Open Core Debate: The Battle for a Business Model

Is software truly open source if you pay for additional features? Youranswer may depend on whether you side with the purists or the, ah,not-so-pure.

A recent trend entering the debate involves the marketing of so-calledopen core software. This morphed business model is not what manyopen source supporters consider “pure” open source. However, open core may come to be the standardbearer in the business software arena.

Open source pundits have been debating the question for about ayear as they try to outline the best possible open source business model. Open coresupporters suggest that this latest licensing model will satisfy thosetrying to balance customer value with investor return while notignoring community facilitation.

“The merits of open core have been debated poorly until recently,”Andrew Lampitt, cofounder at zAgile and director of businessdevelopment for Jaspersoft, told LinuxInsider.

zAgile is a software company dedicated to unifying collaboration forsoftware engineering environments.

Open Core Defined

From the outside, the differences between open source and open core appear relatively subtle, which makes the debateseem even stranger sometimes, according to Jaspersoft CEO Brian Gentile. For the purist inopen source, the free software movement is really about having nofeature differences between the free version given away under a General Public License and a version given to a customer who wanted to pay a vendor forsupport.

The distinction between open core and open source rests in what isactually licensed as free, he explained. For instance, in an open coremodel, the vendor gives away the bits to a foundation that is part ofthe architecture.

The vendor is saying to the customer: Here it is, it’s free. The software ismade available under one of the traditional open source licenses.Users can take the product and do whatever is available under that license, explained Gentile. However, open core then goes one stepfurther.

“If you wish, here are some other features you could have that areonly available under a commercial license. They provide you withgreater capability, but you have to buy them or subscribe to them, andyou have to abide by the terms of the commercial license,” he said.

Fuel for the Fire

Gentile added a new round to the ongoing opencore debate in February when he broached the topic in his blog. When responses started lining upboth for and against Gentile’s support of the open core strategy,Lampitt joined the fray by contributing his own.

“I was recognizing comments about open core and getting questionsabout scaling the business. I was simply saying there is a trendcalled ‘open core.’ People within the open source community and evenproprietary vendors were saying that there was no [such] business model asopen core,” Gentile told LinuxInsider.

True to His Core

Lampitt argues that the open core model does exist and has servedJaspersoft well. The debate, he acknowledged, is a complex issue.

Open-core licensing (OCL), Lampitt said, might be thenew standard as a dual license open source business model. The OCL isactually a General Public License (GPL) core with commercialextensions, he wrote.

There exists a sense among its detractors that the open core communityis perhaps holding back some of the features from the community at large by offeringcommercial versions of the software, according to Lampitt. The paidversions have more features than the free version.

“This view is very contentious for some people. The key here is todeliver value. The crust or core features also have to provide valuebut probably in a different way. Enterprise versions have featuresthat the average Joe User might not need but eventually might growinto,” Lampitt explained.

The industry is replete with examples of successful use of the opencore business model as a part of open source licensing, according toLampitt. For example, Linux, Apache, MySQL, Eclipse, OpenProject,Talend, Mulesource, Alfresco, Drupal, Sugar and Jaspersoft all haveabsolutely thriving communities thanks at least in part to theopen source model.

“I see a trend of open core. The bulk of new software companies aregoing to it,” said Gentile.

Customer Satisfaction

Gentile claims that most of his company’s customers actually want acommercial contract from Jaspersoft. The debate should really focus onhow a company might get pulled into an open core model, he noted.

“Jaspersoft actually got pulled into it. Our customers came to uswanting a contract and features that were enterprise-strength. A lotof the community members and smaller companies wouldn’t find muchvalue in that. So the only way to deliver those enterprise-classfeatures that really satisfy is to build them into an upper layer oradd-on approach and then to commercialize them in a way that lets youadd value,” Gentile said.

The point often left missing in the debate about open core not beingtrue open source software is that if a vendor has a product that doesnot offer value, nobody in the community would use it, according to Gentile. A naturalmarket mechanism is at work, he said.

Mixing Meanings?

Open core is a relatively new term, and that may be what’s causing some of the consternation.

“The push against it is due to the view that open source projects areopen source end to end. It’s open source across the whole stack.What’s changing now is a mix with commercial software,” Tom Berquist,CFO for Ingres, told LinuxInsider.

Open source vendors who can offer both models can work with othercompanies on a commercial basis. So it comes down to who owns thelicense. Most community developed projects cannot be commerciallylicensed, he said.

“Our product was proprietary, and we open sourced it. I foresee acontinued mixing and matching. We can continue to argue about themerits of open source end to end. But the role of the economy ischanging the realities. There are very few purist open sourcecompanies of any meaningful size. The concept is almost a religion forsome instead of focusing on the money angle,” Berquist said.

Open Failings

Opening up the core platform of what a company is trying to sell isextremely risky, according to Michael Krotscheck, senior developer forResource Interactive. The risk is there because this action instantlychanges their environment into a commodity market. Once that’s done,the rules of business strategy are no different in an open core modelthan they are in any business environment.

The specific environment of software makes cost leadership a verydelicate balancing game. If the product is too expensive, the opensource community will undermine the vendor. If the product is toocheap, the vendor devalues the platform, he reasoned.

“At the same time, you essentially cede control of the platform to thecommunity, so that the actual direction of your product is no longerunder your control and therefore not predictable. That’s where pureopen source falls short of being a truly valid business model, whichwe’re seeing with Red Hat,” Krotscheck told LinuxInsider.

Opposing Models

The open source software concept has spawned five business models,explained Dave Roberts, Vyatta’s vice president of strategy. One isthe vendor giving away the castle for free. A second model is to giveaway the software and sell the hardware. This is common in applications like VoIP (voice over Internet protocol).

The third model is to give away the open source version and sell theclosed source version. MySQL and Alfresco take this approach.

The fourth model is to offer a freedownload or paid features version. Examples of this are Zimbra andSugarCRM.

The fifth model is service-based. The vendor sells managementservices. Examples are Red Hat and JBoss.

“We see companies falling into several of these categories. The debateis the question, is it legit to do this? My response is yes. Opensource can accommodate a variety of models. This is great for theindustry. I see no need to pick sides,” Roberts told LinuxInsider.

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