The Thanksgiving holiday has given me the opportunity to consider the critical new role of collaboration in innovation. This role was emphasized to me during a single day, November 17, in Silicon Valley. In the morning, I attended the Cloud Computer Expo and speaker after speaker, from Cisco to HP, discussed how OpenStack software was critical to their success in cloud computing and was transforming cloud computing industry. OpenStack software to enable cloud computing is being developed under the management of the OpenStack Foundation in a collaboration of over 150 companies. The OpenStack project was started by NASA and Rackspace, but was recently reorganized as a foundation to take over the funding and management of the project www.openstack.org (as a matter of transparency, I represent the OpenStack Foundation). I think that such collaborations will be increasingly critical for the future because many business problems are too complicated to be effectively solved by a single company. For example, the auto industry has joined with the consumer electronics industry to form a collaboration for entertainment systems in automobiles, the Genivi Alliance http://www.genivi.org/.
At the end of the day, I attended the Sierrra Ventures CIO Summit cocktail party (yet another good reason to have Sierra Ventures as an investor) and Jed York of the 49ers was discussing the role of technology in the new Santa Clara stadium (it sounds like it will be spectacular). Yet he also focused on the need to encourage collaboration with the Silicon Valley community to take advantage of the possibilities presented by the technology infrastructure of the new stadium.
From cloud computing to sports, collaboration has become central to business success in the 21st century.
Last year, 2011, was one of the most active years in legal developments in FOSS. This activity reflects the increase in FOSS use: Laura Wurster of Gartner, noted in the Harvard Business Review blog that open source has hit a “strategic tipping point” this year with companies increasingly focused on using “open source” software for competitive rather than cost reasons http://lawandlifesiliconvalley.com/blog/?p=619.
Continuing the tradition of looking back over top ten legal developments in FOSS, http://lawandlifesiliconvalley.com/blog/?s=top+10+2008&x=40&y=6, my selection of the top ten issues for 2011 are as follows:
1. Android Patent Litigation. One of the most widely reported legal developments in FOSS has been the patent wars surrounding the Android operating system. Over 40 patent cases are pending between a wide variety of parties, including Motorola Mobility, Inc., HTC, Samsung Electronics, Inc. and Apple Computer, Inc. This year saw several decisions in these suits. In Australia, Apple won a trial court decision which enjoined the distribution of Samsung’s Android tablets based on a claim that the Samsung tablet violated Apple’s design patents. However, after a series of appeals, Australia’s High Court overturned the injunction and Samsung can now distribute its tablets. Apple was more successful in Germany where it was successful in obtaining an injunction based on Apple’s design patents which prevents the distribution of Samsung’s Galaxy Tab 10.1 (however, Samsung has released a revised version named the Galaxy Tab 10.1N). Apple was not successful in obtaining an injunction against distribution of Samsung’s Galaxy Tab in the United States, although the judge stated that Apple’s design patents might be infringed. More recently, on December 19, the ITC ruled that HTC’s Android phones violated two claims of an Apple utility patent and issued an “exclusion order” for HTC Android phones which would take effect on April 19, 2012. HTC has announced that it will provide a workaround. Google has been handicapped by its lack of patents to assert in defense of Android (it started with only 600 patents, but is aggressively buying new patents and has agreed to purchase Motorola Mobility, Inc., primarily for its patent portfolio).
2. Oracle v. Google. A separate but related case is Oracle’s suit against Google for the alleged infringement of Oracle’s copyrights in the Java software (which it acquired from Sun Microsystems, Inc.) and certain Oracle patents by Android. Oracle is asserting that the Android operating system infringes the copyrights in “twelve code files and 37 specifications for application programming interface packages”. The decision on this claim could have a significant impact well beyond this case: most software lawyers have viewed APIs (and their specifications) as either having no copyright protection or very limited copyright protection. These views govern the interpretation of both FOSS and proprietary licenses. The court described APIs as follows:
Conceptually, an API is what allows software programs to communicate with one another. It is a set of definitions governing how the services of a particular program can be called upon, including what types of input the program must be given and what kind of output will be returned. APIs make it possible for programs (and programmers) to use the services of a given program without knowing how the service is performed. APIs also insulate programs from one another, making it possible to change the way a given program performs a service without disrupting other programs that use the service.
