Open source is not a business model (2018) | Hacker News Reader

Open source is not a business model (2018)

anonymoushash.vmbrasseur.com

186 pointsJNRowe145 comments

Kind of Meta: The meaning of "business model," in a software/startup context is somewhat quaint:

“All it really meant was how you planned to make money.”

"Model" seems grandiose for a word that could be simplified to "income source." Comparisons to restaurants tend to be strained. Restaurant "business models" are not generally that complicated: People pay restaurants for food. Some deliver. The reason software people contemplate business models and restaurateurs don't is that "software," regardless of licensing, doesn't come with a standard business model. Every one is a snowflake.

In software, "business model" is a wide range of possibilities. Most of them failing. Many quitely succeeding. A few explosively winning. Is AirBnB a software business model? Is Adwords? Even MSFT, which does literally exchange software for money... MSFT's "business model" is a complicated, impossible to replicate thing.

The majority of software that's literally exchanged for money is done with some sort of services/support bundled in... and the customer is a business. If I give it away then why do people buy it?" is not even a sensible question. What does that question mean for Google, Apple or Amazon? There are plenty of exceptions: Photoshop, MS office... but even these are becoming online services and the "business model" is less directly "software for cash."

TLDR, software doesn't have a standard business model regardless. Weighted by revenue share, the vast majority of software revenue comes from advertising, luxury electronics, web services or some other "business model" that isn't contradicted by OS in any way. "Selling software" in a sandwich-4-cash comparable way is surprisingly rare, regardless of license.

> Every [software business] is a snowflake.

As much as I appreciate this comment, it's less limited to software than you paint it to be. When you start digging into how businesses actually make money, you quickly realize it's rarely what it seems.

Many gas stations that are wildly successful, such as Sheetz and Wawa, don't make their money selling gas, they make it selling food using gas as a commodity to get the customer in the door. Likewise, McDonald's doesn't really make its money selling food either, although this is a lot more complicated and heavily involves real estate and franchising.

In other words, nothing is really as it seems when you peel back the veneer. Software just happens to be relatively new and is poorly understood by most people.

IKEA is another great example of a business that uses food to get people through the door.

I have never been to IKEA to get food and then bought furniture as an afterthought. It kept me in once I’m there but it did not get me in the first time. Granted I live 40 mins away from IKEA.

I don't think it's meant as a primary attraction, but given the choice of going to the furniture store with a hot dog at the end, or a furniture store with nothing, you'll choose the hot dog one every time.

But that is significantly different from the gas station example. The parent said that the gas stations primary income is selling food not gas.

Ikea primary income is selling furniture. It would be much more interesting if they actually made more money selling food than gas.

I think his comment was about the food in IKEA being a loss leader, like petrol at the petrol station.

Certainly not sold at loss based on how much they charge.

Not sure where you are, but in Australia the hot dogs cost $1 ea.

The staff working at the stand would be paid something on the order of $25/hr, plus paid breaks, annual leave, sick leave, long service leave and superannuation. There would have been at least a solid minute of marginal labour in the hot dog I ordered today - asking me for my order, accepting payment and putting the sausage/condiments in the bun. This doesn't even consider the amount of labour required to boil the sausages, cut the buns, clean the kitchen at the end of the day, manage the orders from head office etc. I'm also ignoring slack time, where the queue is empty and the staff are not serving any customers.

In terms of raw ingredient cost, the meat they use is a cut above your bog standard Frankfurt and I suspect would be something like $5/kg in bulk. Assuming each sausage contains 100g of meat, that's 50c per sausage plus another ~10c for the bun. Even assuming the condiment cost is negligible, there'd be another 10c of cost in the little cardboard tray they give you.

Already we're getting up around $1.20 per hot dog, and I'm ignoring rent, power bills (which would not be insinificant in a commercial kitchen) payment processing fees and probably more things I haven't even thought about.

Not a chance they turn a profit on these. Tune in next week where I give a detailed analysis of the economics of their 50c soft serve cones!

Yeah, rent and labor alone make up most of the cost involved in restaurant food, the food cost itself is usually marginal. I'd imagine the rent for the space used up by the cafe is decently under what it would be to lease a comparable space on it's own.

As far as I know you dont only buy a dog a call it a day. You are basing your argument on the commodity product appeal which unlocks more expensive products with no labor involved such as drinks and already prepared pastries.

Also rent is very cheap wherever ikea is located.

I can’t be sure as to the veracity of the statement but there are plenty of articles out there quoting that IKEA’s strategy is to have the cheapest food in a 30 minute radius around the store.

The whole IKEA experience is designed to get you to leisurely browse through their showroom, so that later when you're at home thinking about getting a new TV stand you're picturing the one you saw at IKEA.

The food is less to draw you into the store and more to keep you in there longer. Though I have also tagged along with friends on IKEA trips way more than any other retail shopping, and the meatballs are definitely part of that.

This article sheds some interesting light on the topic.

https://www.hartman-group.com/newsletters/1541318916/ikea-s-...

Probably only on places where you dont have restaurants. Never seen Ikea using food to bring people in the countries I have been to.

I don't know so much about Ikea, but that's definitely a known strategy for Costco, with it's $1.50 hot dogs in the food court, and also $5 chickens.

> McDonald's doesn't really make its money selling food either

I would like to learn more about McDonald's business model. How is this possible?

