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Commercial open source, the future state

Commercial open source is evolving as fast as the technical innovation it fosters. Are open-source vendors balancing community and revenue effectively?

In preparation for my upcoming OSBC session, "Open-Core Licensing: The New Business Model Standard for Commercial Software," I dug through some old presentations to try to figure out how monetization efforts have changed in commercial open-source companies.

Ultimately, revenue from open source boils down to understanding buyer types, as described by former MySQL CEO and current Sun Senior Vice President Marten Mickos starting all the way back in 2005.

Marten described the buyer market for open-source solutions as:

  1. Those who spend time to save money
  2. Those who spend money to save time

Marten has also asserted that "in the past, differentiation was a compelling reason to buy but, if incorrectly implemented, it could also drive the compelling reason to abandon."

That statement leads into the topic of discussion around open-core licensing and the associated risk-versus-reward scenario as open-source vendors manage projects to balance revenue and community.

The big challenge for vendors trying to monetize open-source products is how to encourage payment for something (anything?) while not bastardizing the user base that is hooked on the free software. I've outlined below my latest attempt at explaining the commercial open-source evolution--or at least, an explanation of how several companies have matured their models to ensure both community and financial success.

  1. Support + free code
  2. Support + commercial license
  3. Support + commercial license + indemnity + warranty
  4. Support + commercial license + indemnity + warranty + exclusive features

Obviously, there are exceptions to the rules in all cases, and in fact certain companies, such as SugarCRM figured out early on that they could use the leverage point of "exclusive features" to get customers, while also encouraging development of the community.

It's not clear what the future holds, but I suspect we'll continue to see a movement toward No. 4 above (support + commercial license + indemnity + warranty + exclusive features) and an increased attention to community development that ensures users have the ability to create their own exclusive features if what they want is not readily available in the free product.

As Redmonk analyst Michael Cote wrote in "Making Billions with Open Source, Revisited," "it's those 'highly scalable, highly monetizable businesses' that are a tougher nut to crack, and a little help from closed source can look like a big mallet."

We'll be discussing the impact of open-core on buyers and vendors at OSBC on Wednesday, March 25 from 11:40 a.m. - 12:30 p.m.

Follow me on Twitter @daveofdoom