If Oracle prevails and the court finds that APIs are copyrightable, lawyers will need to rethink how they interpret both FOSS and proprietary licenses. The issue could be particularly important in determining whether interactions between software programs licensed under GPLv2 or GPLv3 create, respectively, “derivative works” or a “modified version” and, thus, impose the license terms of GPLv2 or GPLv3 on the software modules with which they interact. The first significant decision in the case rejected Google’s attempt to eliminate the claims through summary judgment (Google won only on a single minor point). http://www.scribd.com/doc/65143317/Oracle-v-Google-Denial-of-Google-s-Summary-Judgment-Motion. However, this decision is not surprising because summary judgment is generally used for settled issues of law; the copyright issues in this case are on the cutting edge of the law.
3. Perfect 10 v. Google. Although this case was not strictly about open source software, it established a critical principle for remedies for copyright infringement. These remedies also apply to enforcement of copyright licenses in certain situations. For decades prior to this decision, the presumption was that the remedy for copyright infringement was always “injunctive relief”. Injunctive relief means that a court orders an “infringer” to comply with the terms of the license. The Perfect 10 decision in the Ninth Circuit Court of Appeals made clear that “injunctive relief” is no longer a remedy which is always available for copyright infringement. Instead, the court stated that : We therefore conclude that the propriety of injunctive relief in cases arising under the Copyright Act must be evaluated on a case-by-case basis in accord with traditional equitable principles and without the aid of presumptions or a “thumb on the scale” in favor of issuing such relief.
Injunctive relief is an unusual remedy for breach of license agreements, because under Anglo Saxon law, the standard remedy for breach of contract is monetary payment. However, a remedy of monetary damages has little value for breach of open source licenses because the open source software is generally distributed at no cost. The Perfect 10 decision undercuts the value of the Jacobsen decision to the open source community. In Jacobsen, the Court of Appeals of the Federal Circuit decision found that injunctive relief was available for open source licenses if the relevant obligations were drafted to make them a “restriction” on the scope of the license rather than just a contractual obligation (a “covenant”) http://lawandlifesiliconvalley.com/blog/?p=65. However, the other standard copyright law remedies such as attorneys fees, actual damages and, potentially, statutory damages remain available. However, injunctive relief, the most valuable of remedies, may be more difficult to obtain to enforce open source licenses.
4. Publication of Software Package Data Exchange (“SPDX”) Specification. The management of open source software in the supply chain has been a continuing problem. However, the open source community has been working to find a solution to this problem. The work has been guided by the SPDX Group (the SPDX Group is a working group of the Linux Foundation and is associated with FOSSBazaar) which has developed the SPDX specification as a standard format for describing the components, licenses and copyrights associated with a software package. For example, SPDX Group has identified seven versions of the General Public License version 2, the most commonly used open source license. If widely adopted, SPDX will be critical to effectively manage open source software as it becomes more widely used in the supply chain. As noted in the Harvard Business Review blog by Gartner Group, the ubiquity of the use of open source software has not been matched by effective management of its use http://blogs.hbr.org/cs/2011/03/open_source_software_hits_a_st.html.
5. Revision of Mozilla Public License. The Mozilla Public License is one of the most popular open source licenses. After eighteen months of work, Mozilla has announced a new version. The Mozilla Public License version 2 (“MPLv2”) is a much simpler, shorter and more usable license. The new license has adopted approaches (and sometimes the terms themselves) from other open source licenses: the patent license provision was adopted from the Apache license and the termination provision from the General Public License version 3. In addition, Mozilla has made the MPLv2 compatible with the Apache license. And MPLv2 has also included a provision to make the license “compatible” with other licenses. For example, MPLv2 permits distribution of code under the MPLv2 with other modules licensed under GPL variants (GPLv2, GPLv3, APGL and LPGL) if such modules are part of a “Larger Work” (unless the notice in the software states that the software is “Incompatible with Secondary Licenses”). However, these differences mean that the transition to the MPLv2 for existing projects will require careful thought.
