[via Jeff and Business Week]

Most business models rely on giving the software away over the Web, then either charging for a souped-up version of the program or for training, maintenance, and support.

But revenue continues to be a problem. While open-source companies trumpet hundreds of thousands of downloads, on average just about 2% of those customers are actually paying any money. After all, just because every piece of software companies rely on to run their businesses can be replicated with open-source alternatives, that doesn’t mean there’s a market for it, caution analysts.

The upside is that many more companies will try open-source software because it’s free. The viral nature of the Web and the open-source community means companies don’t need a costly sales organization. Instead of hiring expensive, experienced salespeople and investing a lot of money and time in closing deals with skeptical CIOs, open-source companies just put their code online. Developers within companies often download the software for a test drive. Word of mouth spreads the news. Before long, young companies such as SugarCRM and JasperSoft are getting tens of thousands downloads a day, without spending a dime on sales calls.