The Open Source Equation

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Software publishers new to the world of open source often have a common question: can they be "open source" without allowing others to redistribute or make derivative works of their code?

Simply put: no.  In fact, the ability to redistribute code is the first criteria the Open Source Initiative uses to evaluate a license to see if it really is "open source".

This question arises out of a simple dynamic.  Publishers have heard that users like "open source," and so it feels like an interesting marketing dynamic to tap into.  However, this possibility that someone other than them might make some money or get some credit based on the work they've done stops publishers in their tracks.

Is this a real concern?  

Well, it depends on what you, the publisher, are trying to do and why.  Let's take a look at a couple of reasons and then some questions to help you decide which is right for you.

Open source is a strategy that does two things really well.  First, distributing your powerful, high quality and trustworthy code for free is a great way to get a big audience fast. (See note 1)  Second, engaging with that audience about your app builds a dedicated and devoted community who can help push your product forward, both in terms of capability and market penetration, also fast.  In fact, it creates a tremendous market pull in your product's direction.  

This kind of app and community momentum can build tremendous value.  See VM Ware's purchase of SpringSource, e-Bay's purchase of Magento or RedHat's purchase of JBoss.  These are all significant transactions.

Is open source the only way to create this kind of value?  Of course not.  However, when you choose open source, you're betting the value you create using the free and open source model — fundamentally about pull — will be greater than the value you create using closed source and the traditional push model of outbound sales and marketing.  (See note 2 for details on The Open Source Business Model.)

There's another calculus that sometimes comes into play here — a moral and emotional calculus. It boils down to this: you, the publisher, have put your blood, sweat and tears — and money — into your app, and no one other than you should be allowed to reap any financial benefits of the work. This can be an incredibly strong feeling and very difficult to overcome.  Is it right or wrong?  Only you can decide.

Making a decision about the right way to distribute, market and capitalize on your work is complex, but there are questions you can ask that will help you.

1. What does your market value?  Does your market value community?  Do you want developers to deeply engage with your product? Do they have a solid history with open source software?  How much education will you have to do?

2. How big is your market?  If there were zero acquisition costs to use your app, would everyone use your product?  What about if you app was almost free?  

3. If you gave your product away and built a large community around it, who specifically among your competitors would jump in and start trying to profit from it?  How successful will they likely be?  What could you do to mitigate that threat other than not release your app as open source?

4. For both open source and non open source distribution models, what metrics are most important to you? How will you reach them? How much will that cost? How long will it take?

5. What does wild success look like if you give your product away?  What does a wildly successful community look like?  What about when you sell your product?  What does wild success look like and what does your community look like?  How about failure?

A final question, suggested by our own Pat Patterson, is this: What do you do that's special and hard to replicate?  Is it the algorithms in your app?  Or is it your know how in getting the app up and running for customers?  If it's the algorithms, open source might not make sense.  But if it's the expertise, your know how in getting customers up and running and successful, keeping your app closed or not using an OSI compliance license doesn't add much value.

At the end of the day, the biggest problem most new products have is gaining traction and generating uptake.  If your audience is used to working in a community setting and has experience with open source software, releasing your app under an OSI approved license is a great way to engage people, activate the power of a community and build momentum — fast.


(1) Stephen O'Grady from RedMonk did a great session at the Open Source Business Conference called Welcome to the Age of Data that examines the evolution of software companies and talks about a unique opportunity open source companies have because of their distribution skills.

(2) So how do you drive growth?  Check out The Open Source Business Model: Key Metrics and Levers from David Skok.  It's excellent. 







June 15, 2011

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The Open Source Equation