Home Web 2.0 Expo: Open Source Business Models

Web 2.0 Expo: Open Source Business Models

On Monday morning I attended a panel which included two case
studies from leading businesses built around open source software applications – Sugar CRM and MySQL AB. The case studies were presented by their
respective CEOs, John Roberts and Marten Mickos, and focused on the business model their
organizations have adopted.

The rest of the day, I found myself reflecting a lot on the presentation and then – as
luck would have it – I ran into MySQL AB’s Marten Mickos and Zack Urlocker (Executive VP
of Products) at a happy hour that evening. I ended up talking to them about their
business over a few beers and concluded that they are a great lesson for any website
looking to scale audience.

For Profit Businesses

Back to the panel now. First of all it is important to point out that both these
organizations operate with the intention of making money. This obviously isn’t true for
every one of the over 140,000 open source projects listed on Source Forge. Both companies have more than a
hundred people contributing to the product as paid employees and clearly are oriented
towards generating value for their shareholders. In fact, John attributed being a
commercial open source business’ as one of the keys to SugarCRM’s early

What is interesting is that they have been able to build these businesses with so much
less capital than previous closed source applications in their space. John estimated that
SugarCRM has achieved the same market traction at this point that Salesforce.com did in
the first 3 years, but with about 20% of the costs.

Creating an Architecture of Participation

They have done this by creating what
both panelists called an architecture of participation, which they built
into their business strategies. John covered six components to that ‘architecture’ that
made participation straight forward with SugarCRM:

  • Extensible Project – SugarForge: a site
    developers can go to and create their own complementary projects (currently over 8,000
    developers have participated)
  • Easy for anyone to participate (easy to download, share ideas, etc…)
  • Others Can Profit – Sugar Exchange: a
    site for people to create extensions to sell their wares
  • Transparency: for example the support forums are completely public, whether you use
    the software or are just interested in it
  • Access to the code (it is open source after all)
  • Easy to purchase the PRO edition

SugarCRM has had 3 million downloads of their application and it has been translated
into 50 different languages, so they are obviously doing something right.

MySQL has an even larger audience receiving approximately 50,000 downloads a day of
their application. Marten framed the significance of this in an interesting way. He
pointed out that their closest (closed source) competitor has fifty-six thousand paid
employees. However, every day he has fifty thousand passionate new users. He
quipped that while it is easy to disregard these as mere amateurs, “Noah’s Ark was built
by amateurs, Titanic by professionals.”

Still Have Sales People, but …

While this model certainly has led to some interesting distribution and
keeps the cost of sales low, it is important to point out that both organizations have
executives responsible for sales. In fact, MySQL has over 70 sales professionals. The
difference is they are focused on selling consulting services and support, instead of
proprietary software. While MySQL doesn’t disclose their revenue, it is about equally
divided between services, support and revenue from OEM partners.


The Web 2.0 conference has been organized under the theme ‘web 2.0 is _____’ – with
everyone contributing something different in the blank space. In fact, the conference
organizers provided conference t-shirts with ‘web 2.0 is ____’ and gave all of the
attendees markers to fill in our answers. Many of the answers filled in centered around
collaboration with users and efficient distribution.

What I found interesting after listening to the above presentation is that not only
can web 2.0 entrepreneurs build sites on top of open source projects (like MySQL – L.A.M.P.), but they
can actually learn a lot about promoting their services from these products. So the next
time you’re in a marketing meeting trying to figure out ‘distribution’, an interesting
brainstorming question is — what did mySQL or SugarCRM do?

About ReadWrite’s Editorial Process

The ReadWrite Editorial policy involves closely monitoring the tech industry for major developments, new product launches, AI breakthroughs, video game releases and other newsworthy events. Editors assign relevant stories to staff writers or freelance contributors with expertise in each particular topic area. Before publication, articles go through a rigorous round of editing for accuracy, clarity, and to ensure adherence to ReadWrite's style guidelines.

Get the biggest tech headlines of the day delivered to your inbox

    By signing up, you agree to our Terms and Privacy Policy. Unsubscribe anytime.

    Tech News

    Explore the latest in tech with our Tech News. We cut through the noise for concise, relevant updates, keeping you informed about the rapidly evolving tech landscape with curated content that separates signal from noise.

    In-Depth Tech Stories

    Explore tech impact in In-Depth Stories. Narrative data journalism offers comprehensive analyses, revealing stories behind data. Understand industry trends for a deeper perspective on tech's intricate relationships with society.

    Expert Reviews

    Empower decisions with Expert Reviews, merging industry expertise and insightful analysis. Delve into tech intricacies, get the best deals, and stay ahead with our trustworthy guide to navigating the ever-changing tech market.