How can you make money giving your stuff away? This is the dilemma facing open source companies.
The entire reason for the existence of open source companies is peddling good software products for free. There are no marketing or support costs involved as customers do not have to be sold "free stuff" nor do they expect service on these goodies. They come in droves and download a good product and tell everyone and their brother about it who in turn flock the site and download away. This viral marketing puts the user base growth on steroids.
However, there is an inherent promise of "free." These users will seldom, if ever, agree to pay.
The good news is that the world is divided amongst the "do it yourselfers" and "can't or won't do it myselfers." The latter willingly pay for services such as installation, customization and technical support. They are the source of much needed revenues for an open source company. The survival and value generating ability of an open source company is in creating a big enough base of these customers.
So, does this model work in practice?
Fortunately, open source software companies such as Red Hat have shown that their business model is as robust as that of the "pay for product" companies such as Microsoft and Oracle. But their ranks are pretty thin. MySQL is about to join them with an IPO slated for the near future.
Will they succeed? Why should you care?
If your strategy is to avoid open source like the plague, then you need to rethink it. Not only is the model good for long term cost management but also innovation. Open source software spawns many innovations by lowering the barrier to entry for entrepreneurs. Each major software platform, such as MySQL or Linux, acts as the "sun" of a universe that has many planets and their satellites. The universe is full of innovators with ground breaking ideas and unfettered by corporate inefficiencies or pressures. Should you choose to become a part of it this entire universe is at your disposal!