Community and Commercial Strategies in Open Source Software

This paper describes the recent evolution of business strategies used by companies offering products and services based on free and open source software (FOSS). The primary focus is on companies that develop and release products under an open source license. The paper compares their practices with traditional proprietary software companies and with community-based open source projects, and identifies growing overlaps between the different kinds of software companies. Finally, the paper describes the likely impact of recent technology developments in mobile and cloud computing on open source software and related business. 1 Commercial and FOSS Software: a Brief Overview The commercial software industry dates to the mid-1960’s, when software was first sold independently of the computer on which it ran. The dominant sales model for this enterprise software has been an initial fee that includes a commercial license to use the software. Customers have the option of buying product support, typically at an annual price of 15-20% of the original list price, that entitles them to regular updates and personalized technical support [1]. These software companies also sell professional services, including training, product customization, and product integration (“the full product”). While they may have a network of consultants, distributors, and resellers, changes to the product itself are made by the company, which determines product features, priorities, and release schedules. Since the emergence of the personal computer industry in the early 1980’s, there has also been a commercial market for consumer software, initially available primarily through retail channels, but now more commonly sold online for immediate download or provided as an online service for a subscription fee. End-user license agreements (EULAs) govern the use of such software, typically restricting the installation, use, and redistribution of the software, as well as limiting vendor liability for harm to the consumer or the equipment on which it is used. In addition to these commercially-licensed products, there has long been software available free of charge, dating back to the earliest days of the computer industry. Universities and research laboratories, both commercial and government-based, frequently provided their software, including source code, to interested parties. Even after the markets for commercial software developed in the mid-1960s, many organizations continued this practice. In the early 1980s, Richard Stallman created the GNU project at MIT [2], and freely distributed that software to anyone who wanted it, in keeping with his belief that all software should be free to modify and distribute. He subsequently created the Free Software Foundation (FSF), which emerged as a leading advocate for free software. The Open Source Initiative (OSI), created in 1998, produced the Open Source Definition [3] and approves software licenses that are compliant with that Definition, including those created by the FSF. Many of these OSI-approved licenses anticipated the use of open source software in commercial products and did not include the restriction on contributing modifications back to the project that is found in the FSF licenses. The emergence of open source software disrupted traditional software businesses in the sense that organizations no longer had to rely solely on commercial vendors, contract software developers, and/or their own internal development efforts. A highly visible example of this new option was IBM’s decision to include the highly popular open source Apache HTTP server in their WebSphere Application Server; that decision attracted attention from business journalists [4]. With WebSphere holding a substantial share of the application server market, WebSphere customers, which included many of the world’s largest companies, were using open source software in their business-critical applications. From there, the commercial opportunities for FOSS grew rapidly. Today, one can choose among several types of FOSS software in addition to proprietary software, either installing it locally, or on a hosted server (physical or virtual). 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. Many of the leading vendors of proprietary software, including Microsoft, Oracle, and IBM, now offer FOSS alongside their “closed” products, reflecting a change in their software business strategies. In the remainder of this paper, we shall primarily focus on FOSS, addressing several different approaches to building businesses on FOSS as well as the growth of FOSS. In Section 2, we discuss non-commercial or “community” approaches to FOSS. In Section 3, we discuss the commercial approaches to FOSS, and try to compare them with both community-based and proprietary (“closed source”) software. Section 4 is an overview of the various business models used by companies offering FOSS products and services. Finally, we discuss in Section 5 the likely impact of trends in mobile and cloud computing on FOSS. 2 Community-based FOSS In this section, we review the two major types of non-commercial FOSS projects, which we term independent and foundation-based. We devote particular attention to Linux, since it is one of the most important FOSS projects and has both community and commercial aspects. 2.1 Independent FOSS projects Hundreds of thousands of FOSS projects have been undertaken, with many of them made widely available in public repositories (“forges”). Since anyone can create, use, or fork a FOSS project, these forges contain projects in widespread use as well as those created primarily for the developer’s own use or as an academic exercise. Highly active projects, such as the VLC media player, the Ruby on Rails system, and the FileZilla issue tracking system, are easily identified through visible project information, such as the frequency of updates, the number of followers and milestones, along with counts of downloads, code commits and user recommendations. These projects, as with most projects in these forges, are developed and maintained by a community of volunteers, with a small number of people on each project authorized to commit changes to the main code base. We shall refer to these projects as “independent” community FOSS projects, in contrast with FOSS community projects that are hosted by a non-profit foundation, each of which provides support for one or more projects, forming a community of developers and users. 