Admittedly I haven't actually read this article, but the title suggests it's accurate.

https://qz.com/965779/mcdonalds-isnt-really-a-fast-food-chai...

I'm not sure that's quite accurate. Yes, they are a landlord to franchisees, and their profits show up as rent. But those franchisees are all earning money to pay rent the same way: selling hamburgers the McDonald's way. They don't have a lot of leeway to change practices or sell something different, because if they do, the landlord will literally kick them out.

It's basically a REIT for tax purposes, but that doesn't mean they don't profit from selling hamburgers.

I think you might find that the franchisee's profit margin isn't as high as macdonald's margins on the fees paid by the franchisees.

But if we're talking about restaurant business plans, the franchisee has far more claim to being a restaurant.

Well yea, in the same way that McDonalds employees aren't all billionaires.

Hey you should watch The Founder basically explains how McDonald got started and how it went international

I have. It was very interesting, but I don't think it mentioned that McDonald's doesn't make most of its money from food.

I agree with you. I believe mcdonalds makes most its money from franchising and royalties earned by mcdonalds franchises rather than food.

McDonalds is cheap in US but some countries it’s considered a luxury

The article I originally read was years ago and was about Burger King, but I'd imagine the same idea holds. You'd buy up land that wasn't worth much yet, build a restaurant on it in the meantime, and 40 years later it's way more valuable. There's also a nice little synergy that building fast food causes more surrounding to retail to be built, increasing your land value faster.

Here's one I was able to find on McDonald's:

https://blog.wallstreetsurvivor.com/2015/10/08/mcdonalds-bey...

McDonalds started to make money selling burgers but then along the way they found a more profitable way to invest their money for long term profits.

>> nothing is really as it seems when you peel back the veneer

Technically true, but I think this misses my point. Big businesses are complicated. Clever business people often compliment burger cooking businesses with franchising, real estate investing or crypto to make better businesses.

I'm not saying that a profitable business model for a restaurant is trivial. It's not. What I'm saying is that restaurants have a default mode. Software generally doesn't. There are software business that operate mostly by selling software on (eg) the Apple App store. That is more exception than rule though.

You're right that software business models aren't novel. Sandwich-4-cash has never been the only business model, even if you do sell sandwiches. That said, "Restaurant" is still a bad model for understanding a software business.

A lot of the objections of OS specifically have very little relevance to most software "business models."

Look... Apple refused to sell OSX and it's hard to say that was a bad choice considering how things proceeded. IDK if Apple ever considered open sourcing it, but either way... "How do you sell iphones when iOS is free?" is a hyperbolic question. You can sell iphones whether or not iOS is OSS. That doesn't mean it's a good or bad business choice. It just means it's a possible, non absurd business choice.

This does not consider b2b at all, where selling software in a sandwich-4-cash comparable way happens on the orders of many, many billions of dollars per year.

Open source is an implementation strategy for closing a business model. Strategic use of open source can move a business model from a money loser to a money maker.

It can be extremely strategic to use source components in the supply chain of a software product. Using open source components allows the engineering team (if one is needed at all) to focus on the unique parts of the project. This can reduce development/maintenance costs and timelines. It can also make up for missing skills on a business team. Facebook did this with Open Compute Project.

It can also be strategic to release parts of a product as open source. For example, releasing a database, OS, or framework as open source can establish an industry standard, improve brand awareness, quality, and make it easier to hire new talent. Basecamp did this with Rails. Google did this with Android.

Open source can also commoditize a market segment to a point where large companies that might otherwise compete choose not to. WhatsApp did this with Erlang and their initial messaging stack.

However, if you’re releasing 100% of your intellectual property & technology as open source then you might attract enough attention to get funding, but you probably don’t have a business model.

I don’t agree with reduced maintenance cost because all internal patches must be ported to newer versions of the component all the time.

It's quite possible for that workload to still be cheap relative to writing it yourself from scratch (e.g., I wouldn't think twice about vendoring git-subrepo).

That said, if incorporating upstream changes is more expensive than writing it yourself then...just fork the project and write new changes yourself. It's definitely possible that the project isn't a good fit and that you'd be better off starting from scratch than starting from an open-source base, but that dimension is orthogonal to the question of ongoing maintenance cost.

The concern you raise is a valid & important to consider. I’ve seen situations where there’s a mismatch between the update schedule of a component and the update schedule of the larger project & it creates an issue.

> if one is needed at all

Depends. If what we are releasing is a product of engineering (even someone else's), we'll need someone that at least thinks like an engineer in the woodpile.

In my experience, engineering isn't really about balancing binary trees, designing FFT implementations, or writing functional code.

I believe that it's a discipline, and an approach to an organized, end-product-oriented, problem-solving way of working. I've met people that I'd definitely classify as "engineers," that have jobs with no obvious connection to tech, like soldiers, masons, carpenters, and even janitors. I've also met people with advanced technical degrees that can't take an engineering approach to save their lives. Their code and products have been abysmal failures.

As long as I've been in tech, there's been this myth of the "engineer-free" product. The one that is dreamed and executed by Corner-Office executives. A product that jumps straight from their genius, into customers' hands; with none of those messy tecchies fouling the mix.