6. Cybits Decision in Germany. This decision makes clear that companies cannot alter the terms of software licensed under GPLv2. AVM is a manufacturer of FRITZ!Box router, a digital subscriber line DSL terminal, which uses the Linux Kernel as a part of their production firmware (which is licensed under GPLv2). Cybits, a software producer, distributes the Internet filtering software “Surf-Sitter DSL”, which is intended to protect children. The Surf-Sitter application downloads FRITZ!Box software to the user’s computer, modifies it and then reinstalls it back on the FRITZ!Box.
AVM claimed that Cybits did not have the right to modify the part of the FRITZ!Box firmware which was licensed under GPLv2. The court rejected AVM´s claims that Cybits should not be permitted to alter the firmware of AVM and denied that Cybits had infringed AVM´s copyright by distributing Surf-Sitter. The court found that the firmware is a collective work, which contains modules licensed under GPLv2. Cybits or any third party may modify the GPLv2 licensed software. Thus, AVM is not able to control any modifications to the GPL licensed components of the FRITZ!Box firmware.
7. Project Harmony Publishes Standardized Contributor Agreements. Many commentators have complained about the problems raised by the number of licenses approved as “open source”, a problem frequently referred to as “license proliferation”. Yet a similar problem is lurking in the development of open source software: the contribution agreements which govern the rights provided by contributors to a project. Project Harmony was a community effort to resolve this problem in advance by developing a set of standard agreements which can be adopted by open source projects http://www.harmonyagreements.org/about.html.
Many open source projects use the “license” for the project as a contribution agreement, but a variety of separate open source contribution agreements have developed over time, from the Apache Contributor Agreement to the Joomla Contributor Agreement http://community.joomla.org/images/JCA_General_Draft.pdf. Although many open source projects can use their standard open source license (i.e. GPLv2 for Linux or Mozilla Public License for the Mozilla browser) as the “contribution agreement”, this approach “locks in” the open source project to that license. If the open source project wishes to change the license (such as the change of OpenOffice project from GPLv2 to Apache), this approach would require that each contributor agree to the change. A good example of the potential for problems with this approach is the Open Street Map Project (“OSM Project”). The OSM Project has been struggling with shifting from a Creative Commons license to a more appropriate Open Database License http://wiki.openstreetmap.org/wiki/Open_Data_License_FAQ. After three years, the transition is still not complete. Finally, the OSM Foundation has given up on obtaining agreement from the remaining contributors and will probably delete contributions from contributors that have not agreed to shift to the new license http://en.wikipedia.org/wiki/Open_street_map#Licensing. In addition, open source licenses do not deal with a number of other issues which should be addressed by contribution agreements, such as contributions by minors and changes of license. Project Harmony also makes it easier for corporations to contribute to open source projects by avoiding the complexities of managing the differing terms of these new contribution agreements. The Project Harmony standard contribution agreements permit projects to make a choice between a license or assignment approach and, then, select among several options to change licenses in the future (without obtaining permission from each contributor.
8. Dispute over Koha Trademark. The importance of the protection of trademarks to open source projects was illustrated by the recent dispute over the Koha trademark between Horowhenua Library Trust (“HLT”) and a commercial company, PTFS, http://koha-community.org/update-2/. HLT manages the Koha open source project. PTFS filed for trademark protection for Koha in New Zealand after it had acquired a company which used the trademark and the trademark was, then, registered by the New Zealand government. Upon registration of the Koha trademark, HLT complained and appealed for help. Subsequently, PTFS agreed not to enforce the trademark and even to transfer the trademark to HLT http://patentbuff.com/2011/11/koha-alls-well-that-ends-well_28.html?spref=tw.
