business of open source

[email protected] Licensed under a CC BY-SA license

The Business of Open Source

TIM Lecture SeriesDec 12, 2013

Michael Weiss www.timprogram.cawww.carleton.ca

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http://www.timprogram.ca

http://www.timprogram.ca

http://www.carleton.ca

http://www.carleton.ca


Outline

★ Part I

• Open source business

• Business patterns

• Stage 1-3 open source businesses

• Lessons

★ Part II

• Stage 4 open source businesses

• Licensing

• Architecture

• Future of open source

• Lessons

• Next steps

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Open source

• Open source (OSS) has become an integral part of commercial software development

• In the past, open source software development was considered to be driven by volunteer effort

• Today, most of it is carried out by companies

• For example, over 80% of changes to the Eclipse platform are made by paid developers

• How do you build a business around open source?

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Defining open source

• Free Software Foundation (FSF) defines open source through four freedoms: freedom to i) run, ii) study and change, iii) redistribute, and iv) distribute changes

• “Open source is a development method for software that harnesses the power of distributed peer review and transparency of process” (Open Source Initiative)

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Not a business model

• Open source is used by the business as a strategy to strengthen its business model (Bailetti, 2009)

• Elements of a business model and how OSS can help

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Importance Community convinces customers on dimensions of importance: eg functionality, avoid lock-in

Value Customers get eg higher quality, efficiencyPartners can spend more money on going to market than on R&D, & can collaborate

Resources and Processes

Access to talent and customersEqual footing for small and large companies

Profit Focus on IP that differentiates themGenerates demand for paid complements


Open source business

• Uses open source to develop new products

• Builds its products/services around open source offers

• Initiates its own open source projects

• Leverages open source as a form of co-opetition (ie cooperation between competitors)

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Open source engagement model

Modified from Carbone (2007)

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Use

Contribute

Champion

Collaborate

Level

Profit

mailto:[email protected]





Patterns

• Idea of patterns originates in architecture

• Have become popular in software (design patterns)

• A pattern is a recurring solution to a common problem in a given context and system of forces

• Recently, patterns have been documented for other domains than software, eg business patterns

• Patterns are mined by domain experts, reviewed by shepherds, and subsequently workshopped

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Example: Whole Product

• You sold your first products to early adopters

• You need to sell more than a technology

• The solution needs to address the whole problem faced by the customer in a particular market

• You may also need to provide training and integrate your product with the customer’s existing systems

• Therefore, sell a whole product that includes everything the customer needs

• The benefits of your technology are clear to customers, and you can differentiate yourself from competitors

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Elements of a pattern

• Name that communicates the intent of the pattern

• Context in which the pattern applies

• Problem that the pattern solves

• Forces describe the conflicts within the problem

• Solution that resolves the forces

• Consequences of applying the pattern

• Known uses provide evidence that this is a pattern

• Related patterns link to other patterns

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Pattern languages

• Patterns are rarely applied in isolation; rather they become words in a pattern language

• Each pattern describes how it fits into a larger whole through links to other helpful patterns

• Patterns also describe how their solutions create benefits; a pattern should only be applied when its benefits are needed

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Choose your own adventure

• Pattern languages can be navigated in different ways like the chapters in a “Choose Your Own Adventure” book

• Each pattern solves one problem and introduces new problems that can be resolved by applying further patterns in the language

• When you follow patterns you create a pattern sequence

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Business patterns

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Business Design Patterns for Product Development 25-Aug-08

(c) Allan Kelly 2007 – www.allankelly.net Page 2 of 24

In parts the patterns draw on existing research and literature. Inevitably these

patterns represent the author’s understanding and views on how companies

should go about tackling the problems identified. While there are no right

answers to these problems - indeed some out dispute the problems identified

– it is hoped that these patterns can help expand the understanding of

business strategy in the technology domain.

3 The Patterns

Figure 1 - Pattern sequence

SINGLE PRODUCT

COMPANY

Page 4

When a company is starting there are so many things to

do. Focus all your attention on a single product. Get

this product right and get it selling before moving onto

other products.

