The life and death of open source companies

I always appreciate Armin's posts.

I think the key point is that the FSL is necessary when profit is required. The GPL is a philosophy of social distribution more than a way to build a capitalist enterprise. Using GPL software ensures that software stays socially distributed instead of privately; but that can lead to issues for private profit.

It might be 3D but it is funny open source and printers coming up when closed source printer drivers help kick off RMS and GPL.

I feel like the problem is defined in the title.

Open Source. Company.

These are two pretty distinct concepts, and the (traditional) motives for those two things don't merge terribly well.

Over and over we see the same story playing out. Companies need to make revenues to sustain the employees. Open Source makes "competing" with an existing company trivial, but with none of the invested costs. So the first mover, the program author, is always at a strategic disadvantage.

This is not an accident- it is baked into the very point of open source. There's a reason that very few people in the bazaar actually make decent money. There's a reason the cathedral has treasures.

My recommendation is this - decide if you want to make a company, or if you want to make Open Source. The number if places that have succeeded in both is vanishingly small.

The tragedy with any form of software development is that it becomes a commodity very quickly. That's why open source works so well for commodity software. The challenge is that while everybody needs commodity software, they aren't necessarily willing to pay for it. People pay for other things like managed services, support, etc. But not for software directly.

Take operating systems as an example. Unless you have very specific needs, Linux is probably good enough. That's true across most of the industry. Most device manufacturers at this point default to using Linux. Why bother building your own OS when the commodity option does the job. It doesn't make any sense to want to compete with free and OSS. Apple and MS seem to continue to resist this notion but they are increasingly exceptions.

So, open source companies are a bit of a contradiction in terms. You invent something, and then immediately turn it into a cheap commodity by releasing it for free. And then you expect to get money for that. Investors get attracted by rapid growth. And giving something for free can produce some rapid growth.

So, they've repeated fallen into the trap of investing in what proved to be worthless commodities. Some outlasted their IPO at least, which makes for happy investors. But those quickly turn into niche products. Because they are at that point commodity software providers competing with perfectly good OSS ones.

Most new closed source database products out there only have a short while before their differentiating features are absorbed by open source ones. Twenty years ago there were lots of new database products. Most of those were OSS. Several of those then transitioned to closed source. But at this point postgresql does most of what used to make those products interesting. And if it doesn't, just wait five years.

The finance model for OSS is very simple. You need OSS to produce closed source software. It's not optional. You can't compete by doing everything in house. So, most OSS software projects are financed by those companies using them the most. Those projects don't fix themselves. So, there are a lot of companies spending money on the commodity stuff they've built their business on. For example, Oracle keeps on pooring money into Java. Even though it is open source. They make money from it elsewhere. Same with IBM. MS is a big OSS contributor. Google too. Every big software company out there. None of them are driven by idealistic motives. This is economically necessary for them to do.

Great post!

The FSL is interesting because it correctly assumes the existence of parasites, ie 'harmful free-riders'.

There are ofc too many projects doing what is in effect free R&D for larger entities... these free riders having zero interest in the health or longevity of open technical ecosystems, so game theory is the right lens, I think.

I'd be very interested to learn of any other proposed structures along the lines of the FSL: particularly if anyone here has opinions on/ direct experience with them!

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Earlier incarnation/s of this approach are mentioned on the FSL page.

Open Core https://en.wikipedia.org/wiki/Open-core_model BUSL https://mariadb.com/bsl11/ FSL https://fsl.software/