When I first got out of university, I was hired to work at Bell-Northern Research (now fully integrated into Nortel) like a lot of Canadian kids did back around 1990. There I got a passion for the telephony industry working on software for their central office switch products. I just found it cool how someone’s voice can get digitized and then merged, switched, and split off to someone else’s phone on the other side of the planet faster than you can blink an eye. The hardware was cool and the software didn’t seem too complicated except for the protocol handling between different countries who all seemed to embrace different standards.

I often thought it would be pretty easy to turn a low cost PC into a small switch, or PBX, with the right interface cards. But, I was also pretty sure it would be way too expensive since that industry was still driven by the big telecom companies who weren’t about to sell things on the cheap.

Recently I ran across the Asterisk project (who presented at EclipseCon, BTW) which is making open source software that will let you do just that. It has tons of features for making your own PBX including voice mail, conference bridges, and voice over IP support. But where do you get the inexpensive hardware? Well, Asterisk just happens to be sponsored by Digium, who just happens to make such toys. As it turns out, one of their staffers wrote the software and they decided to just give it away for free and start an open source community around it.

That makes way too much sense. It turns out that a lot of people had the same idea that I did and a lot of them are turning that idea into businesses. These guys benefit from the free software and Digium benefits from these guys buying their hardware. Since it is open source, you can plug in other vendors’ hardware but since Digium started the project, they have the bulk of the mindshare. It’s a risk they’ve taken but if you have the confidence in your “for money” products, taking the plunge to get that mindshare can pay huge dividends.

Eclipse kind of follows this model, although not as blatant. Check out Digium’s booth at VON Spring 2006. It has Asterisk everywhere. Everyone loves an open source project that lets them do cool things, so people stop by. Once you are there you can see one of Digium’s 12 partners to buy some cool hardware and services. Everyone wins.

When people ask me how you make money with open source software, this is where I will send them. These guys are teaching a good lesson on open source business models.