2.2 Foundation-based FOSS “Foundation-based” community FOSS projects differ from independent community FOSS projects through the stewardship and governance of their projects. The Linux Foundation, Free Software Foundation, the Apache Software Foundation, the Mozilla Foundation, the Document Foundation, and the Eclipse Foundation are home to numerous FOSS projects, including the Apache HTTP web server, the Eclipse programming environment, the Subversion version control project, the Firefox web browser, LibreOffice, and others. While there are significant differences among the governance To appear in: it – Information Technology Wasserman – Commercial Open Source of these projects, they all share the property that anyone has access to the source code and that anyone can participate as a member of the community around any project as a user, tester, or contributor. Most of these foundations have created their own license governing the use and distribution of the software associated with its projects. These foundations receive funding from corporations and other financial supporters to support the costs of project infrastructure and foundation management. That funding, combined with the screening and review of the various projects, attracts a larger community of developers and users, which, in turn, means that the foundation-based projects are quite stable. 2.3 Linux Distributions The most widely used foundation-based FOSS software is Linux, originally developed by Linus Torvalds beginning in 1991. Today, development of the Linux kernel is managed through the Linux Foundation. There are hundreds of software distributions (“distros”), some with commercial support, e.g., Ubuntu and SUSE, but many without, e.g., Gentoo and Mint. These distros combine the Linux kernel with a large set of independent and foundation-based FOSS projects, and are typically packaged so that it is a straightforward task to install the Linux kernel with these projects. Beyond that, the distros are combined with updating mechanisms and repositories from which users may select and install additional compatible libraries and applications. In general, the software in these distros has been widely used and tested, with the result that the quality of the software in a distro is very high. Independent studies have found that the quality of this FOSS software is comparable or superior to traditional packaged commercial software [5]. Linux itself is a non-commercial foundation-based project. Many users select a Linux distro for their server and/or desktop and use community-based support mechanisms to address any issues that they may have. In addition, though, some Linux distros are offered with commercial support services, including service level agreements (SLAs) for critical issues and protection against legal claims of intellectual property (IP) infringement. Here we see a fundamental distinction between non-commercial and commercial FOSS projects. For many individual users, particularly those with technical expertise and those not working on businesscritical projects, the non-commercial versions, with their community-based support, are sufficient and offer high quality software at no charge. However, many companies, governments, and other organizations require commercial support similar to that provided by traditional software vendors. For them, Red Hat Enterprise Linux or Ubuntu with paid support from Canonical may be a suitable choice, in contrast to the non-commercial CentOS, openSUSE, or Ubuntu without paid support. 2.4 Support for Community FOSS A key issue with non-commercial projects is that the software is available “as is”, with no official support of the type expected by those who pay vendors, e.g., SAP or Oracle, for support of commercial software products. Nonetheless, well-governed projects maintain discussion fora, allowing anyone to post a question or comments, and anyone to respond. In that way, many user issues are easily resolved, sometimes more quickly and easily than with traditional commercial support mechanisms. Such projects also maintain issue tracking systems where users can post bug reports and feature requests. As with commercial software products, though, there is no assurance that the fixes or enhancements will be made. In addition to the message boards and issue tracking systems, many non-commercial projects maintain IRC chats where it is sometimes possible to get immediate responses to simple issues. Knowedgeable users and project committers often stay connected to an IRC channel as a way to help the community. Finally, there are free third-party sources of support for FOSS, such as Stack Overflow, a question-and-answer site for developers. With these mechanisms, a developer can post an issue or a question on a project’s discussion board, interact with project developers on the IRC channel, and post the same issue on a Q&A site. Taken together, many issues are quickly resolved through the volunteer efforts of the community around that FOSS project. Other widely used and mature open source projects include the Drupal content management system, the WordPress publishing system, and the LibreOffice office suite. These projects were developed independently and non-commercially, following traditional open source practices of communitybased development and support, and remain active, community-based projects. At the same time, though, each has attracted a broad range of related commercial activities, including add-on software, books, and training. This commerce is consistent with the Open Source Definition. 3 Commercially-supported FOSS There are two distinct categories of commercially-supported FOSS software. The first is where a company offers professional services and products based on community-based software (both independent and foundation-based). For example, Red Hat and Cloudera generate revenue for their businesses through selling subscriptions to the software, offering professional services and add-on products, and/or providing legal assurance services. The second is where a company develops FOSS software with its own engineering team, making that code available to all, and then selling services and add-on products to create a business. JBoss, MySQL, and Zimbra, all of which have been acquired by other companies, all fit into this category, which is more accurately termed “vendorcontrolled FOSS” or “vendor-created FOSS”. 