I chaired a session on VRM start-ups and VRM business models at VRM+CRM 2010.

We talked mostly about Open Source (Free Software), working in a decentralised / distributed way. I don’t think anybody cares much about the closed + centralised model.. we already have Google/Facebook.

Here are some of the business models which were discussed and my understanding about how some projects are thinking of making money..

Business Models

Open Source – pay for labour

The software is Open Source but a customer will pay developers to customise it for their needs or their market niche. We are using this model for early TrustFabric revenue.

Non-Profit

Work for free, because it’s fun. No money involved. One person in the group claimed to be doing this, but it seemed to be mostly around setting standards rather then providing a practical service.

Government Funded

Government gives initial funding with the idea that the project becomes self sustainable in future. There was an example of medical record storage in the US. I know of projects which the EU and UK governments have funded, so this seems to be gaining momentum.

4th Party Hosting
A service provider (like an ISP) could host personal data stores for end users. End users could pay their hosting provider or choose to give the hosting provider access to some of their data and view advertising. I don’t really know of an example of this one.

Freemium
Give away free basic hosting, show some ads, sell the advanced features. Something like the WordPress.com model.

Apps
Give away the basic platform but make money on the (SaaS) apps running on top of the platform.

Current Projects

How are existing VRM businesses/projects making money?

Disclaimer: I think a few people are not ready to share their full business models at this time and it’s early days for VRM business models. This is my basic understanding (read: I could be very wrong).

A list of projects from the VRM Wikipedia page:

Azigo – Software development house, Open Source
EmanciPay – University project
Kynetx – Software development and web services platform/language, not Open Source
ListenLog – Government/University funded
Mydex – Government funded + App model, seems centralised
Paoga – Not sure
SwitchBook – VRM search, I’m guessing sellers will pay
TrustFabric – Open Source, pay for customising (in the beginning)
UMA – Seems you pay to become a member
The Mine Project Non-profit, no money involved
NHIN Direct – Government funded

How I’d like things to work

With my customer / end-user hat on:

VRM should not cost me any money (no barrier to entry) and I don’t want to see any ads (I value my attention). I may choose a hosted option or I may host my own service. I’ll probably start with the hosted version but I need an easy way to migrate all my data when I move to my own server.

My 1st prize business model:

I think there should be a way for businesses to carry the cost of VRM systems and hosting. The more value a business gets from VRM the more they should pay. I don’t like the attention (ads) business model. We can do better.

From the TrustFabric about page:

How do you make money?
In short, businesses pay TrustFabric because we help them be more efficient in interacting with their clients.. we’d like to think we make money based on savings we show them. So, businesses pay, but TrustFabric is free to end users (customers), forever. It’s NOT yet another advertising based business model.

The way forward

I think the key to a successful VRM business will be to find a niche.. a market where you can show real value quickly. VRM has a massive scope. We should not try to “boil the ocean”.

VRM platforms exist today. The real challenge will be to build a community of developers around open source projects and to have a good user adoption strategy.

I suspect that we’ll have much more clarity on VRM business models in the next year. Exciting times for a new industry.

ps. If you are reading this you can say.. I was there at the beginning, when it was still (un-) cool (-;