Archive for May 8th, 2009

Why we still debate “open core” and why it will not matter anymore

There is an interesting blog-debate between Tarus Balog of OpenNMS fame, Matt Asay of Alfresco and Matthew Aslett on the relative “good” and “evil” of open source, business models and more in relations to whether “open core” companies are really open source or not (and of course I could not resist in chiming in). Before rolling your eyes in disgust for the continuous discussion (that should enter now its 10th year, more or less) I would like to give you my impression on why this has continued to be debated, and why I believe it will be gradually less and less important, to the point that it will be no more than background noise.

Tarus starts with a very good analysis of why the open source definition and the free software definition can be considered to be equivalent, and thus creates an equivalence between open source and free software (that is something that I believe is valid, from the “legal” point of view). Then he extends the concept of open source to companies, and presents his view of what he calls “fauxpen source companies”, that is companies that are not distributing (all) of their software products under an open source license. I understand perfectly the reasons behind Tarus words, but I equally understand why Matt Asay is so vitriolic about them: they talk about different things.

I will state my position in advance, so as to provide some transparency: I have nothing against “open core” models (where part of the code is not available as OSS), and I perfectly understand why some companies may be more interested in adopting such a model instead of a “pure” model, where the entirety of the code is available under one or more OSS licenses. On the other hand, I found no proof of the fact that the open core or hybrid model is superior in terms of revenues, margins, long term sustainability and so on, despite the many papers and blog post that claim that the hybrid model is the clear winner (but unfortunately without any data or proof). So, I believe that Tarus is clearly upset of the fact that hybrid proponents are claiming the superiority of a model against the others, and the fact that by claiming that everyone is “open source” the vendors are effectively diluting the indentification capability of such a tag, and then OpenNMS (as a company) will lose one of the differentiating tools in its commercial proposition.

On the other hand, I clearly understand the fact that Matt clearly feels right in claiming to be part of an open source company, as the majority of the code is clearly OSS, and the recent introduction of non-OSS parts is limited. So, I believe that both are rights, and the problem will disappear with time, for economic reasons.

I will try to explain by using some of my previous words:

There is, however, a point that I would like to make about the distinction between “pure OSS” and “open core” licensing, a point that does not imply any kind of “ethical” or “purity” measure, but just a consideration on economics. When we consider what OSS is and what advantage it brings to the market, it is important to consider that a commercial OSS transaction usually has two “concrete” partners: the seller (the OSS vendor) and the buyer, that is the user. If we look at the OSS world we can see that in both the pure and the open core model the vendor has the added R&D sharing cost reduction (that, as I wrote about in the past, can provide significant advantages). But R&D is not the only advantage: the reality is that “pure” OSS has a great added advantage for the adopter, that is the greatly reduced cost and effort of procurement. With OSS the adopter can scale a single installation company-wide without a single call to the legal or procurement departments, and it can ask support from the OSS vendor if needed- eventually after the roll-out has been performed. With open core, the adopter is not allowed to do the same thing, as the proprietary extensions are not under the same license of the open source part; so, if you want to extend your software to more servers, you are forced to ask the vendor- exactly the same of proprietary software systems. This is, in fact, a much overlooked advantage of OSS, that is especially suited to those “departmental” installations that would be probably prohibited if legal or acquisition department would have to be asked for budget.

The point is that the “open core” against which Tarus fights is not relevant anymore. That is, that “fake” open source product, basically useless, used just as a leverage to the proprietary one is simply not a good strategy for distribution, as it does have none of the advantages of OSS and all the disadvantages of proprietary (in fact, most of those “fake” OSS companies are not in the market anymore, at least not in the same way). If you look at many of the most recent open core propositions, you will see that the real differentiating aspects are support, availability of stable releases, and only in minimal part ancillary non-OSS code, exactly the kind of model predicted by economic advantage for the buyer. The main point is the one I written a few years ago: for the model  to work, the Free Software product must be valuable to be attractive for the users, i.e. it should not be reduced to “crippleware”. If you look at some of the examples I presented to Matthew during our comment exchange, projects like TenderSystem, DimDim and many others are not using non-proprietary parts anymore as the main differentiating aspects, but more as “complements” that enrich a complex mix of services like support, binary packaging and testing, documentation and much more.

So, I believe that we will still see flames between experts, but it will become more and more a playful debate, similar to the one between soccer team fans – playful, heated, and ultimately not relevant for business.