3.1 Community vs. Vendor-created FOSS There are some important differences between community-based FOSS projects and vendorsupported FOSS projects. First, the commercial ventures are strongly driven by the business expectations of their paying customers, and by their own goals of generating revenue. Their customers expect to receive product updates on a predictable schedule, as well as to obtain product support from the vendor. That’s a strong contrast with the practices of many community-based FOSS projects where a common saying is “the software is ready when it’s ready” and where support is provided by the community itself, using online discussion forums as the principal communication mechanism. Second, the code for a vendor-controlled FOSS product is normally written entirely by the company’s employees, unlike the situation with independent and foundation-based FOSS projects where individual core committers lead development of the project, but can accept contributions from others. While many FOSS vendors have developed agreements to accommodate contributions from nonemployees, such code contributions to the core product are uncommon. One side effect of this approach is that vendor-controlled FOSS projects rarely make the pre-release source code available. Community-based projects, both independent and foundation-based, by contrast, usually provide continuous access to the source code, including the nightly builds. Similarly, there are some important differences between FOSS products and proprietary software, the most obvious one being the availability of the source code itself, with the attendant possibility of modifying that code to meet individual requirements. In many ways, though, the most important difference is that customers of proprietary software products must pay an initial license fee for the software while the users of open source software products do not. Also, traditional proprietary software vendors, such as SAP, offer their products only under a commercial license, whereas many commercial FOSS companies offer their products under both an approved open source license and a commercial license. These distinctions lead to different business practices between the two types of companies, especially with respect to sales and marketing [6]. Without access to source code, end users of proprietary products are entirely dependent on vendors to respond to bug reports, enhancement requests, and customization needs for their software. Severe bugs and security issues often result in an unplanned update that can be downloaded from the vendor’s servers. However, other requests may or may not be fulfilled, depending on the company’s product roadmap and competing requests. Users of FOSS products have the option of modifying the code on their own, though it may be impractical to do so, either because of code complexity or because of difficulties in obtaining vendor support for the modified code. 3.2 Why Vendor-Created FOSS? Vendor-created FOSS occupies a middle ground between community-based FOSS and proprietary software. As with proprietary software vendors, FOSS vendors offer professional services, including product support, training, and system integration. Since these vendors have developed the code, they To appear in: it – Information Technology Wasserman – Commercial Open Source are able to offer service level agreements for product issues, as well as the broad spectrum of phonebased support, message boards, and live chat. These FOSS vendors can concurrently accommodate the needs of users who want to use the software at no charge and those who want to pay for the support services. These vendors hope that some “free” users will eventually need support services and will thus convert to paying customers. An example of such a transition is a startup software company that intends to include that software in a product that they offer to customers. To save money, they may wait until they are ready to deliver their product to customers before they sign up for commercial support. MySQL, now owned by Oracle, was an early example (1994) of commercial FOSS. There was a single version of the MySQL source code, available under a dual license model. Anyone could download it and use it indefinitely for no charge. Those customers who wanted to include it in a product that they shipped to their customers were required to purchase a commercial license, thus providing a revenue stream to the company. Today, though, many FOSS vendors offer more than one version of their product. In that model, there is no charge for the basic “community” project, but the companies have built additional proprietary software components that are offered through a commercial license – not an open source license. This notion is termed “open core” [7,8]. In general, customers of the open core products have access to the source code of the community edition, but not to the open core add-ons. (Jaspersoft is a notable exception to this approach, offering “visible source” to its commercial customers under their commercial license.) Because these open core products are offered under a commercial license, rather than an OSI-approved license, they are not considered to be FOSS. Nonetheless, these commercial FOSS vendors meet a need in the marketplace. Many organizations are simply seeking the best solution for their needs. For them, source code access is not a factor in their decision-making process, which is based on product functionality and vendor support. This diversity of needs is recognized by some FOSS vendors. Acquia, for example, was co-founded by the leader of the Drupal project, with the idea that Drupal would remain a community FOSS project, and Acquia would address related commercial opportunities. Potential users can visit the Acquia website and find the community software free for download, just as on the main Drupal site, along with other free software contributed and packaged by Acquia. Acquia’s various commercial offerings are also available on the site, thus providing a broad range of options. In short, there is a demonstrable need for commercial offerings that build upon FOSS. In the next section, we describe a variety of approaches that have been taken toward creating FOSS-related businesses.