11 ms·

Problems With Open-Source Business Models

158 points by johnmark 8y ago

satvikpendem 8y ago
> Once you begin with the premise of “I need an open source business model”, it leads you down a path of “I need to monetize my project” rather than “I need to build a product that delivers value”. This is exactly how I feel as well. I am working on an open source to-do list + calendar (https://getartemis.app https://getartemis.app), source at (https://github.com/satvikpendem/Artemis https://github.com/satvikpendem/Artemis), and I try to subscribe to the same philosophy as Sentry[1] and Ghost[2], two popular products that are also open source but do not avoid generating revenue because of that. One must always strive to compete, whether it be through business model, or more often, product. You can release a good proprietary product, or similarly, a bad open source product; the quality of being open source does not necessarily add nor detract from the quality of the product itself. Sure, one can `git clone` the product, but due to the other factors in the business, the "soft skills" such as marketing, branding, sales and general business development, no one can reliably copy the company still generate substantial revenue [3]. This is not to say, however, that if your company is infrastructure such as a database, that no one will copy and monetize that better than you; they may, even in general usage of the product, but what is missing is the lack of vertical integration within the product. A database is just a part used in the whole of a new product, not the whole in and of itself. That is why if I desire to make substantial revenue from an open sourced product, I would make it a fully integrated product, just as any proprietary one, and that is what I am to do with Artemis. [1] - https://github.com/getsentry/sentry https://github.com/getsentry/sentry [2] - https://github.com/TryGhost/Ghost https://github.com/TryGhost/Ghost [3] - https://ghost.org/about/ https://ghost.org/about/
MrTonyD 8y ago
I've been working in Open Source for a long time now - decades. The problem I see is that so many rich and wealthy companies (and their billionaire owners) are the big beneficiaries of open source. Look at Spark, Hadoop, Linux, gnu tools and others - who uses them at a large scale? It is the wealthy companies who avoid paying salaries for the development of those tools. So I've become convinced that we should distinguish between small companies and large companies, and that small companies should get to use open source, while the big wealthy companies should be required to pay. It should be analogous to the free software given to education - with restrictions in license. (Of course, this won't happen. I'm just sharing my perspective.)
- tdb7893 8y ago
  I don't understand how big companies using it is a problem. Is them using it hurting the projects somehow?
  - Kalium 8y ago
    The idea is that big companies have money to spare and small companies don't. Therefore big companies should be paying for the benefits they are receiving to support the tools they rely on. I'm not convinced personally, but I think that's the idea.
  - ghaff 8y ago
    I don't agree with the parent's solution. IMO one of the things that open source software has done right is that it mostly doesn't distinguish what you can use the software for. However, I understand the point being made. It's essentially a tragedy of the commons argument. Because the companies that get the most value from open source are also often the ones with the greatest resources to give back to open source projects if they chose to, they have a moral obligation to do so. There's also a sentiment one often hears along the lines of: I'm fine with people using my work for free but I don't want them making money off it. (This is essentially the basis for Creative Commons' non-commercial variant). So it's not so much that large companies are actively hurting the projects--though you could argue that hosted offerings compete with the projects themselves. But that they often don't help in anything like the proportion that they benefit.
  - aaachilless 8y ago
    One might believe that OSS's raison d'etre is to increase equality in economic opportunity. If you see OSS dev that way and you see corporations like Google and Facebook as opponents of that cause, then if you agree with GP's statement on who the beneficiaries are, you might also agree with GP that there's a problem.
- tick_tock_tick 8y ago
  The biggest issue with this is very few "small" companies envision staying small forever. Who would risk building their company on a stack that you lose the license for if you do too well? I think what really happened is people didn't quite realize, or didn't think it would matter, what they were giving up when they open sourced their software. It sounds good and feels good but 5-10 years later when it's a core component at major companies it feels like you got ripped off even when you explicitly signed up for it.
vortico 8y ago
>There is no Open Source Business Model. Careful about universal claims. https://vcvrack.com/ https://vcvrack.com/ is an open-source business model and it works great for me.
- kuhhk 8y ago
  Why does this start downloading a file to my computer the moment I click on that link? That's pretty shady...
  - vortico 8y ago
    It definitely shouldn't. What is the filename? Do you have any compromised browser extensions or malware on your machine?
  - tick_tock_tick 8y ago
    nothing starts for me. what are you using?
- codetrotter 8y ago
  Are you the creator of VCV Rack? It’s a cool piece of software and certainly one of the most beautiful user interfaces I have used in an open source program. The project website is cool as well. Very nice with the images of the rack in the mobile version :)
  - vortico 8y ago
    Yes, thanks! The website isn't fully mobile-responsive, but it gets the job done. Since Rack is desktop software, the need for a mobile website is less than normal.
- angel_j 8y ago
  What is the business model?
  - vortico 8y ago
softwaredoug 8y ago
> But many of these companies experience difficulties with respect to their business models, as can be seen from a bevy of recent licensing schemes that attempt to straddle the line between open source and proprietary. It's not clear to me that Open Core has really failed. Case in point, Elastic just IPO'd for billions and has an open core. In their case they completely develop their project. Their community is something of a user community, and the contributor community is heavily Elastic managed. Sure those in the contributor community might complain about how hard it is to contribute, but 99.9999% of the community is more in the 'user' end of the spectrum and appreciate the stability of having a single company's vision and backing I'm not sure its in the spirit of open source, but that's not the question. The question is about effective business models. (more fundamentally 'open core' can mean so many different models it may be becoming meaningless)
- bragh 8y ago
  The problem with Elastic is that their security features are not in the open core and so people tend to skip on that by not even rolling their own IP whitelisting/authentication with a reverse proxy. This results in a huge information leak ending up in the news every few months and you having to explain to your sysadmins and IT that no, Elasticsearch is not insecure as a product, it's just how those people at SoLoMo PwnMeNow Inc. used it.
