82 per cent of software revenues 'squandered' on sales and marketing

Software licences are an outdated way to force users to pay for the marketing and sales costs of the code, according to members of a panel on open source enterprise software at the LinuxWorld conference in Boston.

"We may get to the licence becoming an historical footnote of how software business was done," said Marc Fleury, founder and chief executive at JBoss, which makes open source application servers.

Financial analysts estimate that about 82 per cent of all software revenues go towards sales and marketing.

"We are charging customers to sell to them. To me that seems like an inefficient model," said Larry Augustin, chairman of VA Software, a company specialising in Linux support.

But with open source applications, users do not need marketing and sales to convince them of a product's ease of use. Instead they can download and evaluate the software free of charge and can purchase support at a fee if needed.

The open source model also makes it much easier to find beta testers, according to Peter Levine, chief executive at virtualisation vendor XenSource.

"If you are solving a real problem, open source is a catalyst to get it out into the market so much faster," he said.

The ability to distribute open source software over the internet is just as important as the ability for developers to access the source code, claimed Marten Mickos, chief executive at database vendor MySQL.

But Mickos also killed the myth that open source providers could later turn those free downloads into paying customers.

"It is impossible to pick out those few interested users from the abundance of users downloading free copies. We don't believe in converting," he said.

However, Mickos believes that open source vendors still need the free download users.

While enterprise customers on support contracts are primarily interested in stable releases of software applications, free users are responsible for the vital bug reports and feature enhancements.