There have been a lot of conversations about “open source is dead” and “there’s no viable open source business model” lately. Most of these conversations are fueled by vendors pulling back on “Open Core” sales models. “Open Core” is where you have a standard, free and open source version and sell a better version (and often under a non-viral license) for a fee.

There have been a lot of conversations about “open source is dead” and “there’s no viable open source business model” lately. Most of these conversations are fueled by vendors pulling back on “Open Core” sales models. “Open Core” is where you have a standard, free and open source version and sell a better version (and often under a non-viral license) for a fee.

“Open Core is a relic of how we used to buy software for installation on our own servers or virtual machines.”

Open Core is a relic of how we used to buy software for installation on our own servers or virtual machines. This model is being eaten by Software as a Service (SaaS) and Platform as a Service (PaaS), where you are in essence renting a completely configured and hosted solution.

There is more value in delivering configuration, hosting and operational support than in activating and deactivating features or getting rid of a viral license. A good way to look at i: “No one cares what the license is for Redis if they are using it on AWS.” Should they care? Probably, but they don’t. When the PaaS or SaaS vendor is an aggregator (like AWS or Google Cloud), the value is multiplied by all of the tooling provided.  It’s just the modern version of what RedHat did when they started selling a commercially supported Linux. The value wasn’t Linux, or MySQL, or Apache, it was all the configuration and tooling that came with RedHat. Cloud is really no different. The problem for open source companies is how do you compete with an aggregator. The answer is, there are ways to do so, but the value prop can’t just be different licensing terms.

Here are a few models that are still effective business models for open source software that don’t count on differentiated licensing to drive value:

PaaS / Saas – host it for the client. Value is delivered by better operations. Competitors often are aggregators in the form of cloud vendors.

Be an Aggregator – Redhat and AWS are examples. Old school is RedHat. AWS is just the new way to do it. An aggregator delivers collections of open source software, driving value from configuration and easier deployment.

Support & Services – Free software, paid support, paid consulting. This limits the market to larger companies or at least people who need a much higher level of support. Competitors can be other contributors to the code base.

App Store Delivery – I’m seeing lots of GPL software where the authors are putting the “official version” in app stores (lots of this going on in Windows) and charging for it. Competitors can be anyone who can build and deliver the app, but since many apps need a back end, the hosting of app data can be a moat. This seems especially promising for open source consumer software.