9. The Meaning of Open Source. The power of the community to police the misuse of “open” was demonstrated by Nokia’s attempt to claim that the Symbian mobile operating system was “open” for business http://www.groklaw.net/article.php?story=20110402143136766. However, the Symbian license is not consistent with the Open Source Definition. The copyright license in the Symbian license is as follows:
Subject to the terms and conditions of this Agreement, Nokia hereby grants to You a personal, non-exclusive, non-transferable, irrevocable (except as set forth in Clause 7.1 and 7.2 below), royalty-free and worldwide license under Copyrights licensable by Nokia to: i) reproduce and modify Source Code Components; ii) reproduce Binary Components and Documentation; iii) use and reproduce Utility Software, and iv) publicly display, distribute and make available (a) the Source Code Components to third parties that have acquired a valid source code license from Nokia; and (b) Utility Software, Binary Components and Source Code Components in binary form to third parties, (c) Documentation in unmodified form in all cases i)-iv) solely as part of the Symbian Platform or for use with the Symbian Platform, under the terms and conditions of this Agreement.
The agreement requires a separate license for source code from Nokia and limits the use to the “Symbian Platform.” Nokia was forced to “correct” their original statement to “open for business” rather open source http://symbian.nokia.com/blog/2011/04/04/not-open-source-just-open-for-business.
10. Open Hardware License. The open hardware movement received a boost when CERN published an Open Hardware License (“CERN OHL”). The CERN OHL is drafted as a documentation license which is careful to distinguish between documentation and software (which is not licensed under the CERN OHL) http://www.ohwr.org/documents/88. The license is “copyleft” and, thus, similar to GPLv2 because it requires that all modifications be made available under the terms of the CERN OHL. However, the license to patents, particularly important for hardware products, is ambiguous. This license is likely to the first of a number of open hardware licenses, but, hopefully, the open hardware movement will keep the number low and avoid “license proliferation” which has been such a problem for open source software.
I am looking forward to the upcoming Open Source Think Tank 2011 which we are co hosting with Olliance Group/Black Duck. Andrew Aitken has prepared a great agenda and we are going to have a case study by AOL which they describes as follows: AOL is planning two related open source initiatives: employing open source technologies and practices to improve the innovation and efficiency of their developers and releasing elements of their software portfolio as open source to enrich their ability to deliver content and encourage community contributions.
This year the Open Source Think Tank will be particularly interesting because of the dramatic expansion in the use and importance of Freedom and Open Source Software (”FOSS”). We will be discussing the recent completion of many important industry initiatives to make FOSS easier to use: Project Harmony (contributor agreement), SPDX (assisting management of the supply chain by providing a common vocabulary for describing licenses), new Mozilla license and Open Web Foundation (contributor agreements).
The Open Source Think Tank is unique because of the breadth and seniority of those who attend, from CEOs such as Larry Augustin (SugarCRM) and Tim Yeaton (Black Duck) to counsel such as John Noerenberg (Chief IP Counsel, Qualcomm) and Marissa Aufox (Compliance Counsel, Go Daddy Group) to CTOs such as Shawn Douglass (EMC) and Paul Daugherty (Chief Technology Architect, Accenture).
We will also be discussing the recent government initiatives which could dramatically increase the market for FOSS. I have mentioned these government initiatives in an earlier post. http://lawandlifesiliconvalley.com/blog/?p=607.
We have a few more spaces left for the Open Source Think Tank, but if you are interested you will have to move quickly. http://thinktank.olliancegroup.com/
We had a great time in Paris at our Third Open Source Think Tank this year! We had over 120 attendees, primarily from Europe http://thinktankeu.olliancegroup.com/index.php.
The two case studies were very different and illuminated the range of the open source market: Airbus and the Danish Government. The Airbus discussion was particularly fascinating as they described a product development cycle of twenty years with a product life cycle of forty years. Software has become critical to their planes, but given these time periods, proprietary software has significant disadvantages: (1) most proprietary software companies are likely to be acquired or go out of business during such a long period and (2) even if the proprietary software company still exists, the technology will be dated and the company may be reluctant to invest in maintaining it. An open source approach overcomes many of these problems.
The Danish Government described their efforts to encourage the use of open source in the government, including developing a forge. They faced many of the same challenges described by the State of California which we discussed at the Open Source think Tank in Napa.
