Wednesday, March 15, 2006

Makeing money with other peoples code

For the uninitiated, hosted applications are for the most part web based applications that run on your servers through which your customers access them.

The industry poster boy is , which offers a hosted CRM product. They recently launched a new service called appeasing which is designed to make it easier for small companies to sell hosted applications.

Hosted applications appeal to customers because there is no expensive infrastructure to buy, often can be accessed on the road, and the headache of IT support is often handled by the supplier. Hosted applications are wonderful from a development point of view since you know what hardware your
software is running on and you can take advantage of that.

Now, you could go out there and develop a hosted application from the ground up, which would take a lot of development and testing time. Or, you could take a pre-existing web-based open source project and turn it into a hosted application. This reduces the total development time required to create the initial version of your software substantially. You can add as many or as few features as you think are necessary to differentiate your product.

Even if you only add a few features and clean up the interface a bit you will be able to appeal to customers that are afraid of open-source, or want support, or don't have the IT team to implement the solution them selves, etc. As RedHat and similar places have shown, there are quite a few customers like that.

As time goes on you can add more features that your users require. Now since you aren't actually distributing the software you can avoid a lot of the open source licensing requirements, so you can keep these new features available only to your customers. At the same point in time, to build good will I would strongly encourage giving something back to the community (for example any security patches). You aren't required to, but it may help the community feel better about you making money off their hard work :-)

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