A business model emerges

Actually, IBM’s business model was never really in doubt (unlike some other players in the sector), but it’s worth looking at anyway, for what it says about consortiums and open-source development.

Just under a year ago, IBM announced plans to develop a suite of blockchain services for enterprise clients. Today it revealed the first commercial applications: IBM Blockchain.

Housed in the IBM BlueMix cloud computing store, it differs from the Hyperledger Fabric codebase mainly in the extra security layers.

There’s the business model: while the underlying code is open source (ie. free), IBM will charge for access to the extra secure version.

It makes sense. The target clients are mainly large enterprises, such as financial institutions or conglomerates. They are not going to want even the slightest hint of a risk that their information might not remain secure, or that the processes may get interrupted. Paying extra for access to a blockchain service with additional security features – that is going to save them a lot of money in operation costs – is likely to seem a winning proposition.

Other businesses, such as Microsoft, Intel, Ripple, Chain and R3, have followed the same pattern. The underlying code is free, and the revenue comes from the development of additional services, from consulting fees and in some cases from the sale of specialized hardware and other security precautions.

Why make the underlying code free? To generate a vibrant developer community. If it’s out there for people to tinker with, tinker they will. And while they’re at it, they’ll find bugs, help to fix them, and probably invent some curious use cases that could lead to grand innovations.

It’s curious to think that we live in a time in which proprietary information is no longer the advantage it once was. In the blockchain world, for now at least, success seems to stem from giving your product away, and then charging for the value-added layers. Freemium meets the blockchain.

Whether that will remain the case when blockchain is no longer a “new” technology remains to be seen.



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