WHOLE PRODUCT

Page 8

Customers buy your product to solve a problem but

solving the whole problem requires more than just your

product. Therefore sell your product with everything

Kelly (2008, 2012)


Open source business patterns

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Use

Contribute

Champion

CollaborateLi

cens

ing

Arc

hite

ctur

e

Patt

erns

for

each

stag

e of

eng

agem

ent

Cross-cuttingpatterns






Use

“It costs virtually nothing to start a software business these days.” [when you use open source]

– Jason Fried, 37signals

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Use

Contribute

Champion

Collaborate

Lice

nsin

g

Arc

hite

ctur

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Bootstrap

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You need to shorten the time it takes you to create the first version of your product while keeping your costs low

Reuse existing open source components to develop your products






Example

• The initial version of the BigBlueButton open source web conferencing system (www.bigbluebutton.org) was built by combining 14 different existing open source components, ranging from Red5, a streaming server for managing voice and video streams, to Open Office for converting slides from various formats

• This approach kept the cost of developing the system low and sped up the creation of the first version

• However, bootstrapping also increased the complexity of the software and breadth of knowledge needed

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http://www.bigbluebutton.org

http://www.bigbluebutton.org


Related patterns

• Build on the Shoulders of Others

• Play by the Rules

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Share of customer’s wallet

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Number of customers

Price/Customer

Hardware

Software

Services

Demandcurve

Number of customers

Price/Customer

Hardware

Open source software

Services

Demandcurve

Increase

Based on Riehle (2007)






Higher service revenue

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Number of customers

Price/Customer

Hardware

Software

Demandcurve

Number of customers

Price/Customer

Hardware

Open source software

DemandcurveServices

Service cost

Maximum

Services

Service cost

Increase

Based on Riehle (2007)





“Companies have also begun to recognise that making money from open source software while not giving anything back to the community or project is likely to ultimately result in the failure of their open source related products” – Matthew Langham, Indiginox


Contribute

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Use

Contribute

Champion

Collaborate

Lice

nsin

g

Arc

hite

ctur

e

http://oss-watch.ac.uk/resources/odm

http://oss-watch.ac.uk/resources/odm






Contribute Back

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You need to keep aligned with the open source projects you use

Contribute back resources (code, people, money) to these projects






Example

• Companies generally achieve three goals by contributing back: i) build trust with the community, ii) influence the development of the project, and iii) demonstrate their depth of competence

• Companies like IBM and HP all contribute to the development of the Mozilla Firefox browser. Their contributions consist of code that makes Firefox compatible with their Unix workstations

• Pivos is a hardware company that develops a media player. It sponsors the XMBC open source media center project as a member of the XMBC Foundation, and pays developers to work on the project. It contributed the Android port of XMBC (example of Feature Gift)

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Related patterns

• Feature Gift

• Sponsor a project

• Chinese Wall

• Hire the Men Inside

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Champion

“Let’s make it open source to share costs and give others a platform to participate and contribute”

– Accenture

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Use

Contribute

Champion

Collaborate

Lice

nsin

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Arc

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Credible Promise

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How do you mobilize developers to contribute to your project?

Build a critical mass of functionality early in your project that demonstrates that the project is doable and has merit






Example

• BigBlueButton is an open source web conferencing system whose functionality was sufficient for teaching our online courses, but did not yet have the bells and whistles of competing commercial products (eg recording and playback or desktop sharing)

• “What both projects [Fetchmail and Linux] did have was a handful of enthusiasts and a plausible promise. The promise was partly technical [..] and sociological [..]. So what's necessary for a bazaar to develop is that it be credible that the full-blown bazaar will exist!”

– Eric Raymond

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• Feed the Community

• Modular Architecture

• Sell Complements

• Run a Tight Ship

• Donate Code


Related patterns

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Feed the Community

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How do you build legitimacy with your project community?

Nurture the community without expecting an immediate return






Example

• A company builds up legitimacy with the community by i) giving to the community (code, documentation, participation in the discussion forum), ii) a clear licensing practice, iii) a clear process for making contributions, iv) making decisions in the open, and v) not treating community members as prospects

• “We take the perspective that, if we consciously commit a portion of our resources to assisting others on the mailing list, then as their adoption of BigBlueButton grows so does the pool of potential customers that may approach us later on”

– Fred Dixon

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Community funnel

• A community has three types of participants: i) users who use the technology internally, ii) adopters who integrate the technology into product or services, and iii) contributors who advance the project technology

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Users

Adopters

Contributors Technology

ComplementsEvangelism

Installed base






Related patterns

• Create Pull

• Prepare for Release

• Approved Open Source License

• Permissive License

• Self-Service

• Community as Supplier

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Sell Complements

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How do you monetize an open source product?

