A lot has been written for and against open core now. Yet in the end, a couple tweets can catch all that is needed:
scurryn @h_ingo -- So as long as 'an open core vendor' doesn't call themselves 'an open source vendor' then everything's fine?
h_ingo @scurryn: pretty much. I think I owe everyone one more blog post to answer that question with a few more details.
(Twitter)
This is that blog post.
My ongoing dialogue with Matthew Aslett inspired me to read more of his recent writings. An excellent piece Do not sell anything to your community is based on a blog post by Stephen Walli.
Inspired by Stephen, I also looked into a set of slides I recently created and will try that style for this post...
Aslett and Stephen make a great point:
the conversion of community users into paying customers has long been a concern for open source-related vendors. It has also long been a source of friction, with vendors that offer proprietary extensions being accused of “bait and switch” or otherwise undermining the value of the open source software in an attempt compel community users into becoming paying customers. In recent years the next generation of start-ups has learned that the best way to encourage a frictionless relationship between a vendor and its community is not to attempt to “convert” users at all.
Oh my. I was outside painting my house for a few days, and when I return back online I discover that now everyone is having an opinion on the open core business model. Since some participants are still trying to promote it as a valid open source business model, let's see what everyone is saying and highlight any pitfalls being offered...
Julie Bort of Networkworld.com has an interview with Mårten Mickos of Eucalyptus, formerly of MySQL. In MySQL times it seemed (to me at least) that most users never realized Mårten and his management team were taking MySQL increasingly into a closed source direction. (Maybe I'm just stupid myself, but at least personally I had not noticed this until after I started working for the company.) In this interview Mårten at least comes squarely out of the closet and is defending the model.
Julie makes a good journalistic effort of reporting on the topic from a neutral point of view. Alas, sometimes that approach just makes things fuzzier. So let me try to make one thing clear: Open core may be a good business model, but open core is not open source!
Tekes, a Finnish government agency funding R&D in Technology and Innovation (including MariaDB) has recently published a book on Finnish startups, (PDF), which contains a whole chapter on MySQL AB.
It seems to be a well researched chapter and references many past interviews over the years, as well as being based on interviews of at least Mårten, Monty and Kevin Harvey of Benchmark. This is the most comprehensive narrative I've ever seen of items like "InnoDB Friday", a phrase I thought until now was company confidential, since talking about it would have revealed there was something negative about the day Oracle bought InnoDB (no kidding?). It also reveals what MySQL (AB) thought about the fact that PostgreSQL at one time was more popular than MySQL in one country in the world: Japan, or how much it raised VC capital. On the other hand it still only mentions some issues anonymously or only between the lines and reader is left guessing whether he should fill in "Oracle", "SAP" or something else in the gaps. (And I'm too much a coward to blog the right answers... Ok, so Google will tell you Oracle is the one who tried to acquire MySQL several times before.)
If the recent debate about open core licensing has proven one thing, it is that the issue of combining proprietary and open source code continues to be a controversial one.
It ought to be simple: either the software meets the Open Source Definition or it does not. But it is not always easy to tell what license is being used, and in the case of software being delivered as a service, does it matter anyway?
The ability to deliver software as a hosted service enables some companies that are claimed to be 100% open source to offer customers software for which the source code is not available. Coincidentally, James Dixon has this week highlighted one example in the form of Nuxeo Studio, a configuration and customization environment for the Nuxeo ECM offerings, which is delivered as a hosted service to Nuxeo’s Connect – Developer subscribers.
The nature of Studio’s license came up in a conversation I had recently with Nuxeo CMO Cheryl McKinnon, and I had been meaning to write a post on the subject of hosted subscription services ever since.
Nuxeo Studio is the latest in a line of value-added subscription services that blur the lines between open and closed. It started, arguably, back in 2001 with Red Hat Network, a hosted monitoring and management service. The stand alone Red Hat Network Satellite followed two years later but it wasn’t until June 2008 that the code officially became open source, as project Spacewalk.
Similarly, JBoss Operations Network was first introduced as JBoss Network, part of the JBoss subscription, in March 2005. The code for that was made available in the form of the Jopr project in 2008.