  - deleted 8y ago
    [deleted]
studentik 8y ago
Bread and butter is also 'open source', but not 'free'. There is no problem with 'open source' that is free for non-commercial usage and paid for commercial usage. Is this what GPL is about?
- ghaff 8y ago
  That's not what the GPL is about at all. No (OSI-approved) open source license has the distinction that you draw and one that did wouldn't be approved. (And it wouldn't be an open source license in the eyes of the Free Software Foundation either.)
  - studentik 8y ago
    Thank you! So charging for commercial usage is not considered 'open source' even when source is actually available?
    - ghaff 8y ago
      You can absolutely charge for a product that is based on an open source project. A simple example is you charge for support of an open source project. However, you cannot tell users that they can't use the (unsupported) open source bits for commercial purposes without paying you. Doing so would not be allowed under any approved open source license.
      - zzzcpan 8y ago
        > However, you cannot tell users that they can't use the (unsupported) open source bits for commercial purposes without paying you. Doing so would not be allowed under any approved open source license. OSI approved open source that is. And you can tell users anything you want actually. What you can't do with OSI approved open source license is choose a license not approved by OSI, doesn't matter what it says. But OSI approved open source is not true descriptive open source. SQLite, for example, is universally recognized open source, but not OSI approved. You can go this road and use a descriptive term and ignore OSI and its corporate backing.
jcoffland 8y ago
From the I'm-going-to-take-millions-in-VC-money-and-build-a-billion-dollar-unicorn perspective Open-Source will never make sense. I propose that it is the investment model that is flawed. Open-Source has many benefits that have nothing to do with making investors rich.
40acres 8y ago
Software, including open source, has a high fixed cost (lots of developer time and effort to get version 1.0 out the door) and a low marginal cost (once it's out there you can distribute via homebrew, for example, for no additional cost). With most successful software products, you are paying for the exclusive value that the software provides, with open source that value isn't exclusive at all.. I can simply copy your version and try to integrate it myself. So how does open source software make money? I think freemium and consulting might be good models. Let's say I'm open source organization that builds product X, this product is really popular, has a great developer ecosystem, solid roadmap, lots of folks are using it, etc. If it's good enough large corporations will try to use this product within their systems, why not audit how your customers are building on top of your systems and try to skate to where the puck is going and add an additional layer of features to support those enterprise use cases? The challenge with open source comes w/ integration, at a large scale your open source product is going to be changed to fit the needs of the customer. As the organization behind an open source product you are in prime position to be the leading consultant of this product and assist with integration. To me, this is the best model to make money on open source, however, it requires a really strong product. Something with very high adoption, not just a plugin that handles a very specific use case.
aequitas 8y ago
A talk worth watching about this is "Why I forked my own project and my own company ownCloud to Nextcloud" (https://www.youtube.com/watch?v=UTKvLSnFL6I https://www.youtube.com/watch?v=UTKvLSnFL6I) about how a Open core approach failed in many ways and a great inspiration on how a Open source business model can succeed.
buboard 8y ago
This is almost absolutely correct. Pity there isn't even a model to monetize the blog post, though. Monetization is a problem across the internet that seems to benefit the behemoths. Perhaps we need a middle-ground between open source and proprietary? Open source often becomes a signal to find business partners with similar potential needs. Perhaps you could share source with only 'approved partners', so you can together make "some money" instead of ($0 xor $1billion)
- tomcam 8y ago
  There are many ways one could monetize blog posts. It is not obvious to me that most blog posts are worth any money at all. Let’s take the best case scenario: How much are you willing to pay for the blogs that you read?
  - buboard 8y ago
    $0.20 per article. That's $300 CPM
    - tomcam 8y ago
      That’s a fair number. I am ashamed to admit, however, that I suspect I would second-guess too many blog entries and decide it wasn’t worth the money. Weird. I am disappointed in myself. But I typically read at least dozens of blogs a day. It could really add up.
      - buboard 8y ago
        oops $200 cpm. Still, $1-2 per day is nothing to fret about for most ppl in the west
tinyvm 8y ago
I strongly disagree with the hypothesis raised in the article. First , most open source companies these days are Ventured Back ( Elastic , CockroachDB, MongoDB etc..) meaning the core of the issue isn't "AWS" not paying license fees or people creating tech on top of Open Source , it's VCs who want their money back times ten. Companies like MongoDB/Elastic have raised hundred of millions and yet are still not profitable. Who's fault is it ? Did the MongoDB community ever asked the company to go that way ? Did MongoDB presented a roadmap to the community saying that they would have to be "profitable by Month X" or they would change their licence to make more money ? Nobody has forced those founders/companies hands to make their products open source nor to raise that much capital. If the industry is turning that way it is essentially because those businesses have used Open Source as a mean to reach the widest possible audience in order to increase growth and show great metrics to VCs and investors to raise absolutely obscene amount of cash. Vue.js and Laravel are two very well maintain and extremely profitable open source project. Those projects did not asked for 150M$ in fundraising and then realized : "Ooops we won't meet our 100% YoY Growth to satisfy VCs promises". If some companies are switching their licensing , it's mostly because they overestimated their technology value and can't show to investors the numbers they promised. This isn't due the "AWS Problem" or because of a "wrong business model" with FOSS.
- john_moscow 8y ago
  VCs don't care about profits anymore. Their bet is on getting hockey stick growth using tricks good enough not to spook the uneducated retail investor (that often involves selling dollars for cents) and then dumping the hot potato into the public market. It isn't long-term sustainable and it will result in a major correction one day, but that's the game currently.
  - EGreg 8y ago
    I think this is finally a very insightful comment about a common unspoken approach in the VC industry.
    - Judgmentality 8y ago
kemitchell 8y ago