Sell products or services (eg hardware or support) that complement the open source product






Example

• IBM has made Linux the operating system of choice for its servers and has ported most of its applications

• IBM’s support for Linux drives demand for its servers. Example of a network effect: complements become the more valuable the larger the installed base

• The creators of the BigBlueButton web conferencing system sold add-on modules such as desktop sharing to business users. These add-ons or Paid Features met the needs of users willing to pay for them

• PostgreSQL Experts (PGX) is a core contributor to the PostgreSQL project and sells a range of services

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Services – PostgreSQL

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Related patterns

• Derivative Product

• Services

• Paid Feature

• Support

• Distributor

• Ancillary Product

• Dual License

• Dual Product

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Run a Tight Ship

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How do you keep control of the project’s direction?

Maintain full ownership of the code






Example

• OpenOffice started as a closed source product (StarOffice) that was bought by Sun and later released as open source. When Sun was acquired by Oracle, the project was again put under tight control in order to sell a commercial version

• After receiving push back from the open source community, Oracle again released control over the project by Donating Code to Apache, but not before the project was forked as the LibreOffice project

• Moodle, an open source e-learning platform, is centrally developed by Moodle HQ and a network of partners. Non-core contributors can author plugins (https://moodle.org/dev/contributions.php)

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https://moodle.org/dev/contributions.php

https://moodle.org/dev/contributions.php


Related patterns

• Dual License

• Dual Product (Open Core)

• IP Modularity

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Dual Product (Open Core)

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How do you entice commercial users to pay for an OSS product?

Sell a commercial version of the open source product with exclusive features






Example

• PhoneGap (a popular mobile application development framework) is an Adobe-led Apache project

• PhoneGap was donated by Adobe in 2011: PhoneGap is the brand, Apache Cordova the project

• Adobe sells a cloud-based service PhoneGap Build

• A similar service is offered by Icenium

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PhoneGap Build Cordova Icenium






Related patterns

• IP Modularity

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Pattern Map – Champion

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Sell Complements

Dual License

Create Pull

Donate Code

Foundation

PoolResources

Run a Tight Ship

Credible Promise

Dual Product

Feed Community

Self-Service Community asSupplier

DerivativeProductService

Paid Feature

Support

Distributor

Ancillary Product

EmbeddedOpen Source

Modular Architecture

ManageComplements

IP Modularity






Lessons

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Break

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Collaborate

• Collectives are “used to achieve results that no single member can achieve on its own”

– Bailetti et al. (2013)

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Use

Contribute

Champion

Collaborate

Lice

nsin

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Arc

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Pool Resources

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How do you optimize the use of your resources?

Pool resources with other companies to jointly develop a common stack of open source assets that the companies can all build on to develop their individual products






Example

• The members of the Eclipse project develop common assets (such as GUI components and code generation tools) that each of them requires, but that, on their own, do not create value for their customers

• “[The Linux kernel development team adds] 11,000 lines, remove[s] 5,500 lines, and modif[ies] 2,200 lines [of code] every single day. [...] It's something that no one company can keep up with” (Assay, 2009)

• On the other hand, developing such assets requires them to dedicate resources. All members win by sharing those development costs with other members, and focus on areas of differentiation

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Related patterns

• Foundation

• Sell Complements

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Foundation

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How do you attract other companies to contribute to your source project?

Transfer ownership of the code to an independent foundation






Example

• When Eclipse was spun out of IBM, a foundation was put in place to manage the project

• While IBM still contributes many of the developers, IBM does not own the project, and many of its competitors, including Oracle and SAP contribute to and build many of their products on top of Eclipse

• A foundation creates an arms-length relationship between the project creator and the project

• It centralizes common functions that all members can access (eg legal, marketing, project management)

• Creating a foundation builds trust and facilitates collaboration among the contributors

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Related Patterns

• Shepherd

• Incubation Process

• Whole Product

• Project Champion

• Permissive License

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• Projects play a central role in a collective: their role is to reduce gaps and advance technology


Collectives

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Foundation

Projects Collective

Platform

Resources

Contributions Access

CAR

Governance






Economics of a collective

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Level of contribution

Number of members

Diversity of use

• Time to market• Coordination

• Core asset base• Product

• Organization• Core asset base• Reuse• Unique

Time

Quality

Cost

1, 2

4, 5

6

78

9

3






Propositions

• P1. (Early bird) Improved alignment between contributed assets and contributor’s needs

