August 11th, 2011 — Software
We’ve written about how a bad economy is indeed good for open source software. We’ve also recognized that with open source software’s maturity and place at the enterprise software table, a bad economy can be a double-edged sword for open source since the failure or fade of large enterprise customers, say big banks, hurts open source vendors right alongside traditional software providers.
What is interesting is that after a couple of years of economic rebuilding, we’ve seen recently how open source is being driven by innovation, particularly in cloud computing, where open source is prevalent and disruptive, and also mobile computing, which continues to be impacted by openness.
Given recent economic developments around the globe, I’m wondering whether we may see a return of cost as the main driver and benefit of open source software in the enterprise. Recent conversations with vendors and customers illustrates the fact that the motivation for adopting open source is not always the main benefit from open source. For example, open source users and customers identified cost as the main reason for adopting open source when we asked more than 1,700 of them two years ago. However, when the same group was asked what was the main benefit from open source, the top pick was flexibility. We also saw dramatic increases in factors such as performance and reliability when comparing drivers for adoption and benefits from adoption. Still, just as we’ve seen unpaid community Linux lead to paid subscription Linux and also paid Linux lead to more unpaid community Linux use, it can go both ways with open source advantages, as well. One recent conversation with an up-and-coming, open source-centered vendor in the NoSQL space highlighted how many large enterprise customers are deploying open source in divisional, departmental, pilot and other limited form to replace traditional databases primarily for flexibility, performance and similar reasons, but finding the cost savings to be significant and worthy of wider deployment.
This begs the question whether open source software, driven by its myriad of advantages for different contexts, finds a way to win regardless of whether economic conditions are good or bad? There’s no question open source has displayed staying power throughout both. We should also point out that these advantages and factors end up putting a lot of pressure on open source software development and projects, given there are inherent expectations of cost-savings, flexibility, speed, performance, scalability, etc. As we’ve highlighted recently, open source is not always the correct route for enterprise ogranizations. However, we do believe that if done properly, open source projects and communities can and do deliver benefits that enable both providers and consumers of technology.
Similar to sales and marketing, longevity, economic and developer opportunity, open core, etc., it all boils down to the community, which in a good economy tends to drive innovation and value or in a bad economy serves as a source of cost efficiency, savings and survival. That is, of course, if the community is properly supported in code, cash, contributions and stewardship that still allows open source to do its thing.
October 20th, 2010 — Business strategies, Software
This is an updated version of a post that was originally published in July 2009. It has been updated in response to ongoing confusion about open core licensing.
There has been a significant amount of interest in the open core licensing strategy since Andrew Lampitt articulated it and its benefits for combining open source and closed source licensing.
There remains considerable confusion about exactly what the open core licensing strategy is, however, which is strange since the term arrived fully packaged with a specific definition, courtesy of Andrew. Recently I have begun to wonder whether many of the people that use the term open core regularly have even read Andrew’s post.
I feel somewhat responsible for this given that our Open Source is Not a Business Model report was partly responsible for the increased use of the term open core, and since I remembered that it was this post about commercial open source strategies that prompted Andrew to define open core in the first place.
Additionally, since business models related to open source are evolving constantly, I thought it was worth revisiting the definition of open core and putting it in some context.
What is open core?
According to Andrew’s original post it is a licensing strategy whereby a vendor combines proprietary code with open source code, where “the commercial license is a super-set of the open source product, i.e., it offers premium product features that you will not see in the GPL license”.
At first Andrew was very specific about the use of the GPL license and a development model dominated by a single vendor. However, it quickly became clear that a company like EnterpriseDB, which provides proprietary extensions on top of the community-developed, BSD-licensed PostgreSQL database, also fits the general model.
Therefore, Andrew clarified that there were Vendor Controlled (VC) and Community Controlled (CC) variants on open core.
Incidentally, Andrew did not create the open core strategy. As he himself admitted, he “invented nothing, just articulated it”. Credit goes to Barry Klawans and Paul Doscher (Jaspersoft co-founders), as Andrew noted.
In fact our research indicates that the formation of companies using the open core licensing strategy had already peaked by the time the term was coined – but more on that another day.
