Mike Olson: Open Source Business Models | Summary and Q&A

Transcript

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Summary

In this video, the speaker discusses different business strategies related to open source software. He explains that in the past, businesses had to have a strategy for electricity, and now open source software has become similarly ubiquitous. He explores various business models that have been tried, including proprietary software, services-based companies, and dual licensing. The speaker then goes on to discuss Cloudera's approach, which involves offering proprietary software alongside open source offerings to create differentiation and generate recurring revenue that can be reinvested back into the open source community.

Questions & Answers

Q: What were some of the early strategies businesses had for electricity?

Back in the early 19th century, businesses had strategies for electricity, such as deciding whether to get it from an external source or produce their own.

Q: How does the speaker compare open source software to electricity today?

The speaker believes that open source software has become similar to electricity in that it is now a normal part of the business landscape. It has transitioned from being a discrete, confusing, and complicated thing in the '90s to something that most businesses touch in fundamental ways today.

Q: How did Illustra approach open source software?

Illustra took the Postgres code from Berkeley and made proprietary enhancements to create a better product. However, they did not share these enhancements with the open source community, instead selling the product for profit.

Q: What is one problem with the approach of making proprietary enhancements to open source projects?

By not sharing enhancements with the global open source community, businesses that take this approach surrender the potential contributions and improvements from a wider pool of developers and users.

Q: What is version lagging as a business model?

Version lagging is a business model where the last version of a software is available for free as open source, but the current version is kept proprietary and requires payment. This approach allows companies to monetize their software while still providing some functionality for free.

Q: What is one limitation of the services-based business model for open source software?

Services-based companies that offer free software and charge for support often struggle to drive high margins. This limits their ability to invest in making the core open source product better, resulting in stagnation.

Q: How did Red Hat differentiate its open source business model?

Red Hat offered a cloud-based management service called Red Hat Network, which was a proprietary software. They provided freely available operating systems but offered proprietary software for managing systems as part of their commercial value.

Q: How did Sleepycat use dual licensing?

Sleepycat used a dual licensing approach where they provided their software for free as open source if the user's own software was also open source. However, if users did not want to give away their intellectual property, they had the option to pay for a different license from Sleepycat.

Q: What is the downside of the dual licensing approach?

The dual licensing approach can be seen as distributing the open source software as "poison" and selling the proprietary license as the antidote. While this may be a profitable business model, it can create an initial relationship with customers based on a threat, which may not be ideal.

Q: What is the Cloudera model for open source business?

Cloudera follows a model where they build proprietary software alongside their open source offerings. This proprietary software allows customers to derive more value from their data and infrastructure and offers differentiation from competitors with pure open source distributions. The recurring revenue generated by the proprietary software is then reinvested back into the open source community.

Takeaways

Open source software has become an integral part of the business landscape, and companies need to find ways for monetization and differentiation. While various business models have been tried, the Cloudera model, which combines proprietary software with open source offerings, is seen as a sustainable way to build an open source business. The ability to generate recurring revenue from proprietary software allows for investment back into the open source community, ensuring its continued growth and development. A similar example is IBM's approach with Linux, where they contribute to the Linux ecosystem while also delivering proprietary software on top.