Matt Asay's recent posting on Open Source revenue models prompted me to pen some thoughts on the difference between the traditional license model (where many costs are hidden/paid for by the up-front software license fee) and the typical Open Source subscription model where customers pay an annual charge but with no up-front license fee.
One of the things companies using an Open Source model need to do is make sure they get paid for up-front costs up-front. For example, in the more traditional model a software vendor would get paid an up-front license fee. That license fee would help defray to costs of sales (including extensive pre-sales technical support for evaluations or pilots) and the extra support costs during initial deployment.
A subscription-based Open Source model does not include that up-front license fee. So to the extent that a customer wants pre-sales technical support or technical support to run a pilot they have to pay for those services. To the extent that a customer needs extra help in deployment they need to pay for those services. This can be a benefit to customers as the costs are explicit (not hidden in a license fee) and incremental (you can pay hourly for what you use as opposed to a big license fee that may or may not align with your actual resource usage).
Part of the challenge is educating customers about this different model. The Open Source company needs to explain to the customer that they can pay for consulting services to support their pilot, and then pay for the subscription service as opposed to getting the pilot for free from the proprietary vendor but now having to pay a large licensing fee when they deploy.
Ultimately I think the explicit and incremental pricing structure of the Open Source model is better for customers in the long run. But it will take some time before more customers are used to buying this way.