License affects the business activitiesof software companies. While proprietary software vendors
create custom licenses, open source companies have lesser flexibility. The Open Source Initiative (OSI)
defines a list of 72 licenses as open source (OSI approved). For a project to follow open source licensing, it
has to pick licenses from this set. Logically, one expects an open source company to define its business
model around the license that it selects. Thus, one can assume that business model decisions follow
license choice. In this research, it is found that in some cases, open source companies removes these
license constraints for business reasons. Cases of open source companies moving from one
OSI approved license to another or companies innovating by adding additional terms were observed.
In all these cases, the decision of change is based on the license being a poor fit with their business
goals. Not all open source companies are entitled to change the license because this option is available only
to companies that own intellectual property.
If they do not, they can try to reshape their business
models, but that remains a suboptimal option. Whether cognizant of it or not, organizations are
implicitly choosing a business model when they select a license. Therefore, it is very important to address
licensing and business model decisions as one system, instead of a disjointed two-step process. For this
purpose, the paper introduces: (1) an evolutionary model where license selection and business model impact
each other; and (2) a taxonomy that addresses both licensing and business models. Our approach
helps practitioners include revenue considerations in the licensing choice and researchers to more
accurately study the antecedents and consequences of license choice.
For open source companies, license is a fundamental element of
the overall strategy. Different licenses have different trade-offs between advantages and disadvantages for different
revenue models. Since the license determines what companies can do with their software, license
choice strongly impacts the business model and the opportunities of venture funding. Although license choice represents a critical decision, the choice is not easy. There are
a large number of licenses available. The Open Source Initiative (OSI) currently has a set of
72 licenses as open source (OSI approved). The differences between them and their
business implications are difficult to grasp.
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