Maybe, one day, it will become a reality, but I haven't seen anything that even comes close. I believe that the current "dependency-first" development model is not actually a bad one, but it is one that can go horribly, horribly pear-shaped, if done without a disciplined, deliverable-focused, engineering approach.

For myself, I've always enjoyed doing open-source. It gives me a nice track record to which I can refer, and it has forced me to do top-quality code. We always clean the place before we do an open house. If we do it often enough, it becomes habit. I'm currently working on a closed-source app, but that has little to do with IP or security, and more to do with a marketing embargo. I look forward to open-sourcing it in the future. Significant parts of it are already open-source (almost all written by Your Truly). It isn't really meant to be a profit-making app, but it certainly knocks a lot of commercial apps into a cocked hat; and it's only half-done.

Not a guarantee of quality, but it does work for me. I think that Atlassian open-sources all of their stuff. They seem to be doing OK (I am not a huge fan of their stuff, but can't argue with their success).

Your point about commoditizing an existing market segment is extremely underrated.

Companies should use open source where the existing solutions are blackbox but also commoditized. If everyone's doing it but keeping their doors closed, you have a chance to create an open standard. If it's successful, all the black box companies have to adapt it and basically have now wasted a bunch of time

Open source is to software makers what Groupon is to restaurants: a way to get people in the door, but many of those people are not, and will never become, the customers you seek. Every open source business sells something else, often a solution to its own complexity, such as managed instances.

You hit the nail on the head, I think ghost blog is relatively easy to set up, but for $9 a month and you'll handle my hosting and my ssl certs, and most people with a bit of disposable income are fine with paying that. I just spent $80 on a nice meal and a couple of drinks, if my blog is anything like an income source I'll have no problem with spending $100 a month for someone to manage it for me.

I would still advise students, and other new developers to go through the motions of hosting things themselves via AWS or whatever. If you can get a Ubuntu instance on ec2 to run a public facing website you probably can walk into a tech company and get an entry level job. It's not necessarily hard to learn how to do these things, it's just tedious. Avoiding the tedious drama is how open source companies make money

I totally agree with your comment and you gave a great analogy

Who are these imaginary foes who are presenting their business model to investors with simply the words “Open Source” on a single slide?

Early stage investor here. You’d be shocked. It’s extremely en vogue to start a company and have your value prop be “open source alternative to X,” without any regard for whether there is actually any logic to something being open source.

Most absurd open source alternative you have been pitched?

I’d feel a little bad calling any out bc it’s usually not too hard to figure it out if I gave that info even without a name :)

I'll read between the lines and assume that means you've heard some pretty absurd ones.

Haha I mean nothing that was obviously ridiculous, like “Applebee’s, but open source” or something. It was more just really hand-wavy logic around why their product needed something open source, with no really compelling answer.

I think "because everything should be open source" is a fine answer to why something should be open source, even if it doesn't answer the different and more important question about how the company will make money.

I care to disagree.

If someone is saying it ONLY to make someone give him money it is not good enough answer. My take on this is that a lot of those people just slap "Open Source" on their product to catch people who can invest and care about open source.

If someone does not really care about open source but is just throwing statements around to look good and get money from people, that is not the right way.

Open source isn't just a label. If the label is a lie and the product is not actually open source, that's a separate issue.

Assuming the product is actually open source, the important question to answer is the same as if it's closed: How do you plan to make money? As to why it's open/closed source, any answer just leads back to "and how will you make money?" Neither licensing model is inherently going to make money.

But I have to agree, an answer like "because 'open source' attracts investors" is a red flag. Investors are the means to an end, not the end itself.

I was thinking about this recently. Everyone wants to replicate the success of Mattermost.

I think the reason Mattermost works is because the customer is an IT department. When you get outside IT, the value prop completely vanishes. Regular people buying software don’t know what open source is.

For every Mattermost, there's multiple RethinkDBs.

As an early stage investor do you outright reject "open source" projects or would you consider one that's already making some money? I've never considered putting it this way but I guess you could say the project I maintain is an `"open source" alternative to a specific Twillio product` and MRR is showing steady/strong growth. But being a solo maintainer is seeming to be a strike against me (ahem yc).

What are early stage investors' criteria for open source, in your opinion?

> Do you outright reject "open source" projects ... ?

No! I'm bullish on open source, I just think the current climate is weird. I have a small vc fund, currently 8 portfolio companies and almost half have at least some open source element to their product offering. I'd definitely look at something you're describing, and the fact that you're seeing steady MRR growth is a huge accomplishment, regardless of whether you ever choose to take vc money.

Happy to have a discussion on the topic if helpful, don't feel the need to be in sales mode. You can hit me up if interested: taylor at abstraction.vc

Awesome will reach out thanks.

If you look at it from the input-output financial perspective, where the effort in open sourcing it produces X amount of money, I'd agree its not viable. But if you look at it from the advertising perspective, there are other advantages:

- Appeal to potential employees for their exposure boost

- External contributors to fix minor bugs and do testing, along with online presence

- Availability after the entities maintaining it goes defunct. With any luck if the project has gained some momentum other companies will also have programmers using/wanting to maintain the same thing

- Free to 'on board' or filter candidates even before hiring

So I'd view it as a kind of branding strategy, helping spread good optics for the business. This in turn makes a system where it increases the pool of potential employees and external user support.

