On Software Business Models, Part 1

This "article" will be split in 3 parts, to keep each one short and focused. With absolutely no credential in the field of economics, we will start in this first part by looking at another way to divide our industry into 3 sectors. In the second part, we'll see how this can help us better understand different business models for software. And finally we'll look more specifically at open source software, a subject dear to our heart, and see how to classify different open source business models.

We are used to divide the industry into 3 sectors: agriculture, manufacturing, and services. Instead, let's consider a different perspective and think about how we are spending our own money. From that perspective, the distinction between agriculture and manufacturing seems artificial: both produce goods, sometime even working hand in hand. So let's call this the goods sector. We'll keep services but I would like to add another sector, insurances, which seems to be distinct enough from goods and services: First, we spend a significant amount of money on insurances; Second, when we pay for an insurance we don't get immediately any good or service for our money, but we rather get some "peace of mind" in the form of a promise to obtain later some service or good, under some condition.

In this new division of the industry, we have these 3 sectors: goods, services, and insurances. In the next part, we'll see how this can help us better understand different business models for software.