Managing expectations with Open-Core Licensing

Matt Asay has continued his public conversion to the merits of proprietary extensions/value-add services with the publication of a new post in which he argues that the Open-Core Licensing model is not just good for business but also good for community-relations.

“It’s actually quite difficult to distribute a 100 percent open-source product and monetize it at the same time. Support doesn’t scale. Determining how to make a ‘community’ release compelling while also selling an ‘enterprise’ release without selling ‘just support’ is tricky,” writes Matt, neatly explaining why commercially-licensed extensions are becoming the licensing strategy of choice for the new generation of open source-related vendors.

There are also benefits of the Open-Core Licensing model in terms of creating a clear distinction between the community project and the commercial product, which should enable vendors to better serve their two user groups.

As Matt puts it: “So long as the principle by which features are reserved for the enterprise release is clear and transparent, it enables the company to feed and foster its unpaid community base without reservation, which in turn creates a stronger community.”

I have written once or twice on this subject myself recently and previously suggested that determining what those features that are reserved for paying customers should be would be the main challenge for the next generation of vendors. Software engineer Kirk Wylie indicates that I am over-complicating, pointing out that “For any type of software you can… come up with some type of list of features that is only ever really going to appeal to the group that might pay you money. Focus on the problems that only affect them.”

So long as the community users do not feel that features they need are being withheld from them, the model should work. As Matt explains: “If adding a hint of proprietary software to a solution is done in such a way to encourage a purchase but not compel long-term lock-in, I’m no longer convinced that this is wrong. If it puts food on the table without putting anyone out, where is the harm?”

Matt gives due credit to Savio Rodrigues, who has been banging the drum for hybrid models for some time. Savio recently posted on the subject of source code availability and lock-in, arguing that “‘Source code availability equals freedom’ is slowly becoming another open source myth for paying customers” and that “the end result is not wholly different than a customer using a closed-source product.”

I suggested last month that the Open-Core model might run into problems in that it appears to contradict one of the claimed benefits of open source software: that of eliminating the upfront licensing cost. It creates an issue for vendors in managing the expectations of potential customers and ensuring that they understand the difference between the open source and commercial version of the product.

This isn’t a necessarily a bad thing, if the vendor has done its homework the customer should be more than willing to pay for the additional value. However, it will need to be carefully managed by vendors to ensure that customers understand that the theoretical freedoms of open source software are more than likely negated by the additional value provided by the commercial license.

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4 comments ↓

#1 451 CAOS Theory » Open source is not a business model on 10.13.08 at 6:14 am

[…] month I noted that Matt Asay, one of the highest profile proponents of open source software, had changed his […]

#2 Linux IT Consultant on 10.15.08 at 7:03 pm

Reports: Open source is not a business model …

Last month I noted that Matt Asay, one of the highest profile proponents of open source software, had changed his position on the use of proprietary extensions as a means of attracting paying customers to software based on open source code….

#3 451 CAOS Theory » Commercial open source business strategies in 2009 and beyond on 01.05.09 at 7:15 am

[…] has many benefits for vendors of open source software, including providing up-front revenue and in balancing the requirements of community and enterprise […]

#4 Clint on 03.06.09 at 2:32 pm

Not sure where I saw the post but someone put it very well when they said open source is not really cheaper it just lets you allocate your $$ across the project differently. So instead of paying the heavy licensing fees you can spend more on training and implementation which get shorted in most projects. to think of the spend of open source as the over all project spend…