If by "open source business model" you mean a model that entails getting paid for production of open source software, directly, there are several. Paid open source development happens all the time. If you pay me, I will release open source to do such-and-such. Despite decades of continuous doomsaying, new dual licensing companies pop up all the time. If you use my open source to build closed, pay me for an exception to my copyleft license's terms. Those are just the simplest and best known. There are others, as well as all manner of hybrids, explored and unexplored. My latest work theorizing approaches---modelling business models, so to speak---is here: https://blog.licensezero.com/2018/10/17/mapping-models.html https://blog.licensezero.com/2018/10/17/mapping-models.html My outline of "purebred" models begins here: https://blog.licensezero.com/2018/10/17/mapping-models.html#purebred-models-overview https://blog.licensezero.com/2018/10/17/mapping-models.html#... > Amazon and Google are not going to use your software, particularly your management software, “out of the box”, proprietary or no. They’re going to build their own management UX and UI, because they have their own particular requirements to serve their needs, and they’re going to build them using existing platform APIs. Licenses like MongoDB's SSPL leverage exactly this fact to address their business concerns. Mongo knows the big cloud providers are going to do their own custom service rigging, and that they'll keep it closed and proprietary. SSPL gives permission to use Mongo to offer Mongo as a service, but requires open release of the service rigging. I don't think companies writing and adopting these new licenses want to sell cloud providers proprietary licenses through their sales funnels. I think they'd rather stop cloud providers from offering their databases as services, full stop, or cut special deals with the cloud providers to resell their cores (Mongo) or popular add-ons (Redis, Elastic, ...). > You’re not going to resolve your own business mistakes by reverse-engineering a licensing solution to what was essentially a business model problem. Business model and license do not inhabit separate domains. They always intertwine.
niftich 8y ago
This post raises a lot of good points about the futility of this new wave of split-restriction licenses, but misses fairly obvious one. Entrepreneurs think they want to have an "open source business model" because they have marketshare-scaling problem: they want their software distributed to a wide audience such that it gains usage and mindshare, but not wide enough where AWS is selling their work as a managed service at prices they couldn't by themselves. And by and large, giving software away in a combination of gratis and libre maximizes the gains of mindshare and experience from both the curious amateur and the intrigued professional; the intellectual and societal implications may be different, but it gets used by the bulk of users in the same manner as shareware. For many of these newer projects, the libre aspect isn't a heartfelt belief -- it's a sort of loss-leader strategy to enable access to a particular type of audience, and unlock a particular type of language for marketing. Handfuls of people may exercise their rights to fork and/or redistribute, but plenty of intrinsic barriers exist to keep these from being a competitive threat -- until a sufficiently equipped and dedicated party like AWS or Google Cloud, that is. It's no surprise then, that some offerings are drifting more towards traditional shareware, where restrictions on use are the norm. In this space, we're seeing a conflict unfolding about the ideology and terminology used to describe such split offerings.
- zjaffee 8y ago
  I have to disagree with your premise. Entrepeneurs who are starting these sorts of companies were often engineers at larger employers and were on teams where originally built these platforms that had become open source and relatively successful while they still worked there. Then they realized they were able to raise funding to start their own company around the software they previously built and then decided to do so. This applies for most of the companies mentioned in the article, where open source software later released by the new companies were the mistakes they had made.
  - niftich 8y ago
    I don't disagree with your post; but I think we're talking about different things, because the article talks about multiple kinds of companies. You're right that the companies that are now relicensing are ones that were born from a tool they built first, before monetization was visible goal. I am addressing companies in a more general sense, when entrepreneurs search for market opportunities. That's where the article notes that some see "open source" as a market strategy on its own. And really, the dichotomy contributes to the situation. The ones who built useful tool and years later realized it may be monetizable are hemmed in difficult choices. Do they reneg on open source and go proprietary from this point forward, effectively forking their own product and leaving the gratis, libre one -- the one most people will have exposure to -- stuck on an old version? Do they split into an open core and proprietary enhancements? Do they write a novel license and hope consumers will self-select into tl;dr harmless amateurs and very handsomely paying corporations? And if SaaS providers take their old version, and that fork gains ground? Meanwhile, the ones who used 'open source' chiefly as a customer acquisition lead will face the same set of challenges. In the end, any artifacts published under an open source license are forever -- as long as the interest is there, a sufficiently dedicated party can take it, use it, enhance it, try to build a business around it, and the like. And any past version is a potential competitor, so your business models must be tolerant of that fact. They rarely are.
deleted 8y ago
[deleted]
cryptonector 8y ago
The best open source business model I've seen yet is SQLite's. That business model goes as follows: 0. produce something very widely useful 1. wait for it to become essential 2. create a consortium and profit from the dependence bred by #0 Granted, bootstrapping that is really really difficult.
- stingraycharles 8y ago
  The problem with this model is that quite a few of these open source companies are funded by VCs. In this case, a “consortium” is just never going to cut it, revenue-wise. The most profitable way appears to be to offer a cloud-hosted solution, and herein lies precisely the problem with AWS et al providing these services by taking the OSS software for free.
  - cryptonector 8y ago
