This blog is about my work on the Postgres open source database, and is published on Planet PostgreSQL. PgLife allows monitoring of all Postgres community activity.

Online status:

Unread Postgres emails:

Email graphs: incoming, outgoing, unread, commits (details)

Monday, September 28, 2020

Since open source became a powerful force in the software world, it has gone through several phases. The first phase was built around universities and volunteers, with little business involvement. As open source grew, companies like Red Hat were created to simplify deployment of open source software in enterprises. With the popularity of open source, companies that distributed their software as open source, but were company-controlled, started to proliferate, like MySQL. The distinction between openly-developed open source software and company-developed open source software is still not widely understood. One big distinction is that, for company-developed open source software, a company controls the development process, and bears the full cost of development, which leads to greater customer lock-in and potential future costs as the company maximizes its profits.

Cloud vendors have upended many of the plans of companies built around open source. While open source is often valued by vendors and customers for its rapid proliferation and deployment, there was always a hope that expertise in the open source software would yield sufficient revenue opportunities. What has upended their plans are cloud vendors, who already have a customer relationship by providing cloud infrastructure. They use open source software as an up-sell to cloud customers, bypassing vendors that specialize in open source. This excellent article exposes much of this shift, particularly with this statement:

From an economic perspective (which is what all the industry think pieces and analogies are about), the clouds seem to make a better business from open source than the companies built around particular projects. If you squint, open source could be seen as a very generous charitable donation to some of the largest and wealthiest corporations on the planet.

Instead of open source vendors providing software to be used by potential customers, it is also being used by actual competitors, often much larger and more visible competitors. Such is the problem of open source, that you can't easily control how it is used, though some company-developed open source companies, that do control the software license, are taking steps to avoid this situation, with predictable reactions from the cloud vendors.

The biggest "wow" moment for me in reading this article was the analysis of Red Hat. Company-developed open source companies were always at risk, since they bore the full cost of software development and had a clear monetization strategy — grow and then maximize monetization, but Red Hat was different. It was the poster-child of pure open source (collect from others and bundle) that should have been more immune to the cloud, but the graphs in the blog clearly show that the purchase of Red Hat by ibm was due to cloud competition on Red Hat. This blog entry from the same person goes into even more gory details.

It is not really clear where open source monetization is headed. If cloud vendors were smart, they would keep open source-dedicated companies alive with enough revenue to continue funding open source development and innovation. While open source companies have often yielded high valuations, they have rarely yielded high profits, except perhaps, years ago, for Red Hat. The high-profits world now seems even more distant for open source companies, as cloud vendors, with existing customer relationships, massive standardized infrastructure and services, and economies of scale, siphon even more profit from these businesses.