Open Source isn’t a business model but it CAN be a support model - for the right market the number of companies who will be willing to fund features/fixes that the company can’t be bothered to get noticeable.

It can also be shown as a “backup” - if we fail you have the source and can continue to maintain it.

"backup" is one of the main reasons I prefer open source. Even if it is funded by one company now (and I pay them) there is some sort of continuum plan if they go bust. I am not immediately screwed and I can consider options such as self-maintenance, forks or a migration. This also applies if they change the terms or price.

The amount of monkey-patching I've done to production systems where I don't even have the code (Java is great for this) is immense.

I personally believe Java wouldn’t have been successful 5 years earlier, during the time when everyone was encrypting their code. It was an inacceptable trade-off before Internet. After internet, most software is partly online anyway.

Maintenance is a really good point, but we haven’t found a way to monetize it.

If I gave my software as OSS to paid customers, I’d immediately lose most of my other sales and give my little implementation secrets to my competitors.

I’d like to be able to say “And for +15%, get the source and ability to compile and fix forever”. And not lose my business in the process.

You don’t have to use a true open source license- simply a “shared source” or something with a clause making it BSD when the business ceases operations or similar.

But then, my customer has an interest in making me go out of business.

I doubt it. If you are providing a valuable service it is most likely the the customers interest to keep you alive and maintaining the software, especially since you are likely pooling the funds from a large number of companies. If you go out of business the customers will need to quickly figure out how to maintain the thing themselves, and I would expect that most companies won't "give back" so the cost on each user probably goes up.

> business ceases operations

This is far too specific. What if they try to 10x the price on the next contract renewal. Or change the terms dramatically such that it is no longer suitable for our use case.

I would want to have some sort of shared source agreement but that is still more restrictive than FOSS as the community can't work together to maintain it, so 100% of the burden of updates and maintenance falls upon us. But even this is wildly better than just loosing access (or being forced to pay).

I have worked at a few companies that had contracts written such that if we went out of business (or stopped supporting the product) they would get access to the source code. We would regularly upload our source to Iron Mountain for escrow as part of our contract.

I’ve seen this done with hardware as well when a company I worked for purchased a very specialized IC

What does the „source code“ for hardware look like? Does it also involve patent licenses?

Wasn’t privy to those details. I assume design files and IP.

What this article misses is the presence of bad faith actors who make billions from open source but studiously work to prevent even a small amount of that flowing back to the companies that wrote the software. Kind of like the difference between a restaurant failing because they can't get enough customers vs. failing because people keep robbing them.

This is a bad faith analogy, others profiting from OSS they didn’t write themselves is a feature not a bug. Stealing from a restaurant is not.

Others profiting at the expense of the authors is not a desired feature. A necessary consequence of the current OSS regime perhaps, but not desired. The definitions written down decades ago don't have to be the final say.

I chose the example of stealing from a restaurant precisely because if that were happening, people would call for legal changes to prevent it. Which proves it is sometimes worthwhile to make legal changes to protect value creating enterprises. The only question is whether or how the same should be done for OSS.

Open source tends to be used as a user acquisition strategy for companies in the growth stage not worrying about monetization.

Once they get to the stage of trying to monetize their newfound userbase, they rethink the value of releasing their product as open source.

It's really common for Launc HNs, though. This search shows many just the last two months: https://hn.algolia.com/?dateRange=all&page=0&prefix=false&qu... (with some false positives) Amusingly, two variants of "open source Datadog" the same week.

Are these kind of OS copies successful in YC context? They are apparently getting accepted.

The mentioned Redhat article Part 2 is a 404. Here's the archived version:

"How to Make Money from Open Source Platforms, Part 2: Open Core vs. Hybrid Business Models"

https://archive.is/Yhr8l

Open source sits alongside Free Software. Free Software as defined by the FSF is software that respects the users freedom. Freedom to use, copy, modify... They do say you can charge for it, but never claim it's a good business strategy.

Consulting. Services. Education. Those seem like words that might let you make money. You can attach "open source" to those words but it obviously doesnt stand on it's own as a business model.

The big problem is that there is no distinction between an individual user, SME or a big corporation. The create grounds for exploitation of software developers, social divide and other unintended consequences. The promotion of open source by big corporations is cheaper in the long run that spending money on R&D, salaries, taxes as there is always going to be a good enough project for such corporation to appropriate and make money off of, without having to pay anything to contributors.

> Consulting. Services. Education. Those seem like words that might let you make money.

And that's cool but to a very great degree these often boil down to an exchange of time for money (unless by services you mean SaaS which is really just a product business with a different revenue model). You can make a living but you're on a treadmill that you can't ever really afford to get off of, and it doesn't really scale other than by adding more people.

I mean it's OK, don't get me wrong - it's certainly better than a kick in the balls - and you can make a decent living from it. But I don't find it particularly appealing: I'd much rather be involved in creating products that you can sell over and over again. And, if what you've created is of value to others, why shouldn't you charge them a fee to use it?

(Btw, I'd also add paid support to your list but, again, I wouldn't want to build a business heavily based around providing support because support can really wear you down - or at least it can really wear me down. It's absolutely necessary, but not something I find at all enjoyable.)

> And, if what you've created is of value to others, why shouldn't you charge them a fee to use it?