    I don't see the problem. First, SQLite's developers are not an open source company funded by VCs. I don't know what funding they had originally, but they've leveraged their success into a well-funded consortium. Does it matter if it could or could not work in combination with VC funding? No: what matters is that the developers got funding, end of story. Second, I don't see why a company (regardless of funding source) couldn't spin off a consortium to fund further development of some open source created by that company. Your goal seems to be "profit", which is a fine business goal. Open source is a fine business tool, but not so much a fine business _goal_. It can help you profit, but it can also hinder. Open source is a business tool to be applied on a case-by-case basis. Open source is not easy to use as a core business value. That's because the most important core value to any public corporation is profit, and open source does not intrinsically lead to profit. Building a for-profit business around open source projects with open source as a core business value is undoubtedly difficult. Indeed, the example I gave is of a non-for-profit organization that funds development of one project. Open source is a tool with following costs and benefits (and risks), some of which are: - cost: loss of confidentiality for "secret sauce" embodied in open source - cost: the cost of opening a code base and keeping it open - cost: dealing with a community - benefit: good will - benefit: mind share (this is the big one) - benefit: quality (hopefully) contributions from the community - benefit: credit (especially for developers, which functions as a form of compensation and recruitment incentives) If for some project open source is a tool whose costs exceed the benefits, then don't open source that project. It's that simple.
davidw 8y ago
To have a viable business, you need to figure out what sort of scarcity you're going to take advantage of: https://journal.dedasys.com/2007/02/03/in-thrall-to-scarcity/ https://journal.dedasys.com/2007/02/03/in-thrall-to-scarcity... If the software is open source, the software itself is not scarce, so it makes it a bit trickier to figure out.
- finnreid19 8y ago
  I run a Discord bot on ~30,000 servers and my bot is completely open source. Clones have popped up, but nothing can beat the network effect of having my bot's messages popping up in chats and other people adding it to their servers.
EGreg 8y ago
Once you begin with the premise of “I need an open source business model”, it leads you down a path of “I need to monetize my project” rather than “I need to build a product that delivers value” And where do the resources come from to hire people and build it?
eruci 8y ago
I was pondering this very question as I just launched an open source reverse geocoding/geolocation name service API ( https://3geonames.org/api https://3geonames.org/api ) whose business model consists upon selling a nicely packaged server AMI on AWS. It works well both ways, in the sense that those who are capable coders may download and configure/install the software themselves. Some others will just skip the hassle and buy the Marketplace version. It is a win-win situation, insofar as someone does not take the time to repackage it and sell a competing version on the AWS Marketplace or some other sales channel. I have not figured out that part yet. Any suggestions?
- spectre256 8y ago
  We talked about running a Pelias geocoder AMI back at Mapzen, and it still might make sense today. I'd be really interested to hear how it works out for you. My personal feeling is that developers are irrationally averse to paying for someone else to set up and reliably run software for them, but that it's usually a massively good deal to pay for that service. Even a simple software project that takes an hour a month to keep running is well worth most companies paying $100/month to not have to worry about, for example.
  - eruci 8y ago
    It has worked out relatively well. (Mostly due to the fact we have no competition on geoparsing ) There are a few geocoding AMI's on AWS Marketplace. ( https://aws.amazon.com/marketplace/search/results?searchTerms=geocode https://aws.amazon.com/marketplace/search/results?searchTerm... ) Some big companies on the list (Pitney Bowes, Mapbox, Here) I've always held Mapzen in high regard as one of the best geocoding APIs to come out of the opensource camp. Mapzen would have been a nice addition to AWS for sure. Some companies prefer having their own server rather than sharing access to an API.
    - spectre256 8y ago
      Oh wow I didn't realize there were so many! And yeah, geoparsing is a huge challenge above and beyond "standard" geocoding. Specialization like that is a great asset. For us, we've really been focusing on the customization of Pelias for people who have specific needs. We have Elasticsearch under the hood which is perfect for that sort of thing, and the nature of customization is that an AMI probably can't do what our clients need. But probably someday it will make sense.
ChrisCinelli 8y ago
What are some companies that had 80% or more of the code they wrote open-sourced that ended up with profits of more than 1/2 million a year? Are premium add-on and support/consulting the model? Any platform company that made it?
ChrisCinelli 8y ago
I have been in some open source communities where making money was a recurring problem for the main contributors. But money was never the reason why people started contributing code to the project.
kevinAtStorj 8y ago
While traditional cloud providers have certainly made it difficult for open source companies to monetize the cloud, it seems that the marriage between decentralized cloud protocols and open-source is opening up new opportunities for OSS monetization. Decentralization takes the principles of open source and applies them to the very infrastructure on which software runs. At Storj, for example, we have an Open Source Partner Program that attempts to solve the ‘Amazon Problem’ by enabling any open source project to generate revenue every time their end users store data in the cloud. Storj tracks usage on the network and returns a significant portion of the revenue earned when data from an open source project is stored on the platform. Critically, this enables open source projects to derive sustainable revenue from usage, whether by commercial customers or non-paying open source users. In my opinion, this can help drive and support the next wave of Open Source monetization models.
- wartakode 8y ago
  Hi @kevinAtStorj, I'm really interested with 'Amazon Problem', is any further reference with this company behavior? As I'm aware (personal experience) not only Amazon taking profit from open source, and there are more company use open source for their core product, but not giving any feedback to open source community. Thanks
  - kevinAtStorj 8y ago
    Check out: https://storj.io/blog/2018/08/enabling-economic-empowerment-for-open-source-companies-via-the-storj-network/ https://storj.io/blog/2018/08/enabling-economic-empowerment-...
xmly 8y ago
If you are building a prop software/service above open source, your business success depends on two factors: 1. the popularity of the open source and 2. the goodness of the prod software/service.
- xmly 8y ago
  Comparatively, the business who only builds one software is much simpler. But for open source software itself, the success is not measured by money,but popularity and impact. Linus is successful on Linux work. People and history would remember him. Who cares about VCs in making history?
xte 8y ago
The problem is that we must mandate by law software to being open, easy to use, modify and deploy with simple means, that's to guarantee our freedom and democracy. Than the business model instead of selling (cr)app and training and migration solutions, certifications, ... we can sell time&knowledge of programmers and operation. Of course in this case many "administrative" & "marketers" will loose their job, but that's have a name: natural selection that it can be pushed a bit but sooner or later it will came by nature.
loktarogar 8y ago
I'm sick of these "considered harmful" articles