• P2. (Track record) Increased trust between members

• P3. (Fit for use) Highest benefit from assets to main contributors

• P4. (80/20 rule) Members can focus on value-added

• P5. (Too many cooks) Each member added to a team adds overhead not spent productively

• P6. (Many eyes) Increased feedback from members

• P7. (Sharing the load) Increased resources

• P8. (Many faces) Each new context of use hardens assets

• P9. (Multiple perspectives) Low diversity, collective benefits from multiple perspectives; high, collective appears less cohesive

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T

T

C

T

T

Q

C

Q

C






Licensing

• “To succeed, companies need to find ways to use outside innovations and to become part of a distributed fabric of innovation through a combination of licensing and well-chosen gifts...This is what open source is all about: harnessing engines of innovation in software”

– Goldman & Gabriel (2005)

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Use

Contribute

Champion

Collaborate

Lice

nsin

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Arc

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Play by the Rules

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How do you prevent licensing problems after your product is released?

Ensure license compliance for open source components that are combined

Link (2010)






Example

• Components licensed under the GPL and the EPL are not compatible. When the Mercurial Eclipse plugin (EPL) uses Mercurial (GPL) it calls it as an external executable to avoid license conflicts

• Closed binary-only loadable modules can be combined with the Linux kernel as long as they use a restricted interface and are marked as such

• Compliance can be difficult to test – creates an opportunity for compliance checking tools

• Eg compliance also requires you to check the license compatibility across a chain of dependencies

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Related patterns

• Due Diligence

• Contributor Agreement

• Prepare for Release

• Contribute Back Derivatives

• Shims and Friends

• Open Architecture

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Dual License

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How do you entice commercial users to pay for an OSS product?

Offer the same product under an open source and a commercial license

Link (2012)






Example

• “You can make sure you own the copyrights by either writing all your own code or obtaining third-party licenses. In fact at SleepyCat and MySQL, all code development is done in-house” (Albert, 2004)

• The MySQL database is licensed under an open source license (GPL) as well as a commercial license

• Buyers of the commercial license are released from some of the obligations of the open source license

• Eg, the GPL license, a reciprocal license, requires anyone who integrates the software with their software to license their software under the same terms

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Related patterns

• Restrictive License

• Dual Product

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IP Modularity

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How do you manage open source and proprietary versions of a dual product?

Align intellectual property with product architecture






Example

• SugarCRM’s business model is enabled by a modular architecture that separates IP elements

• IP modularity facilitates development of complements, and thus increases the platform’s attractiveness

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Waltl et al. (2012)

Reporting module

Accounts module

DB access module

Oracle MySQL

Proprietary code tree

Platformcore

Extensionmodules

Accounts module

DB access module

MySQL

Open source edition

Reporting module

Accounts module

DB access module

Oracle MySQL

Commercial editions

Build

IP for open source editionIP for commercial editions






Related patterns

• Modular Architecture

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Architecture

• “There is a need to create an ‘architecture for participation’ that promotes ease of understanding by limiting module size and ease of contribution by minimizing the propagation of design changes”

– MacCormack (2006)

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Use

Contribute

Champion

Collaborate

Lice

nsin

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Arc

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Modular Architecture

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How do you enable external contributors to add to the codebase without requiring them to have deep knowledge of it?

Partition the codebase so that different parts (or modules) can be worked on and managed independently.






Example

• Examples of systems using a modular architecture are OSGi-based runtime frameworks like Apache Felix and Equinox OSGi, as well as Eclipse, an integrated development environment and rich client platform

• “GNU/Linux is known for being a modular complex artifact and its successful development, accomplished by a distributed community of hackers, largely benefited from that. Therefore, it may be surprising that its core component, the so called kernel, was initially conceived as a highly integrated product and that eventually acquired a modular structure” (Rossi, 2003)

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Related patterns

• Stable Core

• Create Options

• Refactor the Code

• Tuning (Mix and Match)

• Conway’s Law

• Manage Complements

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Manage Complements

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How do you manage the quality of complements?