You can, but you probably won't succeed if it's open source, because people can share it around freely without your consent.

There is a middle way: license your software so that big players with more than (say) $1M revenue will have to pay for the development of the software, while the small guy can use the free version.

> because people can share it around freely without your consent.

The nice thing about this approach is that big players like FAANG can't really get around it. But it doesn't matter since your software is probably already a bargain for them (all these big companies are essentially built on open source).

Another approach is a source-available license.

The one I'm interested in would be one, where viewing, modifying, recompiling the source is allowed, but redistribution is allowed only to those who had bought the license from all owners of the source and it's modifications. It would produce a nice "waterfall" effect.

It wouldn't be open-source nor free software, but most people don't really need limitless redistribution, and the source would be proof that said software isn't malicious.

Aka commercial software. Nothing wrong with it indeed!

Just don’t package it with a weird “open” license and pretend it’s OSS. You can dual license if needed and deal with the consequences.

The real treadmill is the current monetary system. Even if you make a product, but revenue doesn't grow at least 15-20% YoY (the rate of money printing last year), its value is shrinking over time.

The real real treadmill is nature. Even if you eat today, you'll need more food tomorrow. How outrageous is that?!

I'm fine with eating the same amount of food. My body doesn't need 20% more food every year to get the same amount of nutrients out of it.

> And that's cool but to a very great degree these often boil down to an exchange of time for money

Isn’t that what all business interactions end up being in the end? Yes, it is a treadmill, but life itself is a treadmill. You need to keep feeding and sheltering yourself even though you JUST ate yesterday.

I don’t think planning to support yourself indefinitely for a short period of work is a healthy expectation. Do you really think you can provide enough value to the world in a few years to provide for yourself for your entire life?

Having to work consistently is the norm, not a treadmill.

> Isn’t that what all business interactions end up being in the end?

Only if you ignore capital. Many business interactions revolve around having access to or utilizing capital in some way. Renting and financing maybe the most obvious examples, but plenty of others too.

The key question is that can/should software be considered such capital asset? It being intellectual (or "imaginary" as some pundits put it), and not tangible, property.

Certainly one obvious example is that, given sufficient capital, I can give it to a wealth management person at a brokerage, give them some guidelines, and pretty much sit back.

You can also become a silent partner in some business where you collect a skim of the profits while someone(s) else do the work to make sure the business continues to produce profits.

I was answering the vein of someone who wants to put in a largely one-shot investment of time and continue to collect money over a subsequent period.

Capital is insanely cheap right now, and trying to get a good return on your investment is not easy.

Yes, you could be a silent partner in a business.... but you likely won't get great returns, and you risk losing it all of the company goes under.

The key is "sufficient capital" obviously. And, of course, it's all about diversification and rate of return. As you correctly note, being a silent partner in a business is riskier than a lot of the alternatives and, if it isn't a commensurately higher expected return, probably not a good idea.

However, given sufficient capital (what's sufficient depends on what sort of income stream you're looking for), largely passive investments in various forms can produce that. After all, that's what many people are looking for when they retire.

Yeah, any product/service, probably has at least some level of ongoing bug fixes, security patches, updates, etc. There are periodically threads on here about creating businesses that mostly just throw off revenue. And there are invariably people who created a nice income stream for a modicum of ongoing effort. But there are very few paths to spending time over a year or so to get to a significant income stream that's little more work than depositing customer payments.

> Having to work consistently is the norm, not a treadmill.

Agreed. Work is what creates value for others. However, trading one's work for money that's designed to loose value over time via the inflation tax central banks impose on us all is why so many hard working people feel they're on a treadmill that they can't get off. If our money functioned correctly as a tool to store value over time, people could work, save, and with frugal living could actually get ahead if their work consistently created value for their clients or customers. There are systemic monetary reasons why work often resembles a treadmill.

Only 20% of people in the USA have more than 10K in the bank. Savings losing money over time isn't relevant to most people, they are spending what they earn before it matters.

(and, btw, my point is not that people in the USA are spendthrifts. It's that most only make enough to support themselves).

Inflation has been so tiny for decades. And in fact, most Americans are in debt, so inflation HELPS them.

Deflationary currency would be a disaster for the economy.

The sale value of commercial software licenses stems from its supply being artificially constrained, which is only enabled by the monopoly granted by government. Exploiting that monopoly to limit access to the software to only those with pockets deep enough to pay for that privilege can indeed seen in a negative way.

I find it interesting. The reason it can be viewed negatively is that the production cost is zero for software. Nobody minds paying a reasonable price for an item that takes effort to make. But we know software can copied for free - barring deliberate schemes to prevent that.

Even many businesses consider product design a "cost center" and production/manufacturing a "profit center". I prefer to think of engineering as an investment in the future.

So "open source" as a business sounds to these people like the investment has already been done for free, and production is free, so we should be able to make massive profit! But they're not providing any value unless they add something significant.

>> And that's cool but to a very great degree these often boil down to an exchange of time for money

So you want to collect rent.

And businesses based on open source want to collect rent from the work other people have already done for free.

Sounds exactly like one of the reasons Free Software came along in the first place.

I've been saying this forever. Open source is just a tool. It's a tool you use to attract customers who want it, or employees who want it, or whatever. It's not a product though, and it's not a sustainable business model. The choice of license you use too is a business tool.

