[Note: since I am writing this from a sunny beach, with a cell phone, I will not be able to add more than a few links to external pages. Will add the rest of them at my return, after the 12th of July]
It seems that Open Core continues to be the source of significant debate; I wrote quite a few posts in the past, and Open Core was one of our researched business models (for more details, see my LinuxTag presentation on business models). I would like to enter again the debate with a few short comments on my own:
- Companies using OC are not the devil, and should not be called names because of their choice of business model. Actually, there are no good and bad business models - only models that work, and those that do not. So, if open core works for a company, that’s a good thing.
- Open core models are somehow confusing for adopters. As a consultant for more than 100 companies and public administrations, actually explaining open core is one of my most common tasks. And the marketing message of companies is confusing: if you go to the Zimbra webpage (no offence against Zimbra, which is a company/product I love and use as example of good practice) you see the phrase “Zimbra – the leader in open source email and collaboration”, not “Zimbra – the leader in open source and proprietary email” (not that the phrase would win any context ) and the same for all the other open core companies. This is not, in my opinion, such a negative point if the website explains the difference between versions in a simple way, as for example both Zimbra and Alfresco do.
- It is true that open core models tend to have a higher revenue than non-OC models. It is also true that OC does have an intrinsic limited number of contributions from outside (as we found in FLOSSMETRICS analysing a few hundreds packages), and as can be found in the mentioned LinuxTag presentation. So, you may have higher monetization ratio, but you basically forfeit external contributions. The CEO should decide what is more important – so the decision is not “ethical”, but practical and based on economics. You will never get the kind of participation that Linux, Apache and Eclipse do have in an Open Core model. If that is ok for you – that’s great.
- The fact that most VC are funding open core companies is just a data point. Lots of open source companies do well without VC funding.
- It is true that lots of people claims that “pure” open source models are not sustainable. Even my friend Erwin Tenhumberg (that is quite knowledgeable, expert and incredibly nice on its own) had a slide in this sense in his LinuxTag presentation; and you can find lots of comments like that in many publication (something like “the majority of OSS companies adopt the so called mixed model”, despite this being actually false, as we found in our survey of OSS companies). The point, like said before, is that the important thing is not that there is a superior model, but that for every company, every market there is an optimal model – it may be OC, it may be pure services, or lots of combinations of our 11 building blocks. The optimal model changes with time and market condition, and what is appropriate now may be wrong tomorrow.
- No open source model can achieve the kind of profit margins of proprietary companies. So, if you want to make your OSS company, remember this basic fact. If you want the kind of profit margins of Microsoft or Oracle, forget it.
So, to end this post, there are three critical points: whether the model is clear for the adopter (and this should be a given, and actually nowadays I would say that most companies are absolutely honest and clear on this), whether the software in its open source edition provides sufficient functionality to be useful to a wide range of adopters (and this is a fine line to walk, and requires constant adaptation) and whether the increased monetization compensates for the lack of external contributions, that can substantially increase the value of the code base (you are trading cash for code and engineering, in a sense).
Can we put this to rest? End the name calling, be friends, and call all of us family? Especially since right now, under the sun of Fuerteventura where I am writing this, it seems difficult to fight
[by the way: sorry for any misspelling. There is no spell checker here on this small screen...]