Meanwhile MySQL introduced MySQL Network Monitoring and Advisory Services as part of MySQL Enterprise in October 2006 as it continued its shift towards subscription revenue (and away from its traditional dual licensing approach).
More recent examples include Nuxeo Studio and Acquia Network’s remote site management services.
In his post James Dixon argues that the delivery of a service like Nuxeo Studio is effectively the same as the open core licensing model, in that it is the delivery of proprietary extensions to an open source core. Florent Guillaume, director of R&D at Nuxeo, and Eric Barroca, Nuxeo CEO, have responded in the comments to that post and Eric’s original to argue that it is not.
My own feeling is that Nuxeo’s approach is not open core, since the original definition of open core concerned proprietary products. However, the existence of Nuxeo Studio means that Nuxeo is clearly not 100% open source.
For that reason, I have come to believe that we need to add a new revenue trigger category to our open source business strategy model, that makes a clear distinction between support subscriptions for 100% open source code, and value-add subscriptions that offer additional hosted services.
It is also a reminder of the importance of transparency. Open core vendors are regularly attacked for misleading potential customers with the promise of open source while delivering traditional licensing. Our recent transparency test indicated that for the most part open core vendors are clear about what features are in which version, and with which license.
I spent some time the other day investigating the web sites of various OSS-related vendors and unfortunately the same cannot be said of all vendors (whether they are open core or “pure” open source).
Too often phrases like “open source subscription license”, “commercial open source license” and “value-added component” are thrown around without any explanation of what exactly is meant, and the so-called open source purists are not immune to glossing over the details.
Simon Crosby recently commented that everybody making money with open source actually has a proprietary angle. I don’t think that is 100% true, but it is getting harder and harder to identify the open source purists.
Last week I presented “From support services to software services – the evolution of open source business strategies” at the OSBC event in San Francisco.
The presentation was effectively a work in progress update on our research into the various strategies employed by technology vendors to generate revenue from open source software.
It included a partial explanation of my theory that those strategies do not exist in isolation, but are steps on an evolutionary process, and also introduced our model for visualizing the core elements of an open source-related business strategy.
I provided a number of examples of how the model could be used to compare the strategies of various open source businesses. Here, for example, is the visualization of MySQL’s strategy.
I was pleased with the response to the presentation, not least the number of people who asked us to send them the slide so they could fill it in for their company and send it back to us.
This is definitely something we would like to do in the future but before we do I would like to ensure we have dealt with any problems related to the model. For now I would be more interested in hearing from companies that feel their strategy is NOT covered by the model.
As Jack Repenning has pointed out, the model does not offer the granularity to express some of the nuances of the various “open complement “ strategies where open source code is not monetized directly but via complementary products (and in my own presentation I had to go beyond the model to discuss “open inside” – building proprietary products on open foundations, and “open edge” – using open source to drive innovation on top of a closed platform).
My initial feeling is that there will always be a level of detail that cannot be expressed in a simplified model such as this, although if I can build them in I will.
The development model category also needs some tinkering, not least to cover “gated community” approaches.
Additionally, of course, the model is not great when it comes to multi-product companies (although multiple models can be used to explain a larger strategy).
So anyway, if you think your company does not fit our model, do please tell us how. To help you understand how the model works, here’s a quick user guide and glossary of terms.
Revenue triggers:
These are the things that paying customers actually pay money for (apart from advertising which is an indirect relationship). They should be pretty self-explanatory. When we refer to “support services” we mean support, training, consulting, implementation services etc. “Software services” refers to SaaS and cloud delivery. Vendors can have multiple revenue triggers for a single product.
Software license:
For the purposes of this exercise we are interested in whether the company has a preference for permissive or reciprocal licensing for the underlying open source project, or uses both.
End user licensing:
What licensing strategy is applied to the product that customers pay for (as opposed to the project that it is based on)? It could be the same open source license (single open source) or a combination of open source licenses (assembled open source). It could be that the same code is available using open source and commercial licenses (dual licensing) or that commercial extensions are available (open core). Alternatively, a vendor may not monetize the open source project itself, but offer complementary software or hardware products (open complement), or may turn the open source code into a fully proprietary product (closed). Pick one.