158 points by johnmark 8y ago

> Once you begin with the premise of “I need an open source business model”, it leads you down a path of “I need to monetize my project” rather than “I need to build a product that delivers value”. This is exactly how I feel as well. I am working on an open source to-do list + calendar (https://getartemis.app https://getartemis.app), source at (https://github.com/satvikpendem/Artemis https://github.com/satvikpendem/Artemis), and I try to subscribe to the same philosophy as Sentry[1] and Ghost[2], two popular products that are also open source but do not avoid generating revenue because of that. One must always strive to compete, whether it be through business model, or more often, product. You can release a good proprietary product, or similarly, a bad open source product; the quality of being open source does not necessarily add nor detract from the quality of the product itself. Sure, one can `git clone` the product, but due to the other factors in the business, the "soft skills" such as marketing, branding, sales and general business development, no one can reliably copy the company still generate substantial revenue [3]. This is not to say, however, that if your company is infrastructure such as a database, that no one will copy and monetize that better than you; they may, even in general usage of the product, but what is missing is the lack of vertical integration within the product. A database is just a part used in the whole of a new product, not the whole in and of itself. That is why if I desire to make substantial revenue from an open sourced product, I would make it a fully integrated product, just as any proprietary one, and that is what I am to do with Artemis. [1] - https://github.com/getsentry/sentry https://github.com/getsentry/sentry [2] - https://github.com/TryGhost/Ghost https://github.com/TryGhost/Ghost [3] - https://ghost.org/about/ https://ghost.org/about/

MrTonyD 8y ago

I've been working in Open Source for a long time now - decades. The problem I see is that so many rich and wealthy companies (and their billionaire owners) are the big beneficiaries of open source. Look at Spark, Hadoop, Linux, gnu tools and others - who uses them at a large scale? It is the wealthy companies who avoid paying salaries for the development of those tools. So I've become convinced that we should distinguish between small companies and large companies, and that small companies should get to use open source, while the big wealthy companies should be required to pay. It should be analogous to the free software given to education - with restrictions in license. (Of course, this won't happen. I'm just sharing my perspective.)

tdb7893 8y ago
I don't understand how big companies using it is a problem. Is them using it hurting the projects somehow?
- Kalium 8y ago
  The idea is that big companies have money to spare and small companies don't. Therefore big companies should be paying for the benefits they are receiving to support the tools they rely on. I'm not convinced personally, but I think that's the idea.
- ghaff 8y ago
  I don't agree with the parent's solution. IMO one of the things that open source software has done right is that it mostly doesn't distinguish what you can use the software for. However, I understand the point being made. It's essentially a tragedy of the commons argument. Because the companies that get the most value from open source are also often the ones with the greatest resources to give back to open source projects if they chose to, they have a moral obligation to do so. There's also a sentiment one often hears along the lines of: I'm fine with people using my work for free but I don't want them making money off it. (This is essentially the basis for Creative Commons' non-commercial variant). So it's not so much that large companies are actively hurting the projects--though you could argue that hosted offerings compete with the projects themselves. But that they often don't help in anything like the proportion that they benefit.
- aaachilless 8y ago
  One might believe that OSS's raison d'etre is to increase equality in economic opportunity. If you see OSS dev that way and you see corporations like Google and Facebook as opponents of that cause, then if you agree with GP's statement on who the beneficiaries are, you might also agree with GP that there's a problem.
tick_tock_tick 8y ago
The biggest issue with this is very few "small" companies envision staying small forever. Who would risk building their company on a stack that you lose the license for if you do too well? I think what really happened is people didn't quite realize, or didn't think it would matter, what they were giving up when they open sourced their software. It sounds good and feels good but 5-10 years later when it's a core component at major companies it feels like you got ripped off even when you explicitly signed up for it.

vortico 8y ago

>There is no Open Source Business Model. Careful about universal claims. https://vcvrack.com/ https://vcvrack.com/ is an open-source business model and it works great for me.

kuhhk 8y ago
Why does this start downloading a file to my computer the moment I click on that link? That's pretty shady...
- vortico 8y ago
  It definitely shouldn't. What is the filename? Do you have any compromised browser extensions or malware on your machine?
- tick_tock_tick 8y ago
  nothing starts for me. what are you using?
codetrotter 8y ago
Are you the creator of VCV Rack? It’s a cool piece of software and certainly one of the most beautiful user interfaces I have used in an open source program. The project website is cool as well. Very nice with the images of the rack in the mobile version :)
- vortico 8y ago
  Yes, thanks! The website isn't fully mobile-responsive, but it gets the job done. Since Rack is desktop software, the need for a mobile website is less than normal.
angel_j 8y ago
What is the business model?
- vortico 8y ago

softwaredoug 8y ago

> But many of these companies experience difficulties with respect to their business models, as can be seen from a bevy of recent licensing schemes that attempt to straddle the line between open source and proprietary. It's not clear to me that Open Core has really failed. Case in point, Elastic just IPO'd for billions and has an open core. In their case they completely develop their project. Their community is something of a user community, and the contributor community is heavily Elastic managed. Sure those in the contributor community might complain about how hard it is to contribute, but 99.9999% of the community is more in the 'user' end of the spectrum and appreciate the stability of having a single company's vision and backing I'm not sure its in the spirit of open source, but that's not the question. The question is about effective business models. (more fundamentally 'open core' can mean so many different models it may be becoming meaningless)

bragh 8y ago
The problem with Elastic is that their security features are not in the open core and so people tend to skip on that by not even rolling their own IP whitelisting/authentication with a reverse proxy. This results in a huge information leak ending up in the news every few months and you having to explain to your sysadmins and IT that no, Elasticsearch is not insecure as a product, it's just how those people at SoLoMo PwnMeNow Inc. used it.
- deleted 8y ago
  [deleted]

studentik 8y ago

Bread and butter is also 'open source', but not 'free'. There is no problem with 'open source' that is free for non-commercial usage and paid for commercial usage. Is this what GPL is about?