We once again had a great discussion of M&A. This panel was particularly useful for startup CEOs because merger is the exit strategy for over 90% of venture backed startups. The panelists emphasized the need to ensure that the company has clear title to the intellectual property in the product. The failure to do so can result in significant delays and possibly reductions in the purchase price. They also noted that one problem that target companies rarely consider is the negative effect of large potential contract liabilities: the most common problem is unlimited liability for intellectual property infringement. Many acquiring companies will not accept such liability. In one case, the acquiring company structured the transaction as an “asset purchase” rather than a merger (much less favorable from a tax point of view for the acquired company) in order to leave the contract with unlimited liability behind. We also addressed these issues in the legal panel (see our presentation at http://www.scribd.com/doc/40133936/Open-Source-Paris-Think-Tank-2010-Final).
The cloud computing panel was supplemented by a real time poll. The attendees were more optimistic about the effect of cloud computing on the use of open source software than the attendees in the Napa Open Source Think Tank in the Spring. A large majority stated that the advance of cloud computing has not effected the adoption of open source software. Both groups agreed that security was the most significant barrier to the adoption of cloud computing. I am sure that this topic will continue to be important at future Open Source Think Tanks.
After the last presentation, we joined attendees of the Open World Forum for a cocktail party in the Paris City Hall and then had a wonderful dinner on a barge on the Seine. We look forward to seeing you next year.
I have been reading the debate about “Open Core” which was stimulated by Jorg Janke post about Compiere. http://www.compieresource.com/2010/06/compiere-open-source-failed.html. The open source community owes Jorge Janke a huge debt of thanks for his frank discussion of what happened at Compiere. People are rarely eager to share the details of their failures. I think that the most important lesson from his posting is the critical importance of management that understands its market. The venture capital industry learned this lesson long ago. When making a decision about an investment, venture capitalists focus on the management team; they understand that the technology is important, but great execution with mediocre technology will win over poor execution with great technology. This rule has been established by decades (and thousands) of investments. Open source companies pose particular challenges for management because of the critical role of communities and their expectations in the success of the company. These issues are very different from traditional software companies. Compiere is a very telling example of the nature of those challenges.
This post has launched a discussion of the “open core” business model and whether it is true “open source” http://www.computerworlduk.com/community/blogs/index.cfm?entryid=3047&blogid=41. I have great respect for Simon Phipps and his contributions to the open source community, but I strongly disagree with his statements. I am very concerned that if he is successful, end users will have fewer software programs under open source licenses. This result arises because of the law of unintended consequences: the successful demonization of the open core model will result in fewer venture capital investments in companies using open source licenses.
In the interest of transparency, I work with over twenty open source companies, most of who were funded by venture capitalists and the vast majority of which use the “open core” model. These companies have provided significant value to end users through the software licensed under open source licenses. Simon states: “But to use the package effectively in production, a business probably won’t find the functions of the core package sufficient, even in the (usual) case of the core package being highly capable.” This statement is simply incorrect. I have sat through many Board meetings and, in fact, the conversion rate from “open source” to “commercial” licenses is generally less than 10% for these companies. Thus, more than nine out of ten end users find the functionality of the open source version satisfactory.
Simon says that open core does not provide software freedom for “end users”. Yet, nothing prevents the end users of the open source version to modify it and distribute it or otherwise exercise the rights under the license. In fact, Compiere demonstrates the fallacy of this position because it created two different forks. Simon complains about the lack of access to the “commercial extensions” of open core programs. However, as Marten Mickos notes, the effect on the end user of the employment of the Apache license is the same as the open core model: commercial extensions are not made available to the community. http://webmink.com/2010/06/24/links-for-2010-06-24/#comment-870. I agree with Matt Aslett that the open core model does not violate the Open Source Definition, either literally or in spirit. http://blogs.the451group.com/opensource/2010/07/02/open-core-is-not-a-crime/. (please note that this position is a personal one and does not reflect the view of the OSI which has not yet taken a position on this issue). Simon appears to be suggesting that only a “copyleft” approach in which all of the software must be available under an open source license to meet the Open Source Definition, which is simply incorrect (the Open Source Definition was a reaction to the limitations imposed by the copyleft approach).