Establish a governance model and provide regulatory tools to manage complement development






Example

• Eclipse had created a three-tier community where external contributions can be made by anyone, but developers who want to contribute to the Stable Core need to follow a thorough incubation process with “gates” at which their quality is assessed. Apache, OpenOffice, and SpringSource are set up similarly

• Complements can be either internal (deployed with the core), or external (added by users)

• Owner of the core controls the interaction of network members through governance structure (hierarchical or flat), openness (open or closed), and regulatory tools

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Governance model: Eclipse

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Project: EclipseGovernance model: Hybrid controlCommunity tiers: Core, internal, and external


Governance structure:Who proposes complements?Who selects complements?




Project: EclipseGovernance model: Hybrid controlCommunity tiers: Core, internal, and external Hierarchical Hierarchical

/FlatFlat

Openness: Who can

participate?

Open Internal ExternalOpenness: Who can

participate?Closed

CoreCommercial






Related Patterns

• IP Modularity

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Quo vadis, open source?

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Beyond the desktop and servers

• “FOSS has had a significant impact not only on traditional desktop and server software, but also on mobile computing, embedded, and cloud platforms, making it a significant factor in software adoption and use for the foreseeable future”

– Wasserman (2013)

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Open source in the Internet of Things

• “Open source software and collaborative development have been proven to accelerate technology innovation in markets where major transformation is underway. Nowhere is this more evident today than in the consumer, industrial and embedded industries where connected devices, systems and services are generating a new level of intelligence in the way we and our systems interact. The AllSeen Alliance represents an unprecedented opportunity to advance the Internet of Everything for both home and industry. We are very happy to host and help guide this work”

– Jim Zemlin, Linux Foundation

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Open beyond software

• Open hardware

• Open data

• Open content

• Open knowledge

• Open APIs

• Open access

• Open science

• ...

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New business opportunities

New patterns ;-)


Lessons

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Next steps

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References• Bailetti, T. (2009), How open source strengthens business models, TIM Review, http://

timreview.ca/article/226• Bailetti, T., et al. (2013), Developing an innovation engine to make Canada a global

leader in cybersecurity, TIM Review, http://timreview.ca/article/711• Carbone, P. (2007), Competitive open source, TIM Review, http://timreview.ca/article/

93• Dixon, F. (2011), Lessons from an open source business, TIM Review, http://

timreview.ca/article/441 • Goldman, R., & Gabriel, D. (2006), Innovation Happens Elsewhere: Open Source as

Business Strategy, Morgan Kaufmann• Link, C. (2010), Patterns for the commercial use of Open Source: Legal and licensing

aspects, EuroPLoP• Link, C. (2011), Patterns for the commercial use of Open Source: License patterns,

EuroPLoP• Link, C. (2012), Patterns for the commercial use of Open Source: Economic aspects

and case studies, EuroPLoP• MacCormack, A., et al. (2006), Exploring the structure of complex software designs: An

empirical study of open source and proprietary code, Management Science, 52(7)• Muegge S. Business Ecosystems as Institutions of Participation: A Systems Perspective

on Community-Developed Platforms. Technology Innovation Management Review.

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http://timreview.ca/article/226











References• Noori, N., & Weiss, M. (2013), Going open: Does it mean giving away control, TIM

Review, http://timreview.ca/article/647 • Riehle, D. (2007), The economic motivation of open source software: Stakeholder

perspectives, Computer, April • Riehle, D. (2012), The single-vendor commercial open source business model,

Information Systems and e-Business Management, 10(1)• Rossi, A. and Narduzzo, A., (2003), Modularity in Action. GNU/Linux and free/Open

source software development model unleashed, Quaderni DISA, 78, Trento • Skerrett, I. (2011), Best practices in multi-vendor open source communities, TIM

Review, http://timreview.ca/article/409• Waltl, J., Henkel, J., & Baldwin, C. (2012), IP Modularity in Software Ecosystems: How

SugarCRM’s IP and Business Model Shape Its Product Architecture, ICSOB• Wasserman, T. (2013), Community and commercial strategies in open source software,

Information Technology, 55(5)• Weiss, M. (2009), Performance of open source projects, EuroPLoP• Weiss, M. (2010), Profiting from open source, EuroPLoP• Weiss, M. (2011), Profiting even more from open source, EuroPLoP• Weiss, M. (2011), Economics of software product line economics, TIM Review, http://

timreview.ca/article/488 • Weiss, M. (2013), Enabling contributions in open source projects, EuroPLoP

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Image credits

• Unless noted, images were sourced from Wikimedia Commons and Flickr under a CC license

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