ghaff 8y ago
That's not what the GPL is about at all. No (OSI-approved) open source license has the distinction that you draw and one that did wouldn't be approved. (And it wouldn't be an open source license in the eyes of the Free Software Foundation either.)
- studentik 8y ago
  Thank you! So charging for commercial usage is not considered 'open source' even when source is actually available?
  - ghaff 8y ago
    You can absolutely charge for a product that is based on an open source project. A simple example is you charge for support of an open source project. However, you cannot tell users that they can't use the (unsupported) open source bits for commercial purposes without paying you. Doing so would not be allowed under any approved open source license.
    - zzzcpan 8y ago
      > However, you cannot tell users that they can't use the (unsupported) open source bits for commercial purposes without paying you. Doing so would not be allowed under any approved open source license. OSI approved open source that is. And you can tell users anything you want actually. What you can't do with OSI approved open source license is choose a license not approved by OSI, doesn't matter what it says. But OSI approved open source is not true descriptive open source. SQLite, for example, is universally recognized open source, but not OSI approved. You can go this road and use a descriptive term and ignore OSI and its corporate backing.

jcoffland 8y ago

From the I'm-going-to-take-millions-in-VC-money-and-build-a-billion-dollar-unicorn perspective Open-Source will never make sense. I propose that it is the investment model that is flawed. Open-Source has many benefits that have nothing to do with making investors rich.

40acres 8y ago

Software, including open source, has a high fixed cost (lots of developer time and effort to get version 1.0 out the door) and a low marginal cost (once it's out there you can distribute via homebrew, for example, for no additional cost). With most successful software products, you are paying for the exclusive value that the software provides, with open source that value isn't exclusive at all.. I can simply copy your version and try to integrate it myself. So how does open source software make money? I think freemium and consulting might be good models. Let's say I'm open source organization that builds product X, this product is really popular, has a great developer ecosystem, solid roadmap, lots of folks are using it, etc. If it's good enough large corporations will try to use this product within their systems, why not audit how your customers are building on top of your systems and try to skate to where the puck is going and add an additional layer of features to support those enterprise use cases? The challenge with open source comes w/ integration, at a large scale your open source product is going to be changed to fit the needs of the customer. As the organization behind an open source product you are in prime position to be the leading consultant of this product and assist with integration. To me, this is the best model to make money on open source, however, it requires a really strong product. Something with very high adoption, not just a plugin that handles a very specific use case.

aequitas 8y ago

A talk worth watching about this is "Why I forked my own project and my own company ownCloud to Nextcloud" (https://www.youtube.com/watch?v=UTKvLSnFL6I https://www.youtube.com/watch?v=UTKvLSnFL6I) about how a Open core approach failed in many ways and a great inspiration on how a Open source business model can succeed.

buboard 8y ago

This is almost absolutely correct. Pity there isn't even a model to monetize the blog post, though. Monetization is a problem across the internet that seems to benefit the behemoths. Perhaps we need a middle-ground between open source and proprietary? Open source often becomes a signal to find business partners with similar potential needs. Perhaps you could share source with only 'approved partners', so you can together make "some money" instead of ($0 xor $1billion)

tomcam 8y ago
There are many ways one could monetize blog posts. It is not obvious to me that most blog posts are worth any money at all. Let’s take the best case scenario: How much are you willing to pay for the blogs that you read?
- buboard 8y ago
  $0.20 per article. That's $300 CPM
  - tomcam 8y ago
    That’s a fair number. I am ashamed to admit, however, that I suspect I would second-guess too many blog entries and decide it wasn’t worth the money. Weird. I am disappointed in myself. But I typically read at least dozens of blogs a day. It could really add up.
    - buboard 8y ago
      oops $200 cpm. Still, $1-2 per day is nothing to fret about for most ppl in the west

tinyvm 8y ago

I strongly disagree with the hypothesis raised in the article. First , most open source companies these days are Ventured Back ( Elastic , CockroachDB, MongoDB etc..) meaning the core of the issue isn't "AWS" not paying license fees or people creating tech on top of Open Source , it's VCs who want their money back times ten. Companies like MongoDB/Elastic have raised hundred of millions and yet are still not profitable. Who's fault is it ? Did the MongoDB community ever asked the company to go that way ? Did MongoDB presented a roadmap to the community saying that they would have to be "profitable by Month X" or they would change their licence to make more money ? Nobody has forced those founders/companies hands to make their products open source nor to raise that much capital. If the industry is turning that way it is essentially because those businesses have used Open Source as a mean to reach the widest possible audience in order to increase growth and show great metrics to VCs and investors to raise absolutely obscene amount of cash. Vue.js and Laravel are two very well maintain and extremely profitable open source project. Those projects did not asked for 150M$ in fundraising and then realized : "Ooops we won't meet our 100% YoY Growth to satisfy VCs promises". If some companies are switching their licensing , it's mostly because they overestimated their technology value and can't show to investors the numbers they promised. This isn't due the "AWS Problem" or because of a "wrong business model" with FOSS.