I agree with Matt at one level that ultimately this debate will be decided by the market (i.e. end users). However, I don’t agree that it is futile. Most venture capitalists will not invest in companies that do not use the open core model, so if the open source community leaders are successful in demonizing the open core model, they will decrease the willingness of venture capitalists to invest in open source companies (just a reminder, that a recent book, Mastering the VC Game, recently noted that venture capitalists typically look at 300 companies for each company in which they invest). Although not all open source projects need venture capital support, venture capitalists have been a significant source of support for open source projects (as well as new software made available under open source licenses) and end users have been the beneficiaries of their investment. If the open core model is no longer considered open source, the biggest losers will be the end users; they will lose the opportunity to benefit from that investment and that is certainly not consistent with the goals of open source
Red Hat has launched “Opensource.com” as the town square for the “open source” community http://opensource.com/should-be/10/1/welcome-conversation-opensourcecom. It provides for a single location to discuss the legal, social and economic consequences of the open source model. This site comes at an inflection point for the FOSS community: FOSS is now ubiquitous and many of the earlier battles for credibility and acceptance are won. Yet, with those victories, the FOSS community finds itself facing new challenges, such as how to deal with managing the numerous modules of open source in many products in a consistent manner (the so called “Bill of Materials” problem) and the continuing problem of dealing with patents http://opensource.com/law/10/2/looking-out-bilski-software-patents-v-foss. And open source is now being viewed as a model for collaboration beyond software http://opensource.com/business/10/2/what-could-politicians-learn-open-source-way. These discussions cut across wide variety of topics and have been spread out across many sites and blogs.
Opensource.com provides a forum to discuss these topics in one place and the opportunity to collaborate in the best tradition of the FOSS community. However, the site will only be valuable if it is used by the community. Red Hat has done the community a great favor and provided the platform, but now the community needs to step up and participate in the discussion. Let’s get to it!
I am participating in SDForum’s Global Open Source Colloquium for the third year. This Colloquium is held the day before OSBC. http://www.sdforum.org/index.cfm?fuseaction=Calendar.eventDetail&eventID=13371 The event is always fun because it is much smaller than OSBC and permits you to interact with the speakers on a personal basis. The speakers are always drawn from major figures in the open source industry with a leavening of speakers from overseas.
This year has a particularly interesting set of presentations with Larry Augustin as the keynote. Larry is a seasoned entrepeneur and a very successful investor in open source companies. We will also have several panels with open source CEOs which focus on the global market. And we will have a great panel of venture capitalists who invest in open source (I know because I will moderate the panel!).
The Colloquium will begin at 11:30 am at the Palace Hotel on March 23. I hope to see you there!
Olliance Group has recently announced the dates of the Open Source Think Tank: March 1-3, 2009. http://thinktank.olliancegroup.com/.
This year represents the fourth Think Tank sponsored by Olliance Group and DLA Piper. I go to many open source events each year and the Think Tank is my favorite because it combines a sophisticated audience, a reasonable size and interesting discussion. Those who have attended also enjoy the format:
The Open Source Think Tank that was hosted by Olliance Group and DLA Piper was ideal, not only for the chance to share ideas and address the challenges surrounding commercial open source with my peers, but for the networking and business development opportunities. CollabNet was able move at least three partner and potential customer relationships forward at the event itself.”
Bill Portelli, CEO, CollabNet
During the 2008 Open Source Think Tank, 120 CEOs, CIO/CTOs, VCs, attorneys and industry luminaries representing the entire open source ecosystem from venture backed startups to Fortune 100 companies. The event is invitation only and it has sold out each time, so sign up early!
Business models in open source continue to evolve. We are seeing a very interesting dialog on this issue, started by Matt Aslett in his post last week http://blogs.the451group.com/opensource/2009/01/05/commercial-open-source-business-strategies-in-2009-and-beyond/. He notes that David Rosenberg’s described the dominant business model for commercial open source products is the “open core” model which he describes as follows:
“Typically we now see an “open core” freely available with “exclusive” or proprietary features only available when you pay. If you are trying to build a commercial business on top of an open source project, this is likely the right answer.”
