On my previous post about the scalability of the “support subscription” business model, Joel Jackson said:

“I’m confused Savio…what don’t you understand about a software subscription annuity model? $200-500mill today in base revenue could easily be (along with a modest growth rate of new customers, which Red Hat doesn’t seem to have a problem getting) over $1bill in revenue in the near future”

Joel, thanks for bringing up this point. I’m talking about the Support Subscription business model, not the Software Subscription business model. I may not have been clear on the difference in my previous posts.

JBoss provides us with a good example of the two in practice:

Prior to the acquisition, JBoss employed a Support Subscription business model. Anyone could freely get and use JBoss products without paying JBoss a cent. Customers that wanted to call in with technical support questions and receive defect fixes faster, etc. had to pay for these rights. The customer paid for support around freely available products. The customer was clearly paying for a service (i.e. support, not to be confused with professional services a la IBM Global Services or Accenture).

Several months after the acquisition JBoss adopted the “Fedora-model”, or, in layman’s terms, moved to the Software Subscription business model. Customers can only get certain versions of JBoss products by paying for “a JBoss subscription“. This subscription includes technical support and monitoring services (which were part of the Support Subscription business model that JBoss previously employed). The additional access to non-freely available products is what sets this business model apart from the Support Subscription model.

Software Subscriptions has been a component of the commercial software business model for longer than I’ve been alive. FWIW, over 50% of Oracle’s revenues are driven by Software Subscriptions. Software Subscriptions in the commercial software business model give customers access to non-freely available products. The customer has the right to receive technical support & maintenance around these products under the Software Subscription business model.

If you just said, “wait a minute, are you saying the Fedora model / JBoss Subscription is just like the Software Subscription business model that commercial software vendors have been using for decades?” Bingo.

The Software Subscription business model scales because customers are buying products. When a customer stops paying, they no longer have access to the product. Contrast this with the Support Subscription business model where customers can elect to use the product without support, or start with support and move to unsupported if they didn’t make many support inquiries in the previous year.

There is absolutely nothing wrong with OSS vendors employing the Software Subscription business model. It’s the best business model (from a revenue standpoint) that we’ve seen in the software industry. Just don’t tell me that OSS “changes all the rules and has a cherry on top”.