Consortia are about the only successful open source business model. The most successful such consortium is the SQLite Consortium, which clearly makes D.R. Hipp and his team very happy. One key to SQLite's business success was keeping the best testsuite for it closed source, which makes it extremely difficult to fork the project, or even to contribute to it, which leaves the team as essential to those who depend on SQLite (which includes a lot of FAANG).

No, open source is not a tool.

Open source should be the default mode of operations. It is not some kind of "can opener" to get people who might be interested in your product.

Most of the software does not use "magic algorithms" that no one else cannot think of. Power of people and companies should rise from trust and professional behavior. Well it might be that there really is some magic algorithm but if someone who I cannot trust is providing that algorithm I am probably better off not using it anyway.

I am willing to pay to someone who I can trust that he will do proper work, he does not have to be a "mastermind". He does not have to have some magic tricks up in his sleeve.

Remember that trust and professional behavior beat any "magic algorithm" in the long run anyway. By having open source company/person is signaling that they also rely on trust, but don't use is cynically, please.

24 hour/365 production support is a requirement for large companies, sell that. Putting features behind a paywall doesn't work when the entire business can be forked and those features implemented for free. See AWS with Elasticsearch.

There's a reason enterprises use MSSQL, Oracle, etc.

If I understand this correctly, you're saying companies choose to license paid databases like Microsoft SQL or Oracle over open source SQL databases for support. What kind of support do companies need for a database? I can't figure out this error message my query generates or how can I update to the next version of your DB? Something along those lines?

if there is a sufficiently large issue with the product itself, the vendor is monetarily incentivised to fix it asap. I personally have no expectation of that for free / os software.

> sufficiently large issue

My experience is that for 99% companies there is absolutely no way to be "sufficiently large" for Oracle to take notice of any bugs/problems with their SQL database.

As you don't have the source, there is no way to get the problem fixed.

With open source software you can go on the market and hire one of the developers or an independent contractor.

I think it depends on the type of Oracle product that you are implementing. Having implemented Oracle packaged products for a long time (ERP, OBIEE etc.), there are hundreds of known bugs in each of the modules. In fact, many times, new clients comb through the bug reports before implementing a new module to check if a listed feature has a bug.

Not with Enterprise software they aren't. The vendor contracts (as it's typically written on the vendors paper rather than the customers) have more than enough wiggle room to get out of virtually any scenario. It's only with smaller software companies where you may be able to negotiate these sorts of terms.

Honestly, it's more about CYA than anything.

A sev 1 issue pretty much automatically means a ticket to all relevant vendors at large companies, and typically you'll have a dedicated SE and TAM that will join your war room. You don't want to be the guy whose idea it was to roll some DB you compiled from source off of github and now some critical functionality isn't working and it's on you to fix it. Even medium size businesses will pay quite a bit of money for support, just in case.

Source: I've worked at a fortune 10 in IT. There, it wasn't uncommon to have your SEs from 2-3 different software/hardware vendors on the bridge while troubleshooting any production issues.

If you have a problem with an Oracle database you can have a support person on your place in a very short time, willing to share all the kinds of knowledge that Postgres developers publish on their site from the start (and nothing more, but they will answer your specific technical questions, what is good because with Oracle, you will have a lot of them).

I still don't know what is the fuzz with SQL Server support. AFAIK, no Microsoft support will ever help you in any way.

But you see, it doesn't matter if they don't actually help you. The bosses want to hear that you talked to the vendor, and it gives them an out and someone else to finger point at when issues happen.

The fact that SV hasn't really caught onto this is part of the reason there's not a huge penetration of startup tech into huge companies.

Oracle and many other old-school enterprise software companies ARE Silicon Valley. SV caught onto this decades ago.

Fair, then the new crop seems to have forgotten it

You ever have those moments where you’re just scrounged together a solution from reading a bunch of random tickets and forum posts and you’ve found this fix someone write that may work and now you’re going to try it?

I don’t mind doing it but at the same I hate it because you’re in uncharted territory. Support can help you be that second person in the room that has more familiarity with the problem than anyone on your team.

Also I’ve used Postgres and MSSQL and MSSQL has more features. Postgres only got non-materialized CTEs I think like 10-15 years after MSSQL had them, for example.

It's more a combination of executive CYA and availability of resources (employees, contractors and vendors) who know the product. The actual support provided, even when you are a large customer, often leaves much to be desired. It's usually easier to get the vendor to implement obscure feature X than getting their (significant/useful/timely) help in putting out today's operational fire caused by their product.

Agreed, and I covered this in a few replies, I should have put it in my main comment, CYA is the entire reason.

I'm not saying a business surrounding an open source project can't make money. I am saying trying to make money by locking away features is a bad way to do it. Focus on your product and do it in a single stream rather than separating it into FOSS and a paid tier. Make your money on support contracts.

Smaller companies that self-support probably won't pay you for those features anyways.

Baking bread is not a business model, a bakery on the other hand.

A bakery is a business. Selling the bread to consumers in a shop is the business model.

What about Inspiring Young Aspiring Bakers to bake bread for free so we can all have free bread? Is that a business model?

The author linked to a wikipedia page[0] for examples of viable business models, and it interestingly includes "Professional Open-source Model" without explanation.

