Is There an Open Source Business Model: YES or NO?

The open source definition is over 20 years old. Red Hat is a multi-billion dollar company. MySQL and JBoss have had great acquisition exits. Cloudera and Hortonworks are well on their way to becoming the next billion-dollar software companies. But Stephen would like to observe that despite these successes, there is no open source business model.
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1.Is there an Open Source Business Model: YES or NO? Stephen Walli, Principle Program Manager, Microsoft @stephenrwalli Jeffrey Borek, WW Program Director, IBM @jeffborek

2.Is there an Open Source Business Model? Open Source Software is about Engineering Economics

3. We’ve shared software since we’ve written software U SEN IX B e gin s A p ach e h ttp d Code R e le ase d 1 9 9 5 IB M “SH A R E” D EC U S 1975 M IT Pro je ct sh arin g C o n f & Lib rary C o n f & Lib rary A th e n a B e gin s A p ach e So ftw are A t Prin ce to n GCC B e gin s 1 9 5 3 B e gin s 1 9 6 2 e m acs 1983 Fo u n d atio n 1 9 9 9 IA S in late 1987 A T& T Sh are s 1975 1940s Lin u s R e le ase s O SD L Fo rm s O SD L R e -fo rm s as First U N IX 1 B SD R e le ase d Lin u x Fo u n d atio n Lin u x 1 9 9 1 2000 tap e s e arly- 1977 2007 70s 1950 1960 1970 1980 1990 2000 2010 st nd Fre e So ftw are 1 D o J vs IB M 2 D o J vs IB M O p e n So u rce Fo u n d atio n C o n se n t D e cre e b e gin s D e fin itio n 1 9 9 7 Lau n ch e s 1 9 8 5 “H ard w are B u n d lin g “So ftw are B u n d lin g U .S. C o n gre ss is A n ti-co m p e titive ” is A n ti-co m p e titive ” A d d s C o m p u te r 1956 1969 IB M re sp o n se is to So ftw are to u n b u n d le H W , SW , C o p yrigh t Law & se rvice s p ricin g 1980

4. We’ve shared software since we’ve written software Writing good software is hard work U SEN IX B e gin s A p ach e h ttp d Code R e le ase d 1 9 9 5 IB M “SH A R E” D EC U S 1975 M IT Pro je ct sh arin g C o n f & Lib rary C o n f & Lib rary A th e n a B e gin s A p ach e So ftw are A t Prin ce to n GCC B e gin s 1 9 5 3 B e gin s 1 9 6 2 e m acs 1983 Fo u n d atio n 1 9 9 9 IA S in late 1987 A T& T Sh are s 1975 1940s Lin u s R e le ase s O SD L Fo rm s O SD L R e -fo rm s as First U N IX 1 B SD R e le ase d Lin u x Fo u n d atio n Lin u x 1 9 9 1 2000 tap e s e arly- 1977 2007 70s 1950 1960 1970 1980 1990 2000 2010 st nd Fre e So ftw are 1 D o J vs IB M 2 D o J vs IB M O p e n So u rce Fo u n d atio n C o n se n t D e cre e b e gin s D e fin itio n 1 9 9 7 Lau n ch e s 1 9 8 5 “H ard w are B u n d lin g “So ftw are B u n d lin g U .S. C o n gre ss is A n ti-co m p e titive ” is A n ti-co m p e titive ” A d d s C o m p u te r 1956 1969 IB M re sp o n se is to So ftw are to u n b u n d le H W , SW , C o p yrigh t Law & se rvice s p ricin g 1980

5. Companies shared software before we had the OSD R ed H at Su n O S 1993 1983 A p ach e h ttp d U SEN IX B e gin s Code R e le ase d 1 9 9 5 IB M “SH A R E” D EC U S 1975 M IT P ro ject sh arin g C o n f & Lib rary C o n f & Lib rary A th en a B egin s O SF/1 A p ach e So ftw are A t Prin ce to n GCC B e gin s 1 9 5 3 B e gin s 1 9 6 2 e m acs 1983 1992 Fo u n d atio n 1 9 9 9 IA S in late 1987 A T& T Sh are s 1975 1940s Lin u s R e le ase s O SD L Fo rm s O SD L R e -fo rm s as First U N IX D EC U ltrix 1 B SD R e le ase d Lin u x 1 9 9 1 Lin u x Fo u n d atio n tap e s e arly- 1984 2000 1977 2007 70s 1950 1960 1970 1980 1990 2000 2010 st nd Fre e So ftw are 1 D o J vs IB M 2 D o J vs IB M O p en So u rce Fo u n d atio n C o n se n t D e cre e b e gin s D efin itio n 1 9 9 7 Lau n ch e s 1 9 8 5 “H ard w are B u n d lin g “So ftw are B u n d lin g U .S. C o n gress is A n ti-co m p e titive ” is A n ti-co m p e titive ” A d d s C o m p u ter 1956 1969 IB M re sp o n se is to So ftw are to u n b u n d le H W , SW , C o p yrigh t Law & se rvice s p ricin g 1980

