How do you make money from something that is free? Borrow some moves from the commercial open source playbook.

Massive Open Online Courses (MOOCs) are disrupting the higher education marketplace the way free and open source software disrupted the world of proprietary software more than two decades ago. The disruption in higher education, however, will be different in two key ways:

  1. It will happen twice as fast.
  2. It may spark a competition far different from the one you expect.

At America’s top universities, MOOCs are fueling a heated debate between faculty and administrators. Many professors fear that intimate classroom settings will be replaced by online courses where superstar professors teach on the web and everyone else becomes a glorified teaching assistant. Administrators, in contrast, see MOOCs as a way to reduce costs, gain efficiencies in non-core offerings and ‘export’ courses that reflect their university’s strengths.

Meanwhile, startups like 2u and nonprofits like edX are ready to capitalize on new business models evolving around MOOCs. These arguments for and against MOOCs make sense if you believe that the leading higher education institutions are in the business of selling and delivering education. Given this business model, the focus naturally falls on who teaches courses today, who will teach tomorrow and who will make money producing, delivering and distributing the courses.

But, what if we consider for a moment that the business model of leading universities may be undergoing a significant change that could render these discussions irrelevant? Sound absurd? Well, it also sounds preposterous to be in the business of free software.

When I tell colleagues from other industries that I run an open source software company, they immediately ask, “How do you make money if you give away your product for free?” Here is where the collective experience of commercial open source strategy might be able to shed some light on emerging business models ready to disrupt higher education.

Let’s imagine that the top tier of higher education is actually not in the business of selling education. Instead, they are in what I would term the “talent identification” business. The real payoff for universities comes not from selling courses but rather from finding and nurturing talent and then waiting for payback in the form of contributions to their endowments. Read more.