[0]: https://en.m.wikipedia.org/wiki/Business_model#Examples

Open source is as sustainable as a closed business model in some sectors as long as you are willing to be creative.

I've invested/funded/donated to several OS projects. I don't really expect to make money in most. I do it for the same reason I give large tips time to time.

Somebody has to do it because the value they are providing is IMMENSE.

I ask nothing in return. I give without really thinking about maximizing profit. The way I see it is that when you give to good cause the universe will reward you in ways you don't expect.

I encourage others who are successful to give to OS projects especially folks who work on projects full time with little to no way of supporting themselves because they can't memorize graph algorithms or do whiteboard interviews or neurally diverse.

As much as I have gripes with Github as a corporate entity, it's platform does serve a useful purpose in that it facilitates the movement of capital to OS projects.

I applaud you sir! I started doing something similar one year ago - at the beginning of each month I donate a few $ to one of free/open source projects I use (and every month it's another project that receives donation). I know that one donation won't change author's life, but if enough people do it regularly...

It's just where you build software for. Of software isn't your main product, just needed so you can better make your main product, than open source software can be very helpful for you. It's a nice way to help each other, and it doesn't change your profit.

But if software is your main product, than is open source very hard to pay your bills.

Also if you build software for a company, very few will pay for something that will be shared to everybody. But I know a hospital that pay to write software for some hardware on Linux, and share it as open source so all hospitals that use that hardware with Linux can use it. That is helping other people if you have solve a problem.

Buy indeed, open source isn't a business model, but a way of life.

I would encourage people to read the article. VM Brasseur has a click-baity title, which is fine, but the point they are making is actually a bit more subtle. I'll quote from the article:

> There is a great number of potential business models, but “open source” is not one of them. It is, instead, one of the many tools that can be employed in order to make a selected business model work as expected.

> Therefore open source ... does not ... concern itself with business any more than food concerns itself with business. If there is a business that has a business model that is not living up to expectations, and if that business model uses open source as one if its tools, it’s illogical to blame open source for the failure.

The gist of the article isn't "open source and business are incompatible", rather, it's saying "don't blame open source for a failure of your business".

VM Brasseur focuses on open core specifically, a subset of an "open source business strategy", talking about what kind of expectations one should have engaging in that strategy, pointing to John Mark Walker's post on "How to Make Money from Open Source Platforms" [0].

As an aside, I would like to point out that there are successes in some businesses pursuing an "open source" strategy, for a broader form of open source, either using open source as a key feature or because the technology was open sourced, abandoned and picked up by someone else. Arduino [1] comes to mind, where they used the open sourced Arduino platform, the IDE, the libraries and the open source hardware schematic and boards, that was essentially abandoned by the original creators and picked up by Massimo Banzi and David Mellis. There were other factors to Arduino's success, such as focusing on artists and educators, there being a need for a cheap, accessible electronics/microcontroller platform, selling physical devices and various other economic factors that went into making the business viable, etc., so maybe I'm being overly pedantic and not really contradicting VM Brasseur's claim.

In case people don't know, VM Brasseur is a big proponent of open source and has written a book called "Forge Your Future With Open Source" [2] and is in the process of writing a new book about "FOSS strategy in business" [3].

[0] https://www.linux.com/news/how-make-money-open-source-platfo...

[1] https://arduinohistory.github.io/

[2] https://pragprog.com/titles/vbopens/forge-your-future-with-o...

[3] https://anonymoushash.vmbrasseur.com/2021/03/19/coming-soon-...

Stephen Walli and Jeff Borek have periodically done a faux debate at conferences on this topic. (Spoiler alert: They don't actually disagree.)

I actually like the "Open source is not a business model" framing because, while open source clearly influences what you can do with respect to business models and execution, it's a reminder that open source is not a singular business model. Furthermore, a company's business model/plan will involve a variety of things that may not have much to do with open source directly.

SaaS is out sourced IT. Plenty of SaaS could open source their entire code base and it would have little effect on sales; people would gladly still pay for it to be hosted.

In some categories, having the code open source helps gain adoption early in the process.

So yes, open source is not a business model, but plenty of open source software is monetized these days.

Very true, also it's a way of sucking people in. I run a few servers at work, hosting non critical services, such as password management, wiki and other things that aren't used by many in the org. The day those get used by more than a few people we will go paid SAAS as I don't have the time or mandate to provide 24/7 support.

> SaaS is out sourced IT. Plenty of SaaS could open source their entire code base and it would have little effect on sales; people would gladly still pay for it to be hosted.

The problem is that with open source, anybody can be the SaaS provider and make the money from the open source software. In fact, companies will be more willing to go with either the bigger names or providers they have existing contracts with, than a small open source company.

SaaS inherently favors the larger corporations.

> SaaS

> plenty of open source software is monetized these days

One of the most successful models has been to take open source software that someone else wrote, add your own proprietary extensions and enhancements, and sell it as a service.

Some of the most appealing aspects of open source for businesses are potentially reduced labor costs (because much of the software development work will be either done for free or paid for by others) and faster time to market (because much or most of the engineering work has already been done.)

It's often used as a marketing model.

Baseball is not a business model either.

