How to Make Money on Open Source Software
Yesterday our portfolio company Twilio announced the developer availability of theirOpen VBX platform. Techcrunch and GigaOm had good posts on it. Techcrunch called it “open source google voice for business” and Om Malik said “OpenVBX is simple and yields the one thing users want most: a voice mail box that also forwards calls to different numbers.”
There is other open source PBX software out there, namely Asterisk and Freeswitch. And there are other cloud based telephony APIs as well. But what is important about Open VBX and the Twilio web service API for telephony is the pairing of the two. With Open VBX you get free software to build telephony services and a web based telephony cloud to provision the numbers, calls, text messages, and way more.
We are big fans of the open source software movement. We believe that free and open software opens up markets and new capabilities much more quickly than closed and expensive software products. In the comments to my post on another open source effort we are funding, MongoDB, there was a discussion about why a VC firm would want to invest in free and open software. In that discussion, I explained that there are a number of ways to make money with open source software. The most obvious one is the “Red Hat” model of building a services and support business on top of the open source software. Red Hat has revenues of almost $600mm per year and boasts a public market valuation of over $5bn. MySQL, which also used that approach, sold to Sun for $1bn.
But the intersection of web services and open source opens up some more interesting possibilities. Look at WordPress. The WordPress software is available open source. But they also operate a hosted version at WordPress.com that is a commercial effort. MongoDB is available as open source software that anyone can download and run on their servers for free. But I am sure that hosted versions of MongoDB will become popular as well.
And Open VBX takes that model and adds something more. Yes, there will be hosted versions of Open VBX. Dreamhost already offers a one click install of Open VBX. But Twilio’s telephony APIs for phone calls, messaging, and more are paid offerings that plug into Open VBX and offer another business model for open source software.
So we believe the pairing of open source software and cloud based business models vastly increases the commercial potential of open source software and we are excited to see Twilio leading the market into this exciting new world of open software.
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