Earlier today, my post about business models of Drupal distributions went live on my Mediacurrent.com blog. It took a look at the practical ways of financially justifying a Drupal distribution within a Drupal firm with respect to the recent acquisition of OpenAtrium and Managing News by Phase2 Technologies from Development Seed. I concluded that there are basically two business models: one is getting paid for developing new products and extending existing ones, which is what Development Seed does; and the other is getting paid for providing services around a stable product, which is one of the things that Phase2 does. The acquisition, then, was an acknowledgment that the products that DevSeed built are now mature enough to need the kind of support that Phase2 is better at providing.
Specifically, I noted that "support is a business model of scale." That is, for a business to sell support around a product, it needs to have the capacity to answer support requests whenever a customer calls. As a product gets more popular, as OpenAtrium in particular certainly has, the support requests will increase, and so the company's capacity to provide support needs to increase. This is why Phase2 has about 40 employees while DevSeed has 15. It's also why Acquia, another Drupal company whose core business is selling support around its Drupal products, is even larger and growing quickly. In order to sell support around a growing product, it is necessary to be part of a company that can expand its support capacity. It is also difficult for an individual or a relatively small team to focus on both development and support at the same time.
Development Seed is primarily a product company, and they made money mainly from building rather than supporting OpenAtrium. When OpenAtrium didn't need building any more, it made sense for DevSeed to sell it so that they could focus on building new projects. Product development generally does not require a huge team, and it also does not require a scalable team. It is something that individuals or firms of any size can do to varying degrees. Under this model, developers get paid for working on new products and features.
This paradigm applies to modules as well as distributions. Module developers who want to make money off their work can choose either to accept contracts for features and improvements to their modules or to provide support services around them. However, there is often friction here. Module developers are often working on those modules in their free time and/or by themselves, and don't have the capacity to provide support -- especially if they want to continue developing the module. On the other hand, when someone asks "how do I make money from open source," the Drupal community's typical answer is "sell support services around your products." This is not an answer that makes sense for many individuals and small firms -- especially because most developers think of development as more fun than providing support. To be fair, many people and firms have made money from taking contracts for product development. However there can be a sense of abandonment from users when a module grows so large that its original developer can no longer support it and the community around it is not large enough to fill the gap. This is one challenge Drupal will have to face as it grows.
Another model that some have suggested recently is actually selling code under what has been termed a "Drupal App Store." I am very against this idea for a number of reasons which I won't go into here because others have already expressed in better ways. Also, many (most?) Drupal firms operate mainly around being paid to build Drupal websites, which is not what I'm talking about here, but which is also a valid model.
The friction between support and product development is a real one for which I don't have a solution. I have personally felt it as my modules have grown to be used on thousands of websites. However I think that the lesson we can take away for today is that Drupal developers and firms have more than one profitable option for making money around Drupal. The market for Drupal services of all kinds is certainly growing quickly. So if you're a firm or developer interested in building a distribution or module, go for it! There's lots to look forward to.