Wednesday, August 28, 2002

How to Make Money as a Product Company?

"McNealy argues that Open Source is threatening licensing revenue needed to finance J2EE's advertising and R&D. Well, with a rumored $42B in the bank, Microsoft will ALWAYS outspend Sun on marketing. Good marketing starts with a good product; don't assume developers are dumb. JBoss has spent $0, I repeat "ZERO" dollars, on marketing and manages to get more downloads than Sun's own J2EE Reference Implementation."

I haven't seen Sun doing much selling of the RI anyway. Why would they? It doesn't make them any money unlike Sun ONE. With JBoss not spending any money on marketing it's really only "selling" to a select range of developers. You need the marketing types to convince the manager types that this is a technology that they can feel comfortable with. In the experience I've had they were willing to spend money on .Net rather than J2EE (free or otherwise) by sheer weight of marketing.

"Our solution to financing development is to pursue the services route. J2EE is a very services intensive market. Those who know how to take advantage of this are sitting on a moneymaking machine. We certainly aren't the only ones to come to this realization. It is also IBM's take on J2EE, where they often discount software licenses if they can make money on services, or, like Sun, on hardware. At JBoss Group, we bill our services at expert rates. We understand Open Source, we understand remote networking and we understand the code because we wrote it. "

"All Free Software really destroys is licensing revenue. This is economically sound since the cost of production is marginal and the cost of re-production almost nil. So that leaves us with hardware revenue. Since there is no free hardware, it seems that is safe."

Hardware revenue is not safe especially from the likes of Dell, IBM, HP/Compaq or even Apple. Sun sees its way out with software and JBoss then gives it away for free. At least Apple can still charge US$129.
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