Open Source = the “Atoms” in Our “Digital Periodic Table”

https://news.ycombinator.com/item?id=26604020

Open source is certainly one way to do marketing, particularly developer marketing. I agree it's not a business model per se.

yes, open source is not a business model, it's a marketing model. All these startups (MongoDB, Elastic, etc.) they used open source like that only. A very good marketing model. These change of terms is also a marketing model. Now the slogan is: It's still open source for everyone, except for AWS!

Unfortunately it is a marketing term now, or new age jargon crap like "dont be evil"

It is not a business model. But it is a good communication and branding strategy

Do we expect copyright licenses to be business models too? Does anyone?

Straw Man

I've seen "not a business model" quipped a hundred times, as if that ends whatever debate is going on. I've yet to see anyone actually argue that open source actually is a business model, as opposed to having their argument bent that way. The author doesn't link to any examples. Who are they browbeating?

I don't see MongoDB arguing that the meaning of open source should address financial incentives for developers, either. I see them arguing that open source copyleft can be strong enough to demand openness from their competitors, as GPL would have in the packaged-software era. Mongo have a financial concern, but exactly to the author's point about means versus ends, they're not trying to write their business into any definition. They're reading the definition to cover a license that works for their business.

If open source didn't concern itself with business, it wouldn't exist. The whole pitch was to business. Cathedral and the Bazaar was a marketing manual for selling manager-types. O'Reilly bankrolled events and meetings. Early on in OSI history, they readily approved several stronger copyleft licenses for specific businesses. MPL. Sleepycat. QPL. IPL. RPL. Arguably AGPL. That's the history.

JMW does say there hasn't been a successful open core product, but he defines success as "ubiquity in the modern data center". In business, there's plenty of success between irrelevance and market domination. Ferraris and fast chargers aren't ubiquitous in modern garages.

What I see here is that open source is a business model to some interested parties. That model is add-on services---integration, customization, support, hosting---and no other. Never mind that dual licensing, open core, delayed release, and others existed well before RedHat and WordPress and IBM successes made headlines. Never mind that these models had their business standard bearers, too. Never mind that they sometimes offered support documentation or configurations for hosting that add-on service companies didn't.

The difference now is that the anti-commercial, permissive-focused, "open source means I never hear 'no'" faction view happens to correspond to the interests of the titans of industry, who are all cloud services companies. These companies want to commoditize their complements---"open source" means we can reap what you sow and sell it to our customers---but not the proprietary code they use to differentiate their clouds. They patronize the big open source foundations.

We shouldn't be asking what open source is or means, as if it's an end in itself. We should be asking what it's for. And accepting there was never any conflict-free consensus there. We brushed all that under a rug in the late 1990s and early 2000s, because there was fame and money and a sense of purpose to be had selling "open source" as a brand and a "revolution". Now that work is done, the victorious allies are squabbling again. So it goes.

> These companies want to commoditize their complements---"open source" means we can reap what you sow and sell it to our customers---but not the proprietary code they use to differentiate their clouds.

I've worked with numerous SaaS businesses who run open source for as much external software as possible because it has better economics at scale. They want tight control of software configurations, ability to diagnose problems themselves, quick application of security patches, etc. It's not cheap; you have to hire highly qualified engineers to make it work.

The approach makes more sense as the business gets bigger, in the same way that it makes sense at some point to design your own data centers, own hardware, etc. It's therefore not surprising to see large businesses go all-in on open source.

I pretty much stopped taking this seriously after they compared restaurants to software development. Restaurants have very different operating cost structures.

The article's point is the product is not the business model, and the author did not try to stretch the point by comparing open source software business models to culinary business models. I suspect the example was selected since many people aspire to open their own restaurant even though they know (or ought to know) the failure rate is atrociously high.

A 100%. We try to make as much as possible of our online video editor (www.typestudio.co) free of charge and try to be as transparent as possible in our communication. But with open source we could never raise a seed round.

There are a million ways in which your business can go belly up, there is so much that can go wrong at any point. I see these open source startups and I just cannot fathom how clueless MOST of these people need to be to build their businesses around an ideology.

I guess if you start from a very specific strategy and you make sure that the FREE/OSS route is the optimal for the sake of your business, it can make sense. Honestly if this happens to me, I would probably get discouraged by the track record of such companies, and just backtrack into a model with a better one, in order to give my business the best possible chance.

Whats up with all the opensource hate on here lately? Has Bill Gates secretly bought this site or something? (User was shadow banned for this post)

in what way is this "opensource hate"?

It's not. It's a useful discussion about the pragmatic limitation of open source.

Maybe the pandemic made people realise affording food and stuff for your work is nice but open source doesn't come near that except a lucky few.

Same question to you: how is this "opensource hate"?

Oh yes it is. But like most products it has its market segment. And that segment is a group that requires a certain function that is not a competitive advantage for any in the group and wants to get that function for the lowest possible cost.

Ok, so much for abstractions. A stark example is that on Microsoft's Azure the majority of VM's are running Linux. A lot of companies want cloud based VM's and they don't want to pay for Microsoft's OS to run them when they can use Linux for free, so they don't.

Another example is OpenStreetMap. Many companies (including Apple) spend millions a year upgrading openstreetmaps. A lot of companies need a mapping function but it's silly for each one to carry the burden of creating their own map when they can all pitch in and use the final result.

This is the market segment where Open Source makes sense.

These are use cases and examples where open source makes sense, not a business (i.e. sustainable profit) model.

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