Further thoughts on the decline of ‘open source’ as a competitive differentiator

This week’s post on the decreased use of the term ‘open source’ as an identifying differentiator in some companies’ marketing material generated a lot of attention and comment, with numerous industry watchers pitching in their perspectives on the reasons for the decline.

If you haven’t read the original post it might be worth doing so for context before continuing with this post.

Various explanations were offered, any and all of which I agree are partly responsible for the observed decline in our sample. Here’s a selection:

* These vendors are trying to drive the focus of potential users to the commercial version.

* It is happening because companies are focusing on functional value rather than licensing.

* For come companies open source is just a means to an end, while for others it is part of their DNA.

* The proliferation of open source software means that open source licensing is no longer a differentiator.

* Open source is not a business model, and never has been. It remains a differentiating development model.

* These companies are increasingly targeting business decision makers, rather than developers/users, and open source does not resonate as well with that audience.

* Open source remains a differentiator if a product is functionally competitive, but will not overcome a lack of functionality.

* The increased acceptance of open source means these vendors are in a better position to focus on other competitive differentiators.

* The vendors now have ambitions beyond “just” being the leading open source player in their sector.

* Some of these vendors are effectively admitting that their primary products are not aligned with open source/software freedom.

* Some of these companies were never truly open source companies in the first place. They tried to re-brand ‘open source’ and they failed.

While I agree with all of these to some extent, I also believe that the focus on the vendors in my admittedly small and unscientific sample has distracted attention away from the wider trend.

For instance, if we accept that the nine vendors changing their use of ‘open source’ did so because they in particular have matured/learned from experience/failed then we would expect most of the more recent market entrants to be going through the same learning curve/repeating the same mistake.

Let’s take a look at another small and unscientific sample of more recent commercial open source-related vendors (which means we are now dealing with a slightly larger unscientific sample)#:

While all of the vendors in our previous sample had, at some point used ‘open source’ as an identifying differentiator, only eight of this more recent sample have ever done so, and three of those quickly stopped doing so.

This suggests that the trend is not specific to the experiences of the companies in our first sample, but has more to do with the wider industry perception of open source as a competitive differentiator and the changing business strategies around open source software.

Macneil Shonle put it very nicely with his comment that “OSS was once “hot” and appeared to be taking over the world. Companies joined the bandwagon. Cooler heads prevail now.”

This is fundamentally what I have been saying since early 2009, such as this post, which included the first ever mention of Open Source 4.0 and this graphic illustration of the four ages of open source-related business strategies:

The concept of Open Source 4.0 was picked up again late last year in the run up to our Control and Community report, which included an update to the language used to describe the four ages, as well as the opportunity to group the 300 vendors assessed in that report into three groups representing the three vendor-related ages.

Updating the graphic above to include the new language and remove Open Source 1.0 – Traditional Open Source, developed by communities of individuals – we get the following:

Which explains, in theory, why we might be seeing a decline in ‘open source’ as a competitive differentiator: the growth of vendor-dominated open source projects has slowed while the growth of multi-vendor open source and proprietary distributors is accelerating. We have moved beyond the era of the ‘open source vendor’.

That’s the theory anyway. Having recently updated the results of our analysis to the end of 2010 and 321 vendors, we can also see what is happening in practice:

So I wasn’t far off…

#Of course there is still an inherent bias in our sample. The only way to avoid that would be to look at all 320+ companies we cover but – believe it or not – I have better things to do.

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#1 Ned Lilly on 07.01.11 at 8:49 am

Matt, interesting follow-up. I think as a software industry-wide analysis, you’re spot on. But I do also think there is a significant difference between broad, enabling, horizontal technologies and more specific vertical applications. Things like Hadoop are clearly the former – successors to Linux, Apache, Eclipse, etc. in terms of their place in the ecosystem, while applications like ERP are generally more vendor-focused.

Companies like xTuple, who developed their own application from scratch, open sourced it as a deliberate business strategy, and then built successful open source communities around it, are doing very well in Open Source 3.0. The closest thing the open source ERP world has to what you describe as Open Source 4.0 is really more of a Open Source 1.5 – the Adempiere fork of Compiere, which subsequently failed as a company (largely because it lost its open source community – see my discussion at http://www.erpgraveyard.com/2010/06/consona-compiere.html).

While I see the value of a multi-vendor community for defining infrastructure technologies like public clouds, I think it’s a harder sell for narrower vertical applications – so I’d sound a caution on over-hyping the term Open Source 4.0. As we in the software industry know all too well, just because it’s a higher version number doesn’t mean it’s better.

#2 Matthew Aslett on 07.01.11 at 9:33 am

😉 Yes, I should have clarified that it is not necessary for one era to “fail” for another to begin. I agree there will continue to be successful Single-Vendor Open Source players, just as there continue to be successful Open Source Distributors.

#3 Benson Margulies on 07.03.11 at 12:16 pm

I’d be most curious to know what you see in the department of companies having their heels nipped by open source alternatives to nontrivial technologies. How, for example, does the market break up into: (a) just install drupal, (b) install drupal and spend nontrivial-$ on assistance, (c) buy some proprietary CMS?

#4 451 CAOS Theory » The rise, fall and reality of commercial open source on 07.07.11 at 8:37 pm

[…] ourselves about the move toward more permissive licensing in commercial open source, as well as a lessening of the use of ‘open source’ as an identifier or differentiator. We’ve also seen […]

#5 Kirk Wylie on 07.11.11 at 10:56 am

Hi, Matt,

If you take a look at the current OpenGamma website (http://www.opengamma.com/) you’ll see that we don’t have the words Open Source anywhere on the landing page. We still emphasize it in dealing with technology executives (because it’s a key differentiator), but in the context of a larger discussion.

What we’ve found is that at least in our market we sell on functional aspects of how the Platform compares with existing solutions, and the Open Source nature of the core platform is just one of those functional areas. Luckily we’ve built something that’s not just an Open Source solution, but radically better in a variety of ways from what has been on the market thus far.

#6 Matthew Aslett on 07.11.11 at 11:06 am

Hi Kirk,

Thanks for the comment and context. I agree in many markets it is better to sell on functionality rather than license, even when the license is a key differentiator.