It’s been awhile since I’ve posted a long, navel-gazing rant about the business of open source software. I’ve been trying to focus more on our business than spending time talking about it, but yesterday an announcement was made that brought all of it back to the fore.
TL;DR; Yesterday the Nextcloud project was announced as a fork of the popular ownCloud project. It was founded by many of the core developers of ownCloud. On the same day, the US corporation behind ownCloud shut it doors, citing Nextcloud as the reason. Is this a good thing? Only time will tell, but it represents the (still) ongoing friction between open source software and traditional software business models.
I was looking over my Google+ stream yesterday when I saw a post by Bryan Lunduke announcing a special “secret” broadcast coming at 1pm (10am Pacific). As I am a Lundookie, I made a point to watch it. I missed the start of it but when I joined it turned out to be an interview with the technical team behind a new project called Nextcloud, which was for the most part the same team behind ownCloud.
Nextcloud is a fork, and in the open source world a “fork” is the nuclear option. When a project’s community becomes so divided that they can’t work things out, or they don’t want to work things out for whatever reasons, there is the option to take the code and start a new project. It always represents a failure but sometimes it can’t be helped. The two forks I can think of off hand, Joomla from Mambo and Icinga from Nagios, both resulted in stronger projects and better software, so maybe this will happen here.
In part I blame the VC model for financing software companies for the fork. In the traditional software model, a bunch of money is poured into a company to create software, but once that software is created the cost of reproducing it is near zero, so the business model is to sell licenses to the software to the end users in order to generate revenue in the future. This model breaks when it comes to free and open source software, since once the software is created there is no way to force the end users to pay for it.
That still doesn’t keep companies from trying. This resulted in a trend (which is dying out) called “open core” – the idea that some software is available under an open source license but certain features are kept proprietary. As Brian Prentice at Gartner pointed out, there is little difference between this and just plain old proprietary software. You end up with the same lack of freedom and same vendor lock in.
Those of us who support free software tend to be bothered by this. Few things get me angrier than to be at a conference and have someone go “Oh, this OpenNMS looks nice – how much is the enterprise version?”. We only have the enterprise version and every bit of code we produce is available under an open source license.
The only thing that wasn’t clear to me was the business model. The founder Frank Karlitschek states that ownCloud is not “open core” (or as we like to call it “fauxpensource“) but I’m not clear on their “enterprise” vs. “community” features. My gut tells me that they are on the side of good.
Frank seemed really to be on the side of freedom, and I could see this being a problem if the rest of the ownCloud team wasn’t so dedicated.
On the interview yesterday I asked if Nextcloud was going to have a proprietary (or “enterprise”) version. As you can imagine I am pretty strongly against that.
The reason I asked was from this article on the new company that stated:
There will be two editions of Nextcloud: the free of cost community edition and the paid enterprise edition. The enterprise edition will have some additional features suited for enterprise customers, but unlike ownCloud, the community and enterprise editions for Nextcloud will borrow features from each other more freely.
Frank wouldn’t commit to making all of Nextcloud open, but he does seem genuinely determined to make as much of it open as possible.
Which leads me to wonder, what’s stopping him?
It’s got to be the money guys, right? Look, nothing says that open source companies can’t make money, it’s just you have to do it differently than you would with proprietary software. I can’t stress this enough – if your “open source” business model involves selling proprietary software you are not an open source company.
This is one of the reasons my blood pressure goes up whenever I visit Silicon Valley. Seriously, when I watch the HBO show to me it isn’t a comedy, it’s a documentary (and the fact that I most closely identify with the character of Erlich doesn’t make me feel all that better about myself).
I want to make things. I want to make things that last. I can remember the first true vacation I took, several years after taking over the OpenNMS project when it had grown it to the point that it didn’t need me all the time. I was so happy that it had reached that point. I want OpenNMS to be around well after I’m gone.
It seems, however, that Silicon Valley is more interested in making money rather than making things. They hunt “unicorns” – startups with more than a $1 billion valuation – and frequently no one can really determine how they arrive at that valuation. They are so consumed with jargon that quite often you can’t even figure out what some of these companies do, and many of them fade in value after the IPO.
I can remember a keynote at OSCON by Martin Mickos about Eucalyptus, and how it was “open source” but of course would have proprietary code because “well, we need to make money”. He is one of those Silicon Valley darlings who just doesn’t get open source, and it’s why we now have OpenStack.
The biggest challenge to making money in open source is educating the consumer that free software doesn’t mean free solution. Free software can be very powerful but it comes with a certain level of complexity, and to get the most out of it you have to invest in it. The companies focused on free and open source software make money by providing products that address this complexity.
Traditionally, this has been service and support. I like to say at OpenNMS we don’t sell software, we sell time. Since we do little marketing, all of our users are self selecting (which makes them incredibly intelligent and usually quite physically beautiful) and most of them have the ability to figure out their own issues. But by working with us we can greatly shorten the time to deploy as well as make them aware of options they may not know exist.
In more recent times, there is also the option to offer open source software as a service. Take WordPress, one of my favorite examples. While I find it incredibly easy to install an instance of WordPress, if you don’t want to or if you find it difficult, you can always pay them to host it for you. Change your mind later? You can export it to an instance you control.
The market is always changing and with it there is opportunity. As OpenNMS is a network monitoring platform and the network keeps getting larger, we are focusing on moving it to OpenStack for ultimate scalability, and then coupled with our Minions we’ll have the ability to handle an “Internet of Things” amount of devices. At each point there are revenue opportunities as we can help our clients get it set up in their private cloud, or help them by letting them outsource some or all of it, such as Newts storage. The beauty is that the end user gets to own their solution and they always have the option of bringing it back in house.
None of these models involves requiring a license purchase as part of the business plan. In fact, I can foresee a time in the near future where purchasing a proprietary software product without fully exploring open source alternatives will be considered a breach of fiduciary responsibility.
And these consumers will be savvy enough to demand pure open source solutions. That is why I think Nextcloud, if they are able to focus their revenue efforts on things such as an appliance, has a better chance of success than a company like ownCloud that relies on revenue from software licensing sales. The fact that most of the creators have left doesn’t help them, either.
The lack of revenue from licenses sales makes most VCs panic, and it looks like that’s exactly what happened with the US division of ownCloud:
Unfortunately, the announcement has consequences for ownCloud, Inc. based in Lexington, MA. Our main lenders in the US have cancelled our credit. Following American law, we are forced to close the doors of ownCloud, Inc. with immediate effect and terminate the contracts of 8 employees. The ownCloud GmbH is not directly affected by this and the growth of the ownCloud Foundation will remain a key priority.
I look forward to the time in the not too distant future when the open core model is seen as quaint as selling software on floppy disks at the local electronics store, and I eagerly await the first release of Nextcloud.