A guest post from Mårten Mickos in response to Simon Phipps's statement of opposition to so-called "open core" models. Mickos argues that "for an open source company to become commercially successful, it needs to have an unfair advantage against its competition". He is the CEO of cloud start-up Eucalyptus and former CEO of MySQL.
A characteristic and great feature of the world of free and open source software (FOSS) is that many of its participants love debating business models. Do closed source software vendors do that? I doubt.
Simon has some great points in his posting yesterday, reminding us all that the non-open features or services a company provides to its customers may lead to lock-in and reduction of freedoms for the customer. He also comments that open core businesses "stand to benefit massively" from this. It seems that he is arguing that this is a bad thing. My main point is the opposite: by having vendors in the open source space that benefit massively, we will have a stronger world of free and open source software (FOSS).
To have many companies that benefit massively in the open source space, I believe we have to practice many different business models. What works for Red Hat may not work for MySQL and what works for MySQL may not work for MuleSoft, and so on. A number of open source companies are implementing so called phone home features and other essential benefits of the product that are predicated on an online connection to the vendor's web service. Because a web service is a service and not a piece of software that gets distributed, many FOSS enthusiasts forget that those services are from all practical standpoints as closed as closed source code.
It seems to me that for an open source company to become commercially successful, it needs to have an unfair advantage against its competition - something that they cannot copy, use, modify or provide to their customers. Red Hat Network is such an example; CentOS and Oracle may copy the bits of the Linux distro, but only Red Hat can provide Red Hat Network. That unfair advantage is nearly always something that goes somewhat against if not the word at least the spirit of FOSS. This has been a traumatic realization for some in the open source world. We would love to see a world equally full of freedom and of successful FOSS businesses. But we don't. Perhaps unfair advantage and lock-in are like salt: it's unhealthy even in relatively modest amounts, but not having it all would be even worse.
The open core model, where you have a fully functional FOSS product at the core, complete and sufficient for deployment, and a separate "Enterprise" edition with non-open features or add-ons, is in line with the above thinking. The model attempts to create an advantage in the market for the vendor. But FOSS forces are also at play.
For instance, Compiere followed an open core model, and yet at one point a fork emerged based on the open core of Compiere. This indicates that open core companies operate within the major forces of free and open source software, and so it also indicates that the market is self-adjusting. If you go too far into the closed mode, you lose traction among open source users and you expose yourself to the threat of forks. Nothing prevents others from developing as FOSS some feature that the vendor has reserved for paying customers only. If you go too far into the open source mode, you may weaken your business model and fail to attract revenues to pay for your operations. Ultimately, customers are the arbiters of success. If they are ready to pay for access to the product or service, the company will have to be seriously mismanaged in order to fail.
My hope is that there will be many more companies based on open source, experimenting with many more business models. When we see some of those companies having success with customers, let us learn from them. In that way we can keep building a stronger ecosystem around FOSS - one which has room for both the purest and the most pragmatic licensing or business model. The big problem is not the innovative companies experimenting with open source business models, but the much less innovative companies who keep producing nothing but rigid and complicated closed source code or web services lacking openness in APIs and data.