6. Companies shared software before we had the OSD (Writing good software is hard work) R ed H at Su n O S 1993 1983 A p ach e h ttp d U SEN IX B e gin s Code R e le ase d 1 9 9 5 IB M “SH A R E” D EC U S 1975 M IT P ro ject sh arin g C o n f & Lib rary C o n f & Lib rary A th en a B egin s O SF/1 A p ach e So ftw are A t Prin ce to n GCC B e gin s 1 9 5 3 B e gin s 1 9 6 2 e m acs 1983 1992 Fo u n d atio n 1 9 9 9 IA S in late 1987 A T& T Sh are s 1975 1940s Lin u s R e le ase s O SD L Fo rm s O SD L R e -fo rm s as First U N IX D EC U ltrix 1 B SD R e le ase d Lin u x 1 9 9 1 Lin u x Fo u n d atio n tap e s e arly- 1984 2000 1977 2007 70s 1950 1960 1970 1980 1990 2000 2010 st nd Fre e So ftw are 1 D o J vs IB M 2 D o J vs IB M O p en So u rce Fo u n d atio n C o n se n t D e cre e b e gin s D efin itio n 1 9 9 7 Lau n ch e s 1 9 8 5 “H ard w are B u n d lin g “So ftw are B u n d lin g U .S. C o n gress is A n ti-co m p e titive ” is A n ti-co m p e titive ” A d d s C o m p u ter 1956 1969 IB M re sp o n se is to So ftw are to u n b u n d le H W , SW , C o p yrigh t Law & se rvice s p ricin g 1980

7.Is there an Open Source Business Model? Collaboratively-Developed Liberally-Licensed Software is about Engineering Economics

8.Open Source is about Engineering Economics $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ Interix $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ ~$100,000 $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ for $10M $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ value capture $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$

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12.Is there an Open Source Business Model? Build vs Buy

13.Is there an Open Source Business Model? Build vs Buy vs. (Borrow & Share)

14.Is there an Open Source Business Model? Projects are not Products

15.Is there an Open Source Business Model? Projects are interesting buckets of technology developed collaboratively by like-minded engineers

16.Is there an Open Source Business Model? Projects are interesting buckets of technology developed collaboratively by like-minded engineers Products solve customer problems and money is exchanged for perceived value

17.Is there an Open Source Business Model? Projects are interesting buckets of technology developed collaboratively by like-minded engineers

18.Is there an Open Source Business Model? Projects have communities Communities have time and no money

19.Is there an Open Source Business Model? Projects have communities Communities have time and no money Products have customers Customers have money and no time

20. Community vs. Customer • Will contribute time to solve • They want to buy something their problems • Look to community and project • Look to the product to solve for solutions their problems • Community wants transparency, meritocracy, and agency • Customers have expectations • Need guidance and tool support based on a cost • Become technology • Community/project is a test for advocates product • Become knowledgeable experts • May participate in community • Make your solution sticky

21.Conversion Rates 1:1000 3% 10% 1:1000 (MySQL Inc.) ~1:100 (JBoss) 1:10 (Red Hat) What Business Ratio Changes 2 Orders of Magnitude between Companies in a Market?

22. Community vs. Customer • Will contribute time to solve • They want to co-market their problems products • Look to community and • Look to the product to cross- project for solutions sell • Need guidance and tool • Partners have contracts support defining business relationships • Become technology around products/services evangelists • Become knowledgeable • Community/project is a test for experts product • Make your solution sticky • May participate in community

23.Is there an Open Source Business Model? Customers versus Community (Money vs. Time; Expectations are different; Conversations are different) Partners versus Community (Don’t mix business with community) Products versus Projects (Success metrics are different; OKRs and KPIs are different)

24.Last Quick Examples … • Kubernetes is a project; AKS and GKE are products • OpenStack is a collection of projects; Helion and RDO are products • Linux is a project; Fedora is a distro project; RHEL is a product

25.A Story of Red Hat in Three CEOs

26.A Story of Red Hat in Three CEOs 1994 1999 2008

27.Is there an Open Source Business Model? Collaboratively-Developed Liberally-Licensed Software is about Engineering Economics There is NO Open Source Business Model…

28.Is there an Open Source Business Model? Alternatively… There IS an open source business model

29.Is there an Open Source Business Model? Collaboratively-Developed Liberally-Licensed Software is about evolving Business Models