What isn’t open core
Sometimes it is easier to define what something is by explaining what it isn’t. Open core is a commercial open source strategy, but just as “all of Alma Cogan is dead, but only some of the class of dead people are Alma Cogan”, not all commercial open source strategies are open core (and more specifically, given recent statements, not all strategies that involve copyright agreements are open core – more on that another day as well).
So, to clear up some apparent confusion:
- Red Hat’s strategy is not open core
Red Hat reserves support and features for paying customers, but it does not do so using closed source licensing (a prerequisite of open core). Instead Red Hat gives away the source code but withholds the compiled, binary version for paying customers.
(N.B. Beware companies claiming to be following “The Red Hat model” as they invariably aren’t – most often I find they mean that they use a subscription revenue model. Very few companies have copied Red Hat’s model for a variety of reasons – a subject I’ll leave for another post.)
- Dual licensing is not open core
In fact, as Andrew Lampitt explained in his definition, open core is a variant of dual licensing (or proprietary relicesing, as some like to call it, or indeed “selling exceptions”). The important thing to note is that in the dual license strategy a single code base is available under an open source or closed license, while with open core the closed source licensed code is a superset of the open source code. Both result in closed source software, but only in the open core strategy is the closed source version functionally different from the open source version.
- The MySQL strategy is not open core (yet)
One of the reasons for the confusion is that MySQL originally started out with a dual license model but changed over time to the subscription revenue model, and flirted with open core. At this point the strategy for MySQL remains dual licensing. It remains to be seen whether the MySQL Server code for Enterprise Edition 5.5 will be different from Community Edition with the inclusion of MySQL Enterprise Backup (which would make it open core) or if the new capabilities will be delivered as a subscription service.
- Subscription strategies are not open core
Although they are a step in that direction. The subscription model provides vendors with a mechanism to distribute value-added features to paying customers. Until now the additional capabilities in MySQL Enterprise (such as Enterprise Monitor) have been delivered as a service via the MySQL Enterprise subscription. Although the code for Enterprise Monitor has not been made available, we would see this strategy as distinct from open core since open core results in a product with a different code base, where as the MySQL Server code in Enterprise and Community is the same. To differentiate from regular support subscriptions I have used the term value-added subscription to refer to this type of subscription. Other examples include Canonical’s Ubuntu Advantage and Nuxeo’s Connect. I would also put Red Hat Network and JBoss Operations Network in this category, although the source code for those value-added services was originally closed, it has now been made available as open source (as previously discussed).
Open foundation is not open core
Vendors such as IBM, Cisco, Oracle and SAP (in fact just about every software vendor) include open source code within larger closed source software packages and hardware products. There is a fine line between the two, but as I previously explained while open core involves offering proprietary extensions targeted at a segment of the open source project user base, open foundation involves using open source software to create entirely new products, targeted at a different user base.
Microsoft’s open source strategy is not open core
Microsoft is undoubtedly making use of more open source and encouraging open source development on its platforms, but its strategy is by definition not open core since it is extremely unlikely the core will ever be open source. In fact, as previously discussed, Microsoft’s strategy turns the open core strategy on its head by encouraging open source development around a commercial core, and has been described by Microsoft as open edge, and by Andrew Lampitt (more amusingly) as open crust. We have adopted the term open edge to describe this strategy and have seen it adopted by a small number of players beyond Microsoft.
October 13th, 2010 — Software
The Linux Foundation has released some survey findings as it hosts its End User Summit. We agree with many of the findings, and discuss our take below. But we also wonder more about which version of Linux these large enterprises are using for their own infrastructure, for cloud computing and for the technologies and services they build on top of Linux. More on that below, too, but first, some thoughts on the survey results.
One of the more interesting findings from the survey pertains to migrations to Linux from Windows. More than 36% of respondents said their Linux deployments in the last two years had been from Windows. More than 31% were moving to Linux from Unix, 13.5% reported no new Linux deployments and most, 66%, said Linux deployments of the last two years have been centered on new applications and services (greenfield deployments).
