Please break our open source business strategy model

UPDATE An updated version of the business strategy framework can be found here. UPDATE

Last week I presented “From support services to software services – the evolution of open source business strategies” at the OSBC event in San Francisco.

The presentation was effectively a work in progress update on our research into the various strategies employed by technology vendors to generate revenue from open source software.

It included a partial explanation of my theory that those strategies do not exist in isolation, but are steps on an evolutionary process, and also introduced our model for visualizing the core elements of an open source-related business strategy.

I provided a number of examples of how the model could be used to compare the strategies of various open source businesses. Here, for example, is the visualization of MySQL’s strategy.

I was pleased with the response to the presentation, not least the number of people who asked us to send them the slide so they could fill it in for their company and send it back to us.

This is definitely something we would like to do in the future but before we do I would like to ensure we have dealt with any problems related to the model. For now I would be more interested in hearing from companies that feel their strategy is NOT covered by the model.

As Jack Repenning has pointed out, the model does not offer the granularity to express some of the nuances of the various “open complement “ strategies where open source code is not monetized directly but via complementary products (and in my own presentation I had to go beyond the model to discuss “open inside” – building proprietary products on open foundations, and “open edge” – using open source to drive innovation on top of a closed platform).

My initial feeling is that there will always be a level of detail that cannot be expressed in a simplified model such as this, although if I can build them in I will.

The development model category also needs some tinkering, not least to cover “gated community” approaches.

Additionally, of course, the model is not great when it comes to multi-product companies (although multiple models can be used to explain a larger strategy).

So anyway, if you think your company does not fit our model, do please tell us how. To help you understand how the model works, here’s a quick user guide and glossary of terms.

Revenue triggers:
These are the things that paying customers actually pay money for (apart from advertising which is an indirect relationship). They should be pretty self-explanatory. When we refer to “support services” we mean support, training, consulting, implementation services etc. “Software services” refers to SaaS and cloud delivery. Vendors can have multiple revenue triggers for a single product.

Software license:

For the purposes of this exercise we are interested in whether the company has a preference for permissive or reciprocal licensing for the underlying open source project, or uses both.

End user licensing:
What licensing strategy is applied to the product that customers pay for (as opposed to the project that it is based on)? It could be the same open source license (single open source) or a combination of open source licenses (assembled open source). It could be that the same code is available using open source and commercial licenses (dual licensing) or that commercial extensions are available (open core). Alternatively, a vendor may not monetize the open source project itself, but offer complementary software or hardware products (open complement), or may turn the open source code into a fully proprietary product (closed). Pick one.

Development model:

This requires a two-part response. Is the open source code developed in public, in private, or a combination of the two (public/private)? Pick one.
Is the development effort dominated my employees of a vendor, or the result of true community collaboration, or an aggregate of multiple projects? Pick one.

Who owns the copyright for the open source code? Is it the vendor in question, a foundation, a distributed collection of companies/individuals, or another company (withheld)? Normally this would be a matter of picking one of the four options, although if a portion of the copyright is withheld, that could be used along with one of the other three.

Do your worst.

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#1 Simon Phipps on 03.25.10 at 10:03 am

Not that I represent any company, but a couple of instant comments:

* I note there’s no distinction between GPL-style strong copyleft and MPL-style weak copyleft. Do you have a rationale for that?

* I’m not sure “dual licensing” is a good heading as the term can actually be used in a variety of ways. For example, Firefox is “dual licensed” (actually triple) but none of the licenses is a closed one. The practice I think you are actually calling out is that of selling non-Free exceptions to open source licenses. How about “providing license exceptions” or “Closed licensing option” or similar as the heading? It makes a difference because, for example, Glassfish is “dual licensed” (CDDL and GPLv2) and that fact is relevant to the case (most assembly uses the rights under CDDL but the GPL is there to allow shipping with Linux) but as far as I remember exceptions are not sold.

#2 Matthew Aslett on 03.25.10 at 10:41 am

Thanks Simon,

I was trying to simplify on the licensing side to avoid getting bogged down on the licensing side in the presentation, but agree that strong and weak copyleft need to be represented long-term.

Also very good point on dual licensing. I agree “selling exceptions” or words to that effect is going to avoid confusion.


#3 Henrik Ingo on 07.04.10 at 1:54 pm

I disagree with Simon here.

“Dual licensing” is well established when the context is business models. As you say, the implication is that one of the licenses is not an open source license. The fact that open source projects can also be licensed with dual or triple FOSS licenses is true, but there’s no use in redefining a term that’s been in use for 10 years now.

Btw, many in the FOSS community (including Monty, or RMS) refer to dual licensing as the selling of GPL or Copyleft exceptions. This is not quite accurate. You have the option between 2 different standalone licenses, neither is an exception of the other. Also the assumption that the GPL is the default license and the proprietary one is the exception is just a point of view of the speaker, who’s to say it’s not the proprietary license that was there first, and the GPL is a new license? (Such as with Trolltech.)

#4 Brian Aker on 03.25.10 at 12:07 pm


“Custom Development”, “Development Services”, or “Non-re-occuring Engineering” make up a good slice of the pie for most open source projects early on. Subqueries, replication, blackhole, some of full text, was all funded in MySQL via this source (and that development was most often done by developers who worked at non-US wages).


#5 Wireless router? | on 03.25.10 at 6:45 pm

[…] 451 CAOS Theory » Please break our open source business strategy model […]

#6 Phil Hendrix, Ph.D. on 03.26.10 at 4:48 pm

Matt – very useful framework. Thank you for sharing. Curious whether you have (or plan to) outline the pros and cons of various strategies, circumstances in which one may be more or less appropriate, whether there is a “natural progression” (e.g., most cos start with X and move to Y,), etc. Also, are your slides available (didn’t see it on Slideshare).

#7 Matthew Aslett on 03.27.10 at 4:22 am

Hi Phil,

Yes we will do that, and I spoke about it a little in my talk – although the detail is not in the slides, which are on the OSBC site


#8 Henrik Ingo on 03.30.10 at 7:35 am

No additions to the framework, but for the Example: MySQL also pursued an open-core strategy, since the monitoring tools were closed source. There were also plans for closed source bits in the server proper, which Sun made an end to. (In this regard, it will be interesting to see how things develop at Oracle: Oracle is a closed source software company anyway, otoh many of the MySQL execs that were pushing in a closed source direction are also gone.)

As for “dual licensing”, I think its meaning is well defined in the context of discussing business models, even if strictly speaking software can be dual licensed without it being a business model.

#9 Matthew Aslett on 03.30.10 at 11:45 am

Hi Henrik,

Thanks. Yes, the MySQL example is “MySQL Classic” if you like. There closed source monitoring tools MySQL had prove that there is a fine line between subscription and commercial license, this is also something we could probably explore in finer-detail – there are other examples of companies that claim to be 100% open source but actually offer features via subscription for which the code is not actually available.


#10 451 CAOS Theory » Let he who is without proprietary features cast the first stone on 04.08.10 at 10:51 am

[…] that reason, I have come to believe that we need to add a new revenue trigger category to our open source business strategy model, that makes a clear distinction between support subscriptions for 100% open source code, and […]