A startup’s heretical plan to turn open source code into money

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Open source software giant Red Hat made $ 2 billion last year. That’s not bad for a company whose flagship product is available for free and legally for download on the web.

Of course, the company charges for the Red Hat Enterprise Linux operating system. But because the product is open source, which means anyone is free to modify and share the underlying code, several alternatives based on the exact same software that Red Hat sells are readily available. What the company’s customers actually pay for isn’t a copy of the software, which they can get for free elsewhere, but the support they need to use it.

This business model has worked well for Red Hat, which grew into a billion dollar company in 2012, and its success has inspired many entrepreneurs and venture capitalists to invest in products based on open source code. last years. But despite hundreds of millions of dollars in venture capital pouring into the coffers of startups selling products based on open source code, many open source developers have struggled to find ways to make money from it. their work.

Quinn Slack thinks her team at a startup called Sourcegraph may have found a solution. Sourcegraph released its code research and collaboration tool under a license called Fair Source. The Fair Source license is similar to open source licenses with one exception: it includes a provision that says any company that has more than 15 employees using the software must pay for it. At the same time, the code is still available for free to everyone, whether they have paid or not. You can always make changes to the software and even publish your own customized versions. But users of your modified version, if they hit that 15 employee threshold, will also have to pay Sourcegraph.

In the open source world, the idea of ​​paying for code can seem like heresy. But the Fair Source model is a way for developers to try to strike a balance between getting paid and upholding the core values ​​of open source. While the Fair Source license is unlikely to satisfy the most die-hard open source advocates, developers who would otherwise simply have decided to release a closed-source product can use it to share their code with the world.

“Better to be 90 percent open than 10 percent open,” Slack says. Or not open at all.

Someone has to pay

Worrying about open source software business models can seem a little odd when companies like Google, Facebook, and Microsoft seem to be releasing new open source tools week after week. But while these companies release software that helps them create their products, they usually don’t open their core products on their own. Google opened Kubernetes, which helps it juggle data between thousands and thousands of servers, but didn’t open its search engine. Facebook opened up its old Cassandra database, but it hasn’t released the algorithms it uses to filter your timeline. Microsoft released the artificial intelligence framework it uses to understand voice commands in Cortana, but it hasn’t opened Cortana itself, let alone Windows.

Open source software developers who aren’t from a big tech company have had to find other ways to make their projects profitable. Some, like Red Hat, sell custom development or support services. Others, like Alfresco, use open source software to create closed source products with additional functionality. A few, like Automattic, sell web-based versions of their software so businesses don’t have to worry about managing their own servers. Still others rely on donations, and many rely on a combination of different business models.

Investors have invested hundreds of millions of dollars in open source startups – Cloudera alone has raised over $ 1 billion. But we’re still waiting to see another Red Hat-style success story, even as the open source losses start to pile up. VA Linux, which sold computers with Linux preloaded, went public in 1999, just four months after Red Hat. Its action collapsed in 2000 and the company refocused on its media and e-commerce acquisitions. All of its assets have now been sold to other companies. Hortonworks, one of the few other publicly traded open source companies, has yet to make a profit. Last October, RoboVM, which sells tools for mobile app developers, abandoned its open source product, complaining that too many companies were using it without paying or contributing to its development. A few days later, startup Famous stopped developing its main product, an open source web development framework, and refocused the company on a web-based marketing product. More recently, a company called ThinkUp, which makes an open source social media analytics tool, announced that it was looking for a buyer because its hosted service was not making enough money to pay for continued development.

Meanwhile, countless open source projects are maintained by volunteers who are not paid by anyone. When project managers can only work on projects in their spare time, critical bugs, such as the well-known “Heartbleed” security vulnerability, can slip through the cracks. Nonprofits like the Linux Foundation have stepped in to help fund a growing number of projects in recent years. For example, the Linux Foundation launched the Core Infrastructure Initiative to help fund OpenSSL and other crucial but obscure open source projects. But these kinds of initiatives work best as a way to fund open source projects that a lot of big companies rely on. Important projects can still be abandoned.

Cash code

The obvious answer, at least from a business perspective, would be to follow the lead of Microsoft, Google, and Oracle and just don’t release your core product open source. But that’s a tough proposition these days, especially for developer products.

“It’s not the way developers like to create software, they don’t trust it as much,” says Slack, who contributed to open source projects like OpenSSL before launching Sourcegraph.


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