1. T ECHNOLOGIES ® S TROMIAN S Pricing and Business Models for Open Source Software Jim Geisman Marketshare, Inc. jgeis@moreshare.com Don Rosenberg Stromian Technologies donr @stromian.com

2. T ECHNOLOGIES ® S TROMIAN S Overview Pricing Issues Business Models Comparisons …And Therefore

3. CorporateSMBsSingle User Custom SW SIs/VARs OS VendorsApp Devprs Customers Developers Resellers Open Source Licensing A Multi-Player Game T ECHNOLOGIES ® S TROMIAN S

4. T ECHNOLOGIES ® S TROMIAN S Customer Pricing Issues Corporate/SMB –Decrease license costs –Increase reliability –More customization, support (if desired) –Server vs. desktop Single Users –Very price sensitive –Want “choice”

5. T ECHNOLOGIES ® S TROMIAN S Are Pricing Issues “Real” SW <25% IT budgets –How much change in license costs? HW < 25% IT budgets and falling People costs > $50-75K average –5 - 8X cost of all SW –> 5X TCO Cost of downtime a killer –$25-50/hr. x # people on a server –Add cost of recovery, sys admin

6. T ECHNOLOGIES ® S TROMIAN S Reseller Pricing Issues GPL Software Means Make Money by Customizing Custom Software Houses –Selling time (like any service business) –Depends on place, expertise, demand Systems Integrators and VARs –Selling proprietary software and systems –Support as a service –Software customizations

7. T ECHNOLOGIES ® S TROMIAN S Open Source A New Opportunity Another new sales platform –Extend product offering –IBM, EDS, Applix Corel... A new opportunity –A new point of entry –Red Hat, >

8. T ECHNOLOGIES ® S TROMIAN S Vendor Pricing Issues OS Vendors –Retail packaging, downloads + OEM sales –Add-on services to resellers –Packaged upgrades, enhancements, applications Applications vendors –“Off the rack” (less-than-finished retail) –Proprietary (closed) applications Horizontal apps can go direct to desktop Vertical apps more likely to go through channel –Customization services

9. T ECHNOLOGIES ® S TROMIAN S Significant Business Issues How does OpenSource Software Compare… –As a business... Vs. traditional software vendor models? Vs. traditional service offerings? –With other product alternatives? How do economics differ? –Support? –Lost time/wasted effort? –Get leverage over other parties? What elements of risk change? –Business (esp. Marketing/Sales) –Technical

10. T ECHNOLOGIES ® S TROMIAN S Our Conclusions … About Open Source SW Opportunities Corporate/SMB –Lower cost desktops but higher training? –Server reliability probably more important Single Users –SOHO maybe in the future –Developers probably soon Installed base of software here to stay –Will slow migration to Open Source/GPL

11. T ECHNOLOGIES ® S TROMIAN S Business Models Comparison How does Open Source change things ?

12. T ECHNOLOGIES ® S TROMIAN S One Area of Hope: Server Pricing Not much change in license costs –E-commerce web server $1M average (Gartner) –SW 10-15% HW about same as SW People the other 70-80% –How many % points will go to open source? But cost of downtime is a real killer –Lost revenues # Hrs. offline x Total revenues / 8760 –Recovery costs

13. T ECHNOLOGIES ® S TROMIAN S In Conclusion … Extend existing service businesses –A “hook” for new ones Proprietary add-ons to GPL SW will be a tough business –No block busters; few large companies Many service opportunities in the Bazaar

14. T ECHNOLOGIES ® S TROMIAN S Contact Information Jim Geisman, President Marketshare, Inc. 35 Main Street, Suite #8 Wayland, MA 01778 Tel: 508-647-0330 Fax: 508-647-4876 E-mail: jgeis@moreshare.com Don Rosenberg, President Stromian Technologies 919 Monmouth Avenue Durham, NC 27701 Tel: 919-687-4172 Fax: 919-688-7210 E-mail: donr@stromian.com See also: www.stromian.com and www.softwarepricing.com