Questions from netizens lingered on after the IT168 interview, “How Sun, pioneer of open source, makes money?” I shall always remember Solaris 10. It took almost 4 years and thousands of talented engineer. How do we justify the investment if we open source? I decided to make this the topic for my talk at China's Partner CTO Summit, featuring distinguished guests such as Hal Stern and Jim Baty.

The era of software licensing is over. Now, participation defines community; communities become marketplace; marketplace generates revenue and leads to profit. How do you get people to participate at the first place? You set your software free. Freedom feeds the hunger of creativity and attracts participation.

Communities, however, must avoid anarchy that hampers profitability. For software, this means the necessity of licenses. Free software combined with proper licensing terms creates healthy participation and leads, eventually, to profitability.

This path shapes like a funnel. The mouth needs to be huge for as many and large communities as possible. Over the other end, a much smaller subset of them generate enough revenue. It is always good to have the mouth of the funnel bigger. It is also foolish to expect a high conversion rate, even worse to manipulate the licenses to increase the conversion rate. Never weaken freedom.

The conversion is not automatic. The participants enjoy the software and require a good reason and an easy mechanism to pay for it, directly or indirectly. Google is paid for by advertisements. MySQL collection subscription and service fees. ITune is part of iPod and a channel for Apple's online music business.

Sun first cultivated communities that are interested in our technologies and products. Then we attract developers to create solutions based on those technologies and products. Monetization then starts: entrepreneurs launch businesses with our technologies; hardware products enjoy a bigger market; enterprises still pay licensing fees for various reasons; communities members pay for subscription, support, and services; enthusiasm generates demands for training and consulting services.

OpenSourcing got Sun noticed and media covered. It opens doors previous shut tight. In this complex world of technologies, many larger companies will pay dearly for the what Sun received from open sourcing our software. Hack, I even heard someone saying Microsoft is now open-sourced. Shows how envious they are.