john_moscow 8y ago
VCs don't care about profits anymore. Their bet is on getting hockey stick growth using tricks good enough not to spook the uneducated retail investor (that often involves selling dollars for cents) and then dumping the hot potato into the public market. It isn't long-term sustainable and it will result in a major correction one day, but that's the game currently.
- EGreg 8y ago
  I think this is finally a very insightful comment about a common unspoken approach in the VC industry.
  - Judgmentality 8y ago

kemitchell 8y ago

If by "open source business model" you mean a model that entails getting paid for production of open source software, directly, there are several. Paid open source development happens all the time. If you pay me, I will release open source to do such-and-such. Despite decades of continuous doomsaying, new dual licensing companies pop up all the time. If you use my open source to build closed, pay me for an exception to my copyleft license's terms. Those are just the simplest and best known. There are others, as well as all manner of hybrids, explored and unexplored. My latest work theorizing approaches---modelling business models, so to speak---is here: https://blog.licensezero.com/2018/10/17/mapping-models.html https://blog.licensezero.com/2018/10/17/mapping-models.html My outline of "purebred" models begins here: https://blog.licensezero.com/2018/10/17/mapping-models.html#purebred-models-overview https://blog.licensezero.com/2018/10/17/mapping-models.html#... > Amazon and Google are not going to use your software, particularly your management software, “out of the box”, proprietary or no. They’re going to build their own management UX and UI, because they have their own particular requirements to serve their needs, and they’re going to build them using existing platform APIs. Licenses like MongoDB's SSPL leverage exactly this fact to address their business concerns. Mongo knows the big cloud providers are going to do their own custom service rigging, and that they'll keep it closed and proprietary. SSPL gives permission to use Mongo to offer Mongo as a service, but requires open release of the service rigging. I don't think companies writing and adopting these new licenses want to sell cloud providers proprietary licenses through their sales funnels. I think they'd rather stop cloud providers from offering their databases as services, full stop, or cut special deals with the cloud providers to resell their cores (Mongo) or popular add-ons (Redis, Elastic, ...). > You’re not going to resolve your own business mistakes by reverse-engineering a licensing solution to what was essentially a business model problem. Business model and license do not inhabit separate domains. They always intertwine.

niftich 8y ago

This post raises a lot of good points about the futility of this new wave of split-restriction licenses, but misses fairly obvious one. Entrepreneurs think they want to have an "open source business model" because they have marketshare-scaling problem: they want their software distributed to a wide audience such that it gains usage and mindshare, but not wide enough where AWS is selling their work as a managed service at prices they couldn't by themselves. And by and large, giving software away in a combination of gratis and libre maximizes the gains of mindshare and experience from both the curious amateur and the intrigued professional; the intellectual and societal implications may be different, but it gets used by the bulk of users in the same manner as shareware. For many of these newer projects, the libre aspect isn't a heartfelt belief -- it's a sort of loss-leader strategy to enable access to a particular type of audience, and unlock a particular type of language for marketing. Handfuls of people may exercise their rights to fork and/or redistribute, but plenty of intrinsic barriers exist to keep these from being a competitive threat -- until a sufficiently equipped and dedicated party like AWS or Google Cloud, that is. It's no surprise then, that some offerings are drifting more towards traditional shareware, where restrictions on use are the norm. In this space, we're seeing a conflict unfolding about the ideology and terminology used to describe such split offerings.

zjaffee 8y ago
I have to disagree with your premise. Entrepeneurs who are starting these sorts of companies were often engineers at larger employers and were on teams where originally built these platforms that had become open source and relatively successful while they still worked there. Then they realized they were able to raise funding to start their own company around the software they previously built and then decided to do so. This applies for most of the companies mentioned in the article, where open source software later released by the new companies were the mistakes they had made.
- niftich 8y ago
  I don't disagree with your post; but I think we're talking about different things, because the article talks about multiple kinds of companies. You're right that the companies that are now relicensing are ones that were born from a tool they built first, before monetization was visible goal. I am addressing companies in a more general sense, when entrepreneurs search for market opportunities. That's where the article notes that some see "open source" as a market strategy on its own. And really, the dichotomy contributes to the situation. The ones who built useful tool and years later realized it may be monetizable are hemmed in difficult choices. Do they reneg on open source and go proprietary from this point forward, effectively forking their own product and leaving the gratis, libre one -- the one most people will have exposure to -- stuck on an old version? Do they split into an open core and proprietary enhancements? Do they write a novel license and hope consumers will self-select into tl;dr harmless amateurs and very handsomely paying corporations? And if SaaS providers take their old version, and that fork gains ground? Meanwhile, the ones who used 'open source' chiefly as a customer acquisition lead will face the same set of challenges. In the end, any artifacts published under an open source license are forever -- as long as the interest is there, a sufficiently dedicated party can take it, use it, enhance it, try to build a business around it, and the like. And any past version is a potential competitor, so your business models must be tolerant of that fact. They rarely are.

deleted 8y ago

[deleted]

cryptonector 8y ago

The best open source business model I've seen yet is SQLite's. That business model goes as follows: 0. produce something very widely useful 1. wait for it to become essential 2. create a consortium and profit from the dependence bred by #0 Granted, bootstrapping that is really really difficult.

stingraycharles 8y ago
The problem with this model is that quite a few of these open source companies are funded by VCs. In this case, a “consortium” is just never going to cut it, revenue-wise. The most profitable way appears to be to offer a cloud-hosted solution, and herein lies precisely the problem with AWS et al providing these services by taking the OSS software for free.
- cryptonector 8y ago
  I don't see the problem. First, SQLite's developers are not an open source company funded by VCs. I don't know what funding they had originally, but they've leveraged their success into a well-funded consortium. Does it matter if it could or could not work in combination with VC funding? No: what matters is that the developers got funding, end of story. Second, I don't see why a company (regardless of funding source) couldn't spin off a consortium to fund further development of some open source created by that company. Your goal seems to be "profit", which is a fine business goal. Open source is a fine business tool, but not so much a fine business _goal_. It can help you profit, but it can also hinder. Open source is a business tool to be applied on a case-by-case basis. Open source is not easy to use as a core business value. That's because the most important core value to any public corporation is profit, and open source does not intrinsically lead to profit. Building a for-profit business around open source projects with open source as a core business value is undoubtedly difficult. Indeed, the example I gave is of a non-for-profit organization that funds development of one project. Open source is a tool with following costs and benefits (and risks), some of which are: - cost: loss of confidentiality for "secret sauce" embodied in open source - cost: the cost of opening a code base and keeping it open - cost: dealing with a community - benefit: good will - benefit: mind share (this is the big one) - benefit: quality (hopefully) contributions from the community - benefit: credit (especially for developers, which functions as a form of compensation and recruitment incentives) If for some project open source is a tool whose costs exceed the benefits, then don't open source that project. It's that simple.

