451 CAOS Theory 
A blog for the enterprise open source community
Control and Community – and the future of commercial open source strategies
Matthew Aslett, November 3, 2010 @ 7:16 am ETBased on our ongoing analysis of open source-related business strategies it has become clear that maintaining a balance between control and community is the key issue facing vendors attempting to generate revenue from open source software.
That is why we chose Control and Community as the title of our latest CAOS report on the evolution of open-source related business strategies.
The report is the culmination of two years’ worth of analysis and research following the publication of Open Source is Not a Business Model in 2008 and builds on that report with an expanded analysis of the five elements influencing open source-related business strategies: software license, development model, copyright ownership, product licensing, and revenue generator.
The report includes the analysis of the open source-related strategies of 300 software vendors and subsidiaries, as well as a survey of 286 open source software users, evaluating their perspectives on the various open-source-related strategies. It also provides the evidence to support our recent assertions about the arrival of the fourth stage of commercial open source.
By plotting the strategies used by the vendors analyzed in this report against the year in which they first began to engage with open source projects we are able to get an approximate view of open source-related strategy changes over time. The results are intriguing.
We found, for example, that the formation of vendors using key strategies of vendor-led open source projects has declined in recent years, while vendors using strategies associated with community-led open source projects have been increasing since 2002.
Specifically, we discovered that the formation of companies using vendor-owned copyright and open core licensing peaked in 2005 and the formation of vendors using strong copyleft licensing, cathedral development, vendor-led development, dual licensing, closed source licenses peaked in 2006.
In comparison, the formation of vendors using the strategies associated with multi-participant open source projects has been increasing since 2002 (non-copyleft licences, distributed copyright ownership), 2004 (single open source licensing), 2006 (community development model), and 2007 (bazaar development model).
By grouping the 300 vendors assessed into three groups representing open source distributors, single-vendor open source and multi-vendor open source/proprietary distributors, it is possible to get an overall picture of commercial open source strategy usage over time.
(A companion chart showing absolute numbers on the Y axis for context, is here).
As can be seen, while the strategies associated with open source distributors dominate among companies formed between 1992 and 1999, the strategies associated with single-vendor open source are dominant among companies formed between 2000 and 2005. We have seen an increase in the formation of vendors using the strategies
associated with multi-vendor open source and proprietary distributors since then.
Our analysis also enabled us to compare open source-strategy usage with the strategy preferences of open source software users, proving some assumptions, such as the fact that vendor-led development, cathedral-style development, vendor-owned copyright, strong copyleft licenses, closed source software and open core licensing are all over-utilized by open-source-related vendors.
In comparison open foundation and open complement licensing strategies are relatively underutilized, along with non-copyleft licensing, bazaar development, foundational copyright ownership, and single- and multiple-open source licensing, as well as support subscriptions, value-added subscriptions, service/support and custom development.
The report also examines how proprietary software vendors have recognized that the true benefit of open source software is not only in disrupting markets through open source software licensing, but also through collaborating with partners, customers, and even competitors on non-differentiating features (something that many so-called open source specialists have failed to do) while continuing to generate profits from complementary products elsewhere in the value chain and also retaining their influence with those responsible for software purchasing.
Our conclusion, based on all the evidence, is that the software industry has entered the fourth stage of commercial open source business strategies, characterized by a shift away from projects controlled by a single vendor and back toward community and collaboration.
There is an increased focus on open source as a development model for the creation of software to be monetized indirectly, rather than a licensing strategy to spread adoption for direct monetization.
Our recommendation is that vendors that control open source projects need to transition toward more collaborative development in order to prove that they are more than just another software vendor that happens to release software using an open source license.
The report is freely available to CAOS subscribers, while non-clients can purchase it separately or apply for trial access. More details are available here.
Comments (19) Categories: Business strategies,Software,The 451 Group
Great analysis. Thanks Matt and the 451 Group team.
As a key contributor to a company that tried (and fell short) by following the vendor-led development/dual licensing approach to monetizing open source, its good to see two positive developments. First, the formation of projects and businesses leveraging open source advantages remains. Second, business model innovation is still critically needed to find a structure that works for the vendor, paying customers and community stakeholders.
While there is one publicly traded open source company (RHAT) and a few large and profitable software companies that have paid big $$ for businesses built around open source technologies (MySQL, SpringSource, Zimbra and XenSource), there is precious little business success around open source.
Customer success and innovation is a clear outcome from open source based on strong adoption of everything from Apache server to WordPress. Business success…I’m still looking for it.
Business success, typically measured on revenue and profit growth for vendors, ROI for investors and longevity for projects, needs to be a critical component of commercial open source. Today, unless I’m missing something, only a tiny minority of open source businesses are publicly reporting business success.
Thanks again to the 451 group for their reporting on the changing landscape of commercial open source strategies. It won’t be until these strategies are successfully delivering ROI that the commercial open source business vendors will be announcing and sharing their financial results. That’s when we know that workable strategies have arrived. Until then, business strategy innovation, experimentation, measurement and adjustment is the order of the day.
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