Development model:
This requires a two-part response. Is the open source code developed in public, in private, or a combination of the two (public/private)? Pick one.
Is the development effort dominated my employees of a vendor, or the result of true community collaboration, or an aggregate of multiple projects? Pick one.
Copyright:
Who owns the copyright for the open source code? Is it the vendor in question, a foundation, a distributed collection of companies/individuals, or another company (withheld)? Normally this would be a matter of picking one of the four options, although if a portion of the copyright is withheld, that could be used along with one of the other three.
Do your worst.
There’s been a fair amount of attention – both positive and negative – on dual licensing in recent weeks. A few days ago Brian Aker wrote: “The fact is, there are few, and growing fewer, opportunities to make money on dual licensing.”
It is a sweeping statement, but one that is worth further consideration, especially since, as Stephen O’Grady noted it is directly contradicted by Gartner’s prediction that: “By 2012, at least 70% of the revenue from commercial OSS will come from vendor-centric projects with dual-license business models.”
Success?
I remember reading this prediction back in December but dismissing it as being based on a fundamental error – the assumption that dual licensing and open source licensing are “essentially the same thing”. As Stephen argues, and we have previously clarified, they are not the same thing at all.
Dual licensing is the practice of selling exceptions to use an open source code base using a commercial license, while open core licensing is the practice of selling extensions to an open source code base. One of them is considered acceptable by Richard Stallman, and one isn’t (more on that in a minute).
As Stephen O’Grady notes, however, the Gartner prediction is further flawed. Even if we were to accept its definition of dual licensing, the prediction is undermined by mathematics. A couple of quick calculations suggest that Red Hat’s annual revenue this year will be easily be more than the rest of the top ten open source specialists combined.
Of course, this calculation very much depends on which vendors you choose to include, and it is quite possible that Gartner’s definition of dual licensing also includes vendors that sell proprietary software that includes or complements open source software. That would make the prediction more realistic in terms of revenue numbers, but would stretch the term “dual licensing” beyond the definition of most people.
It is safe to assume then that “dual licensing” as most people understand it is not going to be as successful as Gartner predicts. But what of Brian Aker’s prediction of its imminent failure? It probably goes without saying that reports of its demise have also been exaggerated.
Failure?
While it is undeniably true that dual licensing has diminished in popularity as a business strategy in recent years (as many commercial OSS specialists have opted for open core extensions as a quicker way to monetize community adoption and proprietary vendors have focused more on open source as a R&D cost-sharing exercise and avoided the community-limiting aspects of dual licensing) there is still a time and a place for dual licensing.
Dual licensing has got itself a bad name in some quarters (“MySQL != Free Software due to dual licensing“) but as mentioned above, it has the approval of Free Software Foundation president, Richard Stallman: “I consider selling exceptions an acceptable thing for a company to do, and I will suggest it where appropriate as a way to get programs freed.”
In fact, much of the criticism of dual licensing seen recently seems to be based on the view that it is used by commercial vendors to discourage users from adopting a free open source version. That is rarely, if ever, the case.
Where we do see dual licensing used, it is more often in enabling users that are unwilling or unable to use the GNU GPL to make use of the underlying code. In that way, dual licensing can be used to serve two different user groups, rather than attempting to cross- or up-sell open source users with a commercial version.
A good example of this is OpenNMS Group. The acquisition of copyright to the 1.0 code base in 2009 out the company in the position of being able to changing its licensing strategy beyong a pure open source approach. While the company is unlikely to go open core (Tarus Balog prefers to call it “fauxpen source”, OpenNMS has delivered Powered by OpenNMS – a commercial license program:
“While the OpenNMS Group encourages the adoption of open source software, some organizations, due to trade secrets, patents or other proprietary reasons, may not be able to use 100% open source software in their environment. The ‘Powered by OpenNMS’ program allows them to purchase the right to use OpenNMS under a more traditional license.”