davidw 8y ago

To have a viable business, you need to figure out what sort of scarcity you're going to take advantage of: https://journal.dedasys.com/2007/02/03/in-thrall-to-scarcity/ https://journal.dedasys.com/2007/02/03/in-thrall-to-scarcity... If the software is open source, the software itself is not scarce, so it makes it a bit trickier to figure out.

finnreid19 8y ago
I run a Discord bot on ~30,000 servers and my bot is completely open source. Clones have popped up, but nothing can beat the network effect of having my bot's messages popping up in chats and other people adding it to their servers.

EGreg 8y ago

Once you begin with the premise of “I need an open source business model”, it leads you down a path of “I need to monetize my project” rather than “I need to build a product that delivers value” And where do the resources come from to hire people and build it?

eruci 8y ago

I was pondering this very question as I just launched an open source reverse geocoding/geolocation name service API ( https://3geonames.org/api https://3geonames.org/api ) whose business model consists upon selling a nicely packaged server AMI on AWS. It works well both ways, in the sense that those who are capable coders may download and configure/install the software themselves. Some others will just skip the hassle and buy the Marketplace version. It is a win-win situation, insofar as someone does not take the time to repackage it and sell a competing version on the AWS Marketplace or some other sales channel. I have not figured out that part yet. Any suggestions?

spectre256 8y ago
We talked about running a Pelias geocoder AMI back at Mapzen, and it still might make sense today. I'd be really interested to hear how it works out for you. My personal feeling is that developers are irrationally averse to paying for someone else to set up and reliably run software for them, but that it's usually a massively good deal to pay for that service. Even a simple software project that takes an hour a month to keep running is well worth most companies paying $100/month to not have to worry about, for example.
- eruci 8y ago
  It has worked out relatively well. (Mostly due to the fact we have no competition on geoparsing ) There are a few geocoding AMI's on AWS Marketplace. ( https://aws.amazon.com/marketplace/search/results?searchTerms=geocode https://aws.amazon.com/marketplace/search/results?searchTerm... ) Some big companies on the list (Pitney Bowes, Mapbox, Here) I've always held Mapzen in high regard as one of the best geocoding APIs to come out of the opensource camp. Mapzen would have been a nice addition to AWS for sure. Some companies prefer having their own server rather than sharing access to an API.
  - spectre256 8y ago
    Oh wow I didn't realize there were so many! And yeah, geoparsing is a huge challenge above and beyond "standard" geocoding. Specialization like that is a great asset. For us, we've really been focusing on the customization of Pelias for people who have specific needs. We have Elasticsearch under the hood which is perfect for that sort of thing, and the nature of customization is that an AMI probably can't do what our clients need. But probably someday it will make sense.

ChrisCinelli 8y ago

What are some companies that had 80% or more of the code they wrote open-sourced that ended up with profits of more than 1/2 million a year? Are premium add-on and support/consulting the model? Any platform company that made it?

ChrisCinelli 8y ago

I have been in some open source communities where making money was a recurring problem for the main contributors. But money was never the reason why people started contributing code to the project.

kevinAtStorj 8y ago

While traditional cloud providers have certainly made it difficult for open source companies to monetize the cloud, it seems that the marriage between decentralized cloud protocols and open-source is opening up new opportunities for OSS monetization. Decentralization takes the principles of open source and applies them to the very infrastructure on which software runs. At Storj, for example, we have an Open Source Partner Program that attempts to solve the ‘Amazon Problem’ by enabling any open source project to generate revenue every time their end users store data in the cloud. Storj tracks usage on the network and returns a significant portion of the revenue earned when data from an open source project is stored on the platform. Critically, this enables open source projects to derive sustainable revenue from usage, whether by commercial customers or non-paying open source users. In my opinion, this can help drive and support the next wave of Open Source monetization models.

wartakode 8y ago
Hi @kevinAtStorj, I'm really interested with 'Amazon Problem', is any further reference with this company behavior? As I'm aware (personal experience) not only Amazon taking profit from open source, and there are more company use open source for their core product, but not giving any feedback to open source community. Thanks
- kevinAtStorj 8y ago
  Check out: https://storj.io/blog/2018/08/enabling-economic-empowerment-for-open-source-companies-via-the-storj-network/ https://storj.io/blog/2018/08/enabling-economic-empowerment-...

xmly 8y ago

If you are building a prop software/service above open source, your business success depends on two factors: 1. the popularity of the open source and 2. the goodness of the prod software/service.

xmly 8y ago
Comparatively, the business who only builds one software is much simpler. But for open source software itself, the success is not measured by money,but popularity and impact. Linus is successful on Linux work. People and history would remember him. Who cares about VCs in making history?

xte 8y ago

The problem is that we must mandate by law software to being open, easy to use, modify and deploy with simple means, that's to guarantee our freedom and democracy. Than the business model instead of selling (cr)app and training and migration solutions, certifications, ... we can sell time&knowledge of programmers and operation. Of course in this case many "administrative" & "marketers" will loose their job, but that's have a name: natural selection that it can be pushed a bit but sooner or later it will came by nature.

loktarogar 8y ago

I'm sick of these "considered harmful" articles