In terms of Windows migration, we agree there are significant drivers for Linux over Windows in cloud computing, where more than 70% of Linux Foundation respondents cited Linux as their primary cloud platform. We agree that Linux appears to be the preferred route to cloud computing offerings, both public and private (as covered in our special report, Seeding the Clouds). However, we must also acknowledge that the continued, wider availability of Microsoft’s Azure is having and will continue to have an impact on the market and may help Microsoft mitigate the cloud connection to Linux, according to cloud users and mixed-environment shops with which we’ve spoken. Another point to remember here is that Microsoft, which has changed significantly in its approach and strategy with Linux and open source, will likely support other hypervisors and perhaps Linux with Azure as well.
The Linux Foundation survey also highlights continued gains for Linux at the expense of Unix, with 19.8% of respondents indicating a decrease in their use of the OS (compared with 18% decreasing use of Windows and only 1.8% decreasing use of Linux). Those planning on increased use were 76% for Linux, 41% for Windows and 19.5% for Unix. We also wonder whether Oracle’s end of support for OpenSolaris will perpetuate Unix-Linux migration?
We also saw consistency from our own research in the Linux Foundation survey’s coverage of the drivers for and benefits of Linux. We asked more broadly about the factors driving open source software, not just Linux, but the results from both our survey at the end of last year and the recent Linux Foundation survey do match up. While cost savings was cited by our own survey respondents as the top reason for adoption, flexibility was cited as the top advantage after adoption. Similarly, the Linux Foundation survey showed that 67.5% of respondents cited ‘features/technical superiority’ as the top driver for Linux adoption. Next, with 65.4% of LF respondents, was ‘lower total cost of ownership.’ A recurring theme we are hearing in terms of Linux and open source cost savings centers on licensing. Not only do users and customers report cost savings from royalty-free open source software, but they also cite license maintenance as a key source of cost savings. Basically, because software is open source, organizations do not have to worry about convoluted IT audits and keeping track of licensing across physical, virtual, cloud and other resources. Though there still may be some trepidation around open source licensing, it seems that Linux and open source software represent both cost-savings and simplicity in terms of licensing for many users, particularly in cloud computing.
While Linux Foundation does not delve into the version of Linux, we recently asked open source consumers about their Linux choices. We have covered unpaid, community Linux in the enterprise since 2008 and more recently community Linux in the clouds, but we were amazed to hear the response when we asked 286 open source users about their Linux choices. More than 70% (206) of respondents cited ‘unpaid community Linux, such as CentOS or Debian’ as the distribution they use. 12.6% reported use of ‘paid, subscription Linux, such as RHEL or SLES.’ With respondents able to check multiple categories, another 26% said they used a combination of paid and unpaid community Linux and another 5% cited other options. Our survey pool of more than 1,700 open source consumers is made up of about 65% with 50 or fewer employees, 10% with 50 to 100 employees, 7% with 100 to 249 employees, another 9% with 250 to 2,500, and 6% with more than 2,500 employees, but we were interested by the fact that only 16% of our survey pool claimed to be non-paying open source users. We also acknowledge the Linux Foundation survey was aimed at large enterprises and government organizations with $500m or more in annual revenue and 500 or more employees.
Still, we continue to watch community Linux, particularly in cloud computing uses, and have no doubt it is having an impact on the paid, enterprise Linux market, mainly in terms of pricing, support and flexibility.
August 19th, 2008 — Business strategies, Licensing, Software
Larry Dignan reports on a coming revolution in software support and maintenance contracts, prompted by Dennis Howlett’s excellent analysis of why the reliance of enterprise software vendors on maintenance revenue is unsustainable.
Noting the negative response to recent price rises from Oracle and SAP, Dennis maintains that increasing maintenance costs is unsustainable as it reduces the opportunities for customers to invest in the innovation that provides them with real value. As maintenance fees go up, less value is delivered, and less budget is available for new software.
“There will come the day, whether locked into the vendor or not, that customers will come together and say ‘no more.’ I absolutely believe that to be a reality,” writes Dennis.
Larry continues the discussion by listing a number of factors that he believes indicate that the time is ripe for disruption:
A weak economy.
Maintenance and support inflation makes no economic sense.
Software vendors think their customers are stupid.
Customers are cornered.
This would appear to be playing into the hands of open source vendors. But maybe not. Consider the recent discussion on open source business models. I wrote yesterday that “most open source vendors have some kind of ‘unique, must-have technology’ that is only available via commercial license or subscription.”