That in itself does not guarantee the continued use of dual licensing. But it does demonstrate. along with the comments of Richard Stallman, that dual licensing remains a valid strategy for generating revenue from open source software that is compatible with the principles of free and open source software.
A couple of posts have been published recently worrying about the impact of more open source specialist vendors being acquired by proprietary vendors.
This is an issue that crops up occasionally. Usually when a major acquisition has been announced, and the current questioning seems to be driven by the ongoing saga of Oracle-Sun-MySQL, as well as the rumoured purchase of Zimbra by VMware.
While fear of the unknown is understandable, to my mind the concern about open source specialists being acquired by proprietary vendors is driven by parochialism and misplaced assumptions about the rate of acquisitions and the acquiring company’s intentions.
For a start the statistics suggest that acquisitions involving open source vendors have declined in recent years (contrary to our expectations to be honest). According to our preliminary figures there were 24 M&A deals involving open source vendors in 2009, compared to 29 in 2008 and 35 in 2007. Dave Rosenberg makes the case that we have seen less open source M&A than we might have expected.
There is always the fear, however, that a proprietary vendor could acquire an open source rival in order to shut it down. This is a theory we at The 451 Group investigated last year via a TechDealMaker service report asking “Could an open source project survive a hostile acquisition?” (451 clients can access the report here).
Looking at the history of M&A involving open source vendors we were unable to identify a single example of a proprietary vendor acquiring an open source project in order to kill it off.
Another significant fear involving open source acquisitions is that the acquiring company will suddenly change the licensing and/or pricing in order to generate revenue from users open source of the open source project.
To me this is a fear based on a false assumption that the only way to monetize open source is directly. If we look at the strategies used by proprietary vendors to generate revenue from open source (as we did oin our Market Insight Service report “How third parties generate revenue from open source“, which was itself adapted from our Open Source is Not a Business Model CAOS report) we find that they are more likely to do so indirectly via complementary products and services.
In contrast open source specialist vendors have no choice but to attempt to monetize the open source software directly, either through support or proprietary licensed add-ons, and we have observed that this creates an inherent tension.
There is also a false assumption that open source specialist vendors are more committed to an open source “philosophy”. Some are, to be sure, but some simply see open source as a means to an end - treating it as a license tactic that disrupts competitors and expends potential adoption. There is nothing inherently wrong with that, but it does mean that for a great many open source “projects” the idea of the development community is a myth.
As previously discussed, Matt Asay noted last year that “vendors that have proprietary selling points elsewhere don’t need to control open-source code.”
In fact, I would suggest that vendors with proprietary selling points elsewhere have more to gain from releasing control of an open source project. Dirk Reihle explained the financial benefits this week with his Economic Case for Open Source Foundations, including sharing development expenses, increasing profits per sale, increases sales, and expanding the addressable market.
The fact that proprietary vendors have proprietary selling points elsewhere means that they are also in a better financial position to trade control for community via a foundational approach, in contrast to open source specialists.
There may well be situations where the acquisition of open source specialists by proprietary vendors might give cause for concern, but I believe it is wrong to assume that the impact will be negative. While many open source specialists might have something to fear regarding increased M&A activity, in the broader context open source software has more potentially to gain from the increased involvement of proprietary vendors than it has to lose.
Since the European Commission announced it was opening an in-depth investigation into the proposed takeover of Sun Microsystems by Oracle with a focus on MySQL there has been no shortage of opinion written about Oracle’s impending ownership of MySQL and its impact on MySQL users and commercial partners, as well as MySQL’s business model, dual licensing and the GPL.
In order to try and bring some order to the conversation, we have brought together some of the most referenced blog posts and news stories in chronological order.
Part one took us from the announcement of the EC’s in-depth investigation up to the eve of the communication of the EC’s Statement of Objections.
Part two took us from there to the eve of the announcement of Oracle’s concessions.
We will continue to update part three, below, until either the acquisition or the EC’s investigation closes.
