of your application.

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