Matt Asay in AC/OS: Red Hat: The mother of all open source business models provides some insight why he thinks Red Hat has such a great open source business model. With all of us struggling to find the real McCoy in open source business models, examples of things that actually work are rare and welcome.
Simply put, the difficulty lies in making money when people can download your software for free. Apparently one way to avoid the freeloaders (well, at least significantly increase the number of people that pay for your software) seems to be to provide the source but not the binary for free. This was a suggestion I made when we started out with Magnolia - simply said, I proposed to sell the installer.
The one thing I never figured out is how to make sure others do not simply take the code, compile it, and then provide it for free. In the case of Magnolia, anybody could provide an installer. The same is true for all other open source code - unless the license forbids you to actually resell a compiled binary, anybody could.
Of course, the question remains: who actually would? Well, it has been done before (remember how vTiger took the sugarCRM code base, removed the copyright, and rebranded it as vTiger?). These cases are rare, however. At the same time they are legal (except, removing the copyright notice was not).
Lets have a close look at what Matt says about Red Hat and why it works. If there is a fireproof way to create license revenue while providing the source code, I'd love to make all our products open source.