December 14: Oracle - Oracle Makes Commitments to Customers, Developers and Users of MySQL
“Oracle has engaged in constructive discussions with the European Commission regarding the concerns expressed by the Commission about the Oracle/Sun Microsystems transaction, and in particular the maintenance of MySQL as a competitive force in the database market. In order further to reassure the Commission, Oracle hereby publicly commits to the following…”
December 14: Commission welcomes Oracle’s MySQL announcement
“Today’s announcement by Oracle of a series of undertakings to customers, developers and users of MySQL is an important new element to be taken into account in the ongoing proceedings. In particular, Oracle’s binding contractual undertakings to storage engine vendors regarding copyright non-assertion and the extension over a period of up to 5 years of the terms and conditions of existing commercial licenses are significant new facts. In this context, Competition Commissioner Neelie Kroes recalls and confirms her statement of 9 December 2009 that she is optimistic that the case will have a satisfactory outcome.”
December 14: Jeremy Zawodny - Trust Oracle? Why?
“Back a few years ago when Oracle dismissing MySQL in public while working hard against it in private, I realized that they were simply trying everything they could to protect their crowned jewels: public denials and classic FUD paired with hush-hugh backroom deals. Nobody has managed to explain, in even a mildly convincing way, what has changed since then. Why should we suddenly trust Oracle? Their crowned jewels are still threatened by MySQL.”
December 14: BusinessWeek - How Oracle Disarmed EU Critics
“The most influential provision in assuaging regulators’ concerns about the proposed acquisition may be one of the least noticed. Amid Oracle’s commitments was a pledge to let other technology vendors continue licensing MySQL for use in their products for another five years.”
December 15: Henrik Ingo - We scared Oracle a little, but their promises for MySQL are mostly an insult to the Commission
“5 years, or any amount of years, as a limit to such assurances is not satisfactory and customers and partners would immediately loose interest in MySQL with this promise. The only workable solution has to be perpetual and irrevocable promises.”
December 15: Stephen O’Grady - Oracle, MySQL and the EU: The Endgame Q&A
“Remember June of 2008? Oracle hiked its prices by 15-20% with no detectible impact to its volume. If MySQL was a real, substantial alternative, wouldn’t we have seen wholesale migrations away from Oracle to MySQL? That we didn’t, and continue not to, tells me they’re two different markets.”
December 16: Sheeri Cabral - A MySQL Community Member Opinion of Oracle Buying Sun
“The FUD about Oracle slowing development MySQL are not valid, and not true. The motivations behind those spreading this FUD are monetary and selfish. As a community member, I have seen Oracle put plenty of time, money and effort into developing InnoDB. I look forward to even more of Oracle’s resources being used to develop MySQL further.”
December 16: Monty Widenius - Oracle gives only empty promises for MySQL
“Oracle is trying to win the case through press releases and public pressure instead of really eliminating the European Commission’s concerns. They show no respect for the European authorities or how we do things here. Oracle just want to dictate their own terms and expect us to accept them on face value.”
December 17: AP - Oracle expects EU to approve Sun deal next month
“Oracle’s president, Safra Catz, said in a statement Thursday that the company now expects that European regulators will “unconditionally” approve the Sun acquisition in January.”
December 28: Monty Widenius - Help keep the Internet free
Monty Widenius launches his petition to help save MySQL by claiming (amongst other things) that “It’s not in the Internet users interest that one key piece of the net would be owned by an entity that has more to gain by severely limiting and in the long run even killing it as an open source product than by keeping it alive.”
December 29: Mark Callaghan - Save MySQL, save the world
“MPAB continues to drive away potential supporters with the tone of their messages, the inclusion of pointless assertions, and the complete lack of references.”
December 29: Sheeri Cabral - Save MySQL by letting Oracle keep it GPL
“I cannot say whether or not Oracle would kill MySQL. However, I have already stated I believe Oracle will not kill MySQL. This is based on the fact that Oracle has had the chance to kill MySQL for several years, by making InnoDB proprietary, and has not.”
January 3: David Nielsen - Why “helping MySQL” reflects poorly on us all
“This has nothing to do with the software’s freedom status and given the FSF’s behavior as well as argumentation throughout recent years, the entirety of the inherent freedoms remain intact even when forking the existing codebase, meaning that this is entirely about the right to make money from proprietary use cases of the code.”