Open Source versus Business Models

Network World is running a guest article Open Source Software Licenses versus Business Models by Outercurve Foundation’s technical director Stephen Walli discussing how FOSS license choice can affect a company’s business model. In Open Source Software Licenses versus Business Models article Walli disagrees that a FOSS license dictates the business model or that the business model dictates the license. It’s not about the choice of license — it’s about solving customer problems.

Red Hat packages an asset that they neither own nor control. They surround the kernel with considerable other software. They support and warrant their product solution.

MySQL AB (the company) built and packaged the MySQL database engine. Their MySQL Network was a subscription “product” that ensured the MySQL database product was supported and warranted. Because they owned their software, the had a healthy secondary revenue stream from licensing the MySQL database to others without attaching the GPLv2 license of the public version.

In both cases, the FOSS project was licensed under the GPLv2, but asset control and ownership dictated how very different billion-dollar businesses were built rather than the license.

IBM doesn’t control or own the Apache projects. A number of Apache projects are key components in the IBM proprietary Websphere platform. The Apache license allows people to use the software in any manner they choose, including closing it into proprietary products.

Many companies are now developing proprietary products on and around the Eclipse platform while others happily deliver software extensions for their own programming platforms licensed under open source licenses (e.g. Intel and Tizen and Amazon and Android).

License choice is an important consideration when making open source software. To help to make the right source in that read A Short Guide To Open-Source And Similar Licenses and Comparison of free and open-source software licenses.


  1. Tomi Engdahl says:

    SparkFun’s Chris Taylor: Community key to open-source hardware–Community-key-to-open-source-hardware

    When it comes down to it, engineer and seven-year SparkFun Electronics veteran Chris Taylor believes anything can be open source, to be shared and improved.

    Does open-source hardware have a place in the world of professional engineering?

    That’s a complicated question. There will always be a place for open source in the professional market because, in many people’s opinions, it’s the way to prototype. You can start from the ground up with whatever you are designing, or you can take a little bit from open-source companies that have already done the work and written the tutorials, and build up whatever prototype you are designing and go through the design phases a lot faster.

    Where that gets complicated is open-source licensing. That is still nebulous. For example, the hardware could have a different license than the software or the firmware.

    When open-source designs do make it into closed-source products, you often don’t see it. It’s done in the background. When a company has done the work on a good process or design, of course that has a place in the design process of on-the-shelf products.

    Open source brings up a lot of questions on “trust.” Without IP, without patents, how do you know what can be trusted?

    With any open-source design, there should be a certain amount of caution. Regardless of the design, you’re going to have to learn a great deal of it yourself. But in a lot of cases, we save the designer from digging through datasheets, testing, and retesting by providing example code, boards, and layouts.

    Yes, there is always going to be that fear.

  2. Tomi Engdahl says:

    When open-source eats itself, we win
    Lessons of the Nginx v Apache slug fest

    For years the headlines have been about open source cannibalising proprietary software. But what happens when open source starts to cannibalise itself?

    In some markets, open source rules the roost.

    But web servers? That’s a market that Apache won ages ago, with no open-source competition to speak of.

    That is, until recently.

    In the past few years, a lesser-known web server, Nginx (pronounced “Engine-X”), has quietly taken market share, to the point that it now owns 12.64 per cent of the global web server market, and 12.77 per cent of the world’s most heavily trafficked websites

    Once an open-source project gains traction, it has tended to continue to gain share. Like Linux.

    But Apache has been on the wane, losing 100 million hostnames since June 2012, and not because of any resurgence from Microsoft IIS. Apache still claims 55.47 per cent of all active sites, but Nginx is on the rise.

    Today, Nginx offers fewer features than Apache, but its performance is significantly higher.

    Over time, it adds functionality and continues to improve performance until, like Linux in the server and mobile operating system markets, it dominates.

    In web servers, open source is eating itself. We all benefit. Let’s hope it happens in every market.

  3. Tomi Engdahl says:

    A founder-friendly term sheet

    If you believe the upside risk theory, then it makes sense to offer compelling terms and forgo some downside protection to get the best companies to want to work with you.

    What’s most important is what’s not in it:

  4. Steam Hack says:

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  5. Tomi Engdahl says:

    Frenemies: How IP Law Helps FOSS Communities, guest blog by Clark Asay

    In previous posts here and here I assessed the intellectual property (IP) risks that free and open source software (FOSS) communities face, as well as some possibilities of how to address them. And I’m certainly not the first nor will I be the last to make such assessments; there is a natural tendency in FOSS communities to view IP law with distrust, since the FOSS movement arose in part as a reaction to corporations using IP rights to thwart openness and sharing of technology.

