Defining Open Hardware
There is no consensus about the definition of open hardware. They use the term open source hardware (OSH) and define it as any piece of hardware whose manufacturing information is distributed using a license that provides specific rights to users without the need to pay royalties to the original developers. These rights include freedom to use the hardware for any purpose, freedom to study and modify the design, and freedom to redistribute copies of either the original or modified manufacturing information.
Making Money with OSH
Using these four dimensions, we found eight different ways of making money with OSH in the listed companies. Those eight methods are summarized as follows:
- Consulting and custom designs over owned OSH (three market offers):this category includes companies which sell services related to the OSH projects that they own. Those services could be custom designs or consulting.
- Consulting and custom designs over third-party OSH (three market offers):this category is similar to the previous one, but the services sold are for OSH designs owned by other companies.
- Proprietary hardware designs based on OSH (one market offer):this category includes companies that sell modified versions of OSH projects that they own.
- Proprietary hardware based on OSH (eight market offers):this category includes the sale of modified versions of owned OSH projects.
- Manufactured OSH (twenty seven market offers):this category includes companies that sell a physical manufactured hardware based on pure-open hardware designs that they own.
- Software tools for OSH (four market offers):includes companies that sell pure-closed software tools for testing and working with OSH assets that they own
- Hardware tools for OSH (nine market offers):this category is similar to the previous one, but these pure-close market offers are not software but hardware tools for an owned OSH asset.
- Dual-Licensing (one market offer):this way of making money with OSH is similar to the dual-licensing model used by some OSS companies. The idea is to offer the same pure-open hardware design that is owned by the company with two difference licenses
Some authors have cited the costs associated with manufacturing hardware as one of the biggest disadvantages of OSH in comparison with OSS. Users who download software code can compile and use it without any cost. Users who download source for an open microprocessor cannot use it unless they pay for its manufacture. However, most of the companies working with OSH have taken this disadvantage as a business opportunity by selling manufactured OSH.
The classification presented here is just the first step towards a more systematic understanding of how companies build business models around OSH. More research is needed to study which models are likely to generate higher incomes and the profitability of the market offers related to OSH.
8 Ways to Make a Living with Open Source Hardware
The 3 first business models in this list are about selling products, which is obviously the most direct way to live from an open hardware project.
#1 You Sell your Own Products
#2 You Sell Products Made by Others
#3 You Sell Products Made with Others
This second category shows 2 models that are based on service. You become an intermediary in others’ open hardware projects.
#4 You Sell a Service
#5 You Sell your Expertise
Because Open Source Hardware is based on sharing knowledge to build the commons and progress together, knowledge has a strong value. Don’t underestimate this asset in your project.
#6 You Sell Workshops
#7 You Ask for Donations
#8 You Are Part of Another Company
How do you make money with open hardware? or How big of a business do you want to build?
Hobby/ Side Project
At this scale, you can create new designs, get them made by a low-volume manufacturer, and sell them from your garage. Many Tindie products fall under this category. Nothing too complicated at this stage as you’re selling on demand, and up to 1,000 units a year, and handling shipping and fulfillment yourself.
Small, Full-time Business
In this category I’d put many of the popular platforms like Teensy or Digispark. Their creators have built great businesses with strong communities. The time commitment ultimately ranges from a few hours a week to going full-time.
This is the point where you’re wondering “How big can this get?!” The difference between a small, full time business and a mid-sized company is that something else is driving your bottom line, meaning your mechanism for generating revenue is different.You are no longer a company that just manufacturers and sells hardware. You’re now becoming a platform.For example, look at Adafruit and Sparkfun.They are manufacturing and designing new products, but there is a lot more going on under the hood.
If you want to build an open hardware company, you should very clearly and realistically define your goals then position your business to match those goals. The vast majority will be small businesses, and open sourcing your design has many benefits from building community to lower development costs.