This is perfectly understandable given that many open source vendors are searching for the hook that will reel in enterprise customers and ensure that they convert enterprise open source users into commercial open source customers. Savio Rodrigues has been talking up this strategy for some time, while Matt Asay agrees that “any business must figure out a ‘proprietary’ differentiator”.
Deciding what that differentiator should be is, as Matt puts it “the nettlesome question” and many vendors have fallen back on the tried and tested enterprise software models and decided that commercial licensing, whether it be for proprietary extensions or a full blown proprietary ‘Enterprise Edition’ is the answer.
This would appear to contradict one of the claimed benefits of open source software, however. The promise of the commercial open source is that it eliminates the upfront licensing cost while replacing the ongoing maintenance cost with a subscription-based support contract.
Commercially licensed ‘Enterprise Edition’ packages might be easier for customers to consume given the familiarity, but if Dennis is right and customers turn against enterprise software support and maintenance models then how many customers are going to be able to distinguish ‘commercial license plus support subscription’ from ‘commercial license plus maintenance contract’?
June 6th, 2008 — Business strategies, Software
Savio Rodrigues has published an interesting post about the adoption of commercial open source software that brings together his thoughts about open source business models and suggests that commercial open source vendors may be heading for a glass ceiling.
As Savio puts it: “OSS lowers marketing, distribution, and sales costs. And yes, OSS is a great way to drive revenue from $0 to $X… s the vendor reaches $X, they have saturated Category “C” users (those with cash and willing to spend it to save time). Now, the OSS vendor must try to win with Category “B” users (those with cash, but who have been trained by the OSS community to expect value for free).”
The categorization is a twist on Marten Mickos’s statement that open source customers are split between organizations that have more time than money (community version users and contributors) and organizations that have more money than time (commercial version subscribers) and adds a third group.
Savio defines this group as “An organization that has more money than time but is used to getting what they need for free and is comfortable enough with OSS to rely on their own skills”.
Roberto Galopinni has also identified this user group, noting: “I believe that is not uncommon to see users – read potential customers – spent a lot of time (therefore money) instead of buying commercial open source products and services. Someone, somewhere in the IT department, knows how much time spends to make things work.”
Added to the problem is the dilemma that is posed by the open source support model: the better the software is, and the more expertise a customer’s IT department has with it, the less likely a customer is to pay for a support subscription.
As previously noted, Jon Williams, former CTO of Kaplan Test, detailed this dilemma at the Open Source Business Conference in March. There are essentially two ways that open source vendors can respond to that dilemma: further innovation (or keeping the product buggy, depending on how skeptical you’re feeling) and the introduction of proprietary products.
Savio is convinced that there is only one option: “The only way that you can convince these users to pay is through the same route that proprietary vendors have been using for decades; sell proprietary products.”
Matt Asay, for one, has (partially) agreed with him: “I do agree with Rodrigues that there needs to be some ‘proprietary’ hook to give would-be buyers a reason to become actual buyers. Where I think we differ is in what we’d keep proprietary.”
The subject of support has also been up for discussion as part of CIO.com’s Executives Online blogathon this week, and I think it is worth noting Bob Sutor’s comment that a support subscription is essentially an insurance policy:
“Just as some people frequently re-evaluate their car insurance policies, open source support contracts should be reviewed on a regular basis. Here are some criteria:
* Was the contract ever used?
* If so, was it worth the money?
* Did users try to use communities or web search to fix their problems or answer their questions? How successful was that?
It may turn out for some open source software (indeed, for some software of any type) in your organization, purchased support is just not used or necessary. Other software may need it and it may be cost effective.”
People take out insurance policies for a number of reasons, mainly because they are obliged to or because they value the item being insured. The point at which people will no longer consider insurance is when the price of the policy is more than the perceived value of the item in question.
It is understandable that technologists assume that the differentiator that encourages users to pay for support has to be a matter of functionality (innovative or proprietary features) but it does not have to be the case.
The insurance policy angle points to another aspect to the open source support dilemma – that the more mission critical the application/service, the more likely a user is to take out a support subscription, regardless of their in-house expertise.
What do people think? Is there an open source glass ceiling? And if so, can the vendors break through it?