    But while some of this distrust may be merited, this focus tends to blind FOSS communities to aspects of IP law that actually serve them well. While certainly not perfect, patent, copyright, trademark, and trade secret law each has something to offer FOSS communities. Below I briefly describe some of the ways in which each helps or can help them.

    1. Copyright

    Because software is generally automatically subject to copyright protection, the FOSS movements’ founders were able to use copyright as the basis for making FOSS available to the public under permissive copyright licenses.

    The virtue of this flexibility manifests itself in several ways. For instance, because the main copyright licenses used in FOSS communities are by now well-known, they help reduce transaction costs because subsequent users are more likely to be familiar with the terms and their rights under them.

    2. The DMCA

    Another partial boon to FOSS communities is the Digital Millennium Copyright Act of 1998 (DMCA). The DMCA is not strictly copyright law, but it is related to copyright;

    Many of its provisions are therefore meant to protect copyright holders against the potential for increased copyright infringement

    For instance, the DMCA includes “safe harbors” that shield online service providers from liability arising from the activities of its users—e.g., uploading infringing content to the site—so long as the service providers adhere to certain basic requirements of the DMCA (e.g., removing infringing content once notified by a copyright holder). YouTube and other online services would have a difficult time surviving without this important liability shield.

    3. Trademark

    Traditionally trademark law’s primary objective has been to protect consumers; trademark rights in use of certain marks are granted in order to protect consumers from potential confusion regarding the source of the goods or services.

    Trademark law is mostly a win-win for FOSS communities. Effective branding is one of the key ways by which FOSS projects distinguish themselves, and trademark law helps ensure that effective branding can occur in the FOSS world. This is especially crucial given the open, permissive nature of FOSS.

    4. Patents

    As I’ve written here and here, patent law is probably FOSS’s biggest foe. And while there’s much to be desired in terms of changing patent law to better accommodate FOSS development, patent law already does provide some help to FOSS communities, or at least some self-help solutions.

    Perhaps the most straightforward way is patent law’s concept of prior art; patents technically shouldn’t issue on inventive concepts that have already been developed and released to the public prior to the would-be patent holder inventing or filing for the same invention.

    those rules generally mean that FOSS communities can do themselves a great deal of good by developing high-quality software and releasing it to the public as quickly as possible.

    5. Trade Secrets

    Trade secret law generally protects information that derives economic value from not being known or readily ascertainable through appropriate means, and which is subject to reasonable efforts to maintain its secrecy. Often companies choose between the (relatively) short-term protection offered by patents and the (potentially) infinite protection offered under trade secret law.

    Another key difference between trade secret law and patent law—and which can benefit FOSS communities—is that trade secret law does not protect the owner of trade secrets against independent development by someone else.


    While FOSS development doesn’t always mesh well with traditional IP law, IP law does provide FOSS communities some aid.

  6. Tomi Engdahl says:

    One Startup’s Heretical Plan to Turn Open Source Code Into Cash

    Open source software giant Red Hat made $2 billion last year. That’s not bad for a company whose flagship product is freely and legally available to download from the web.

    Sure, the company charges for the Red Hat Enterprise Linux operating system. But because the product is open source, meaning that anyone is free to modify and share the underlying code, multiple alternatives based on the exact same software that Red Hat sells are readily available. What the company’s customers are really paying for isn’t a copy of the software, which they can get elsewhere for free, but for the support they need to use it.

    That business model has worked well for Red Hat, which became a billion-dollar company in 2012, and its success has inspired many entrepreneurs and venture capitalists to invest in products based on open source code in recent years. But despite hundreds of millions of dollars in venture capital flowing into the coffers of startups that sell products based on open source code, many open source developers have struggled to find ways to actually make money from their work.

    Quinn Slack thinks his team at a startup called Sourcegraph may have found a solution. Sourcegraph has released its code search-and-collaboration tool under a license called Fair Source. The Fair Source license is similar to open source licenses except for one thing: it includes a provision that says that any company that has more than 15 employees using the software must pay for it. At the same time, the code is still freely available to everyone, regardless of whether they’ve paid or not. You can still make changes to the software and even publish your own custom versions of it. But users of your modified version, if they hit that 15-employee threshold, will have to pay Sourcegraph too.


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