As the open source movement continues to mature the industry is increasingly recognizing that truly free and purely open software does not provide a usable business model that can and will allow for growth. As Matt Asay of CNET properly recognized (see Asay comment after comment 2), while it is nice to ponder open source companies remaining private and foregoing the public funding route, by refusing to proceed down a path that would lead to a large infusion of cash is to doom the open source movement and ensure that it never really becomes mainstream. Whether anyone likes it or not, innovation takes time and costs money, and innovation associated with open source software is no different. Sure, a computer programmer with time on their hands can write code and freely give it away, but that is not a business model or innovation strategy that will lead to widespread acceptance or use. In order for open source companies to grow they need to rely on investors who fund development, and investors are only going to be interested in funding development if there is a proprietary strategy in place. It is as simple as that.
Andrew Lampitt is widely credited as first articulating an open core business model that combines the freedom of open source development with the essential proprietary aspects that allow for commercial success. While Lampitt modestly says he did not invent this concept, he is indeed the one who thrust an unique spin on dual licensing strategies to the forefront back in August of 2008. He proposed the following open core licensing business model:
– core is GPL: if you embed the GPL in closed source, you pay a fee
– technical support of GPL product may be offered for a fee (up for debate as to whether it must be offered)
– annual commercial subscription includes: indemnity, technical support, and additional features and/or platform support. (Additional commercial features having viewable or closed source, becoming GPL after timebomb period are both up for debate).
– professional services and training are for a fee
Since then he has written about this on several occasions, and many others have picked up on this thread, excited by the prospects of combining open source development with proprietary aspects that allow for investors to see growth potential and businesses to differentiate.
As can be expected, those in the open source movement who believe the “free” in free software not only refers to freedom to build on an existing platform but also relates to zero cost believe there can be only one version of open source software and having an open version and a commercial version is antithetical to the meaning of open source. To this Brian Gentile, the Chief Executive Officer of Jaspersoft, explains that successful open source companies are necessary:
[S]ome have claimed the only true and legitimate open source model is to provide identical community and commercial editions of the source code. The argument is that relying exclusively on services and support revenue will sufficiently sustain and that creating commercial extensions renders an open source company no different than a proprietary software company. Minimally, this argument misses a valuable history lesson. Most major software categories where open source has positively disrupted have required successful commercial open source companies to eventually use a model similar to open core, in order to continue growing.
Asay also seems to agree with this position, having said that while he thinks some commentators, such as Savio Rodrigues, go to far: “any business must figure out a ‘proprietary’ differentiator that tells a customer, ‘This is why you buy from me rather than my competitor, and rather than taking it from me for free.'”
Just yesterday Savio Rodrigues also wrote about how open source vendors should focus on both value and price, saying:
I’ve seen too many open source vendors simply beating the “lower cost” drum. At times they also highlight “not proprietary” as if this is a highly valuable feature, one compelling enough to choose product X over a proprietary product Y. I don’t see value in “nonproprietary” for at least two reasons. First, with open standards, the risk of lock-in is reduced not with the availability of source code, but the availability of multiple implementations of the open standard. Second, since the large majority of open source vendors are adopting an open core model, the product for sale can be just as closed source and proprietary as traditional software.
The critical point here is that you cannot build a business and attract customers by only touting lower cost and savings. At the end of the day customers want a working product, one that does what it is supposed to do and offers advantages. Many customers also have an aversion to products and services that cost to little because cost is at least some evidence of quality. If what you were offering is of such high quality and so good why would you have to practically give it away?
Open source developers do not do themselves any favors by believing in the greater good and continually believing that software should be freely available to all and not subject to any proprietary protections. As the 451 group explains, altruistic and service based business models are outdated, and the power of open source is community based sharing of development costs:
As the open source development and distribution model has been adopted, either partially or fully, by both startups and established software vendors, some of the assumptions about open source software have taken a back seat to commercial reality. For example, the idea of a community of individuals sharing the development of software projects for the greater good has been superseded by the image of a community of vendor employees sharing the development of software projects to increase code quality and lower production costs.
Similarly, the idea that the only way of generating revenue from open source software is through specialist vendors that make the majority of their money providing support services has also become outdated. There are now a wide variety of methods used by vendors to generate revenue from open source software.
The growing consensus of those who are not afraid to admit that business is about making money seems to be that in order for the open source movement to continue to grow, develop, mature and become mainstream new business models are required and those new business models should leverage on proprietary additions to open source foundations. This does not call into question the benefit of open source software, but recognizes the limitations on true free open source software. Open source is best when it is used to establish a common foundation that can be built upon, and there is simply no sustainable business model associated with free software meaning no-cost software. There is also no sustainable and scalable business model that will attract investors and needed capital where revenue is tied only to services and support. There are only so many hours in a day and time can only be sold for so much money, so there is a significantly limiting cap on total revenues when fee for service is the only operational, revenue driving model.