In the past, this model has been called “dual licensing” and has been the basis for the successful open source businesses built by Zimbra and SugarCRM. It is not the only business model: as I noted in my post about the confusion on open source and business models, Marten Mickos found over thirteen different business models for open source companies. http://lawandlifesiliconvalley.com/blog/?p=130
Business models for open source companies are continuing to evolve. However the “open core” model poses the very significant challenge of deciding where to draw the line between the functions in the community edition and the “commercial” edition. This issue was the most interesting to the audience at the presentation to the Silicon Valley Chapter of the Association for Corporate Growth last Thursday by John Roberts on “Open Source and the Future of Software.” We set up the presentation as a dialog and my question to John about business model brought the most comments from the audience. The discussion reminded me how new “commercial open source” industry is: SugarCRM started in 2004. We should not be surprised that the model is still evolving.
Matthew also makes the point that many traditional proprietary companies are adding open source elements to their business model. I have assisted a number of proprietary companies on these issues and I expect this trend to accelerate in 2009.
He has followed up this week with a post this week about the importance of the community in any open source business http://blogs.the451group.com/opensource/2009/01/12/commercial-open-source-community-strategies-in-2009-and-beyond/. I think that the management of communities is one of the core differences between open source companies and proprietary companies. Communities provide open source companies many of their core advantages and their management is critical to the success of open source companies. Yet as more open source companies adopt the “Open Core” strategy, they need to ensure that their communities remain active and engaged.
After a busy year end, I have time to reflect about the last year and developments in open source. I was particularly interested in the cascade of articles and comments about how the “Open Source” business model is broken started by Stuart Cohen’s article in Business Week on December 1. http://www.businessweek.com/technology/content/nov2008/tc20081130_276152.htm. I believe that Stuart is just wrong. I think that Charles Babcock got it right in his blog responding to Stuart. http://www.informationweek.com/blog/main/archives/2008/12/open_source_bus.html?cid=RSSfeed_IWK_ALL.
From my point of view, Charles’ most important point is that “open source” is not a business model, it is a means of developing and distributing software. And 451 Group makes a similar point in their report on open source business models (which actually pre dated Stuart’s article). http://www.the451group.com/caos/caos_detail.php?icid=694. I represent over fifteen open source startups (as well as large companies developing open source software) and they have a variety of ways of making money on open source software, ranging from “dual” distribution to support for proprietary additions. Marten Mickos in his keynote at OSBC in 2007 noted thirteen different ”open source” business models. http://akamai.infoworld.com/weblog/openresource/archives/OSBC2007%20-%20Marten%20Mickos%20Keynote.pdf. Second, “open source” cannot be a single business model because it spans a wide variety of different products: the business models for application software are quite different from infrastructure software. Third, most of the companies that I represent use a mix of business models, such as dual distribution and SAAS. In fact, even the “dual” distribution model has two forms: the newer model in which the company distributes a commercial version which has additional functions compared to the open source version and the older model in which the open source and the commercial version are the same. While the characteristics of “open source” development have strong similarities across different types of products, the business models are likely to quite different and will continue to evolve.
The open source community also owes Charles Babcock (and his colleagues at InformationWeek) a vote of thanks for the Analytics report “Open Source Enterprise: Its Time Has Come, And the Price is Right.” It provides an excellent summary of the state of open source software in the enterprise, with plenty of specific examples. However, I think that the most interesting part of the report is “What Happens After the Acquisition”. This section describes the challenges faced in the integration of open source companies into larger companies. The nature of open source companies and their communities requires a different approach from traditional acquisitions. In particular, the acquiring companies need to consider carefully the effect on the open source companies employees and their community when modifying the business model. As more open source companies are acquired by traditional software companies, these issues will take on increasing importance. Both sides need to understand that such an integration will require flexibility.
I think that 2009 will be a very interesting year for open source!