What is the difference between the two? If they charge for a product is it really considered open source? Or does it simply mean that the code is open to be changed but they charge for the program?
It depends highly on the license the code is using. Some companies, like Apple, use FLOSS code as a backbone to proprietary GUI's and software. They contribute relevant changes to the original code back into the community but keep the rest private.
Others, like Mozilla, OO.org, and some linux distros, use sponsors, ads, or charge for support to supplement paid staff working on the software.
You can have a completely open source product and still charge for it using one of the methods above. Often times, these projects are much more mature than completely open, non-corporate backed software because they have the benefit of hiring skilled technicians who are paid to dedicate time and energy into a project.
That's not to say that completely open and free apps are bad, quite the contrary, they just move along a little more slowly because people contribute in their spare time.
That being said, I don't see a problem with people commercializing open source if they make a compelling product for a reasonable price and provide necessary service and support.
Right now I am in the process of comparing two open source social networking platforms. Elgg and Dolphin.
Elgg is completely open source and free. It seems to come with loads of plugins and decent templates. All of which are free. The only problem is that it doesn't seem as stable. I think the only cost they have is to unbrand it.
Dolphin is the more stable product and the bare bones software is free but if you want it ad-free and brand-free, then there is a one-time cost for $100. Most.. if not all of the plugins cost (the really good ones can cost anywhere from $20-$30 a pop. The templates are also around $20-$30+. There are some decent templates for $10. The stability definitely seems there.
Dolphin is top notch, use that. I have no idea about Elgg, but if you say it is unstable, then it shouldn't even be a choice.
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