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Is Open Source A Good Business Model For Your Company?

Is Open Source A Good Business Model For Your Company?

| On 29, Aug 2013

While terms like “cloud,” “big data,” and “devops” may be over-used and over-hyped, it should be clear to anyone in the industry that we are undergoing a fundamental shift in the way IT is delivered, consumed, and even conceived. What is also clear is that this new era in computing is being both driven and dominated by open source.

Ask almost anyone what the most significant and exciting technologies are, almost anywhere in the stack, and you are likely to hear the name of an open source project. Ask about Big Data, and you will most likely hear Hadoop or Cassandra. Databases? MongoDB , CouchDB, and Riak. Storage? Gluster and Ceph, come to mind. Networking? OpenFlow and now Open Daylight. Cloud as a whole? OpenStack seems an unstoppable force. Mobile? It’s hard to ignore the tidal wave that is Android.  Application delivery and devops? Take your pick of Chef, Puppet, Salt, Jenkins, or Docker.

 

As Eric Knorr recently wrote, “We’ve come a very long way from the old saw that ‘open source doesn’t innovate.’ Instead, you might ask: Is innovation in enterprise software happening anywhere else other than in open source land?”

 

Of course, any discussion of open source inevitably comes around to someone asking, “While this may be great for innovation, can open source be a sustainable business model?” As someone starting his second stint as CEO of an open source startup, I can answer with an unequivocal, “It Depends.”

 

Open Source makes sense for an increasing number of situations, especially when a company is trying to disrupt proprietary incumbents or when (as is true almost everywhere) there is a limited window to become prominent in a rapidly changing ecosystem. Indeed, I would argue that, in many situations, trying to make it as a small open source company is far less risky than trying to gain acceptance as a small, proprietary company.  Open source brings its own unique challenges, however, and certainly isn’t appropriate for everyone.

 

With that in mind, here are some questions to ask if you are considering becoming an open source company. The more that you answer “yes” to, the more likely that open source is the right strategy for your company.

 

 

Am I trying to sell into a market with entrenched, proprietary competitors?

If so, being open source can get you into accounts that would never speak to a proprietary startup. Additionally, it gives you the opportunity to compete on battlegrounds that favor you over competitors with larger sales forces, marketing budgets, etc.

 

Am I trying to enable an ecosystem and are there important open source projects around me in the stack? 

If so, being open makes it much easier to form and integrate into an ecosystem.

 

Do I have a clear idea of how to add value on top of the open source version, while making the open source version robust and valuable?

There are many interesting variations on the open source model, but they all depend on having both a big “top” of the funnel (lots of people using, trying, or loving the open source product), as well as a clear reason for a meaningful percentage of those people to pay (e.g. a managed service offering, support). If the only way to get people to pay is to make the open source version substandard, you won’t likely succeed.

 

Will being open source make me radically better than the alternative or will it just make me a cheaper alternative to an already good solution?

The best open source companies use being open to make themselves radically better, at least for certain markets or applications. For example, MySQL wasn’t just cheaper than the proprietary RDBMs, it was better for PHP and helped enable an entire stack (LAMP).

 

Is the nature of my project such that “many eyes” and “many contributors” will make it better? 

In my experience, this is more likely to be true of fundamental technologies, and less likely to be true for things dependent on an elegant user interface.

 

Is my project such that being tested at very large scale is key to success?

While you may never get paid by large universities or national labs, there are few places better to prove your product out at massive scale.

 

Do I understand the implications of being open source on development, QA, sales, marketing, financing, etc.? 

Being open was key to Gluster’s success, and has been key to how Docker is approaching the market. The decision has had significant implications for all aspects of the company. You can’t be “half open” any more than you can be half pregnant. Make the decision wisely.

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