A defense of the open core business model

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.

Mårten Mickos, CEO of MySQL responds to the critique of open core business models by Henrik Igo and Simon Phipps, which we covered here before.

Mårten Mickos:

“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.”

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