This document discusses how open source software is funded and the challenges of the open core business model. It provides background on open source stewardship and funding types, including open core where optional paid-for components are offered alongside free open source software. Open core aims to balance offering enough paid features for revenue while maintaining an engaged open source community. Case studies of open core companies like MongoDB, Docker, and Elasticsearch are presented.

1. How Open Source Is
Funded
The Enterprise Differentiation Tightrope
Ryan Dawson Mauricio Salatino
Sept 2019

2. “[W]e didn't open source it to get help from the community, to
make the product better. We open sourced as a freemium
strategy; to drive adoption.”
MongoDB CEO Dev Ittycheria

3. Speakers
Ryan Dawson
● Worked in banks...
● Switched to open source
● Also in paid-for enterprise
https://github.com/ryandawsonuk
Mauricio Salatino - Salaboy
● 12 years in Open Source
● http://salaboy.com
● @salaboy
● @ZeebeHQ
● @learnK8s

4. Speakers Background
● Worked in open source for a long time
● Experienced how confusing open core business model can be
● Open Source users and contributors

5. Agenda
● Intro on Open Source Software
● Growth of Open Source
● Types of Stewardship/Management
● Types of funding for Stewardship
● Open Core
● Challenges of Open Core

6. What is Open Source?
Open source software is software with source code that
anyone can inspect, modify, and enhance.
Opensource.com

7. Reasons developers join OSS
● Collaboration instead of reinvention
○ Organically form around problems
○ Contribution to the whole developer community
○ Diverse environments
○ Merit based
● Career points
○ Interesting people/experts
○ Public profile
○ Learning for most experienced people
● “People hate their families”

8. Open Source in the Enterprise
Previously open source was perceived as immature, buggy and vulnerable.
Now they rely on it.
They prefer a commercially-friendly open source license, not copyleft.
Prefer to see a steward behind an OSS project.

9. Stewardship
The steward is whoever provides governance and sets the roadmap for the
project. This may be one party, several collaborating or even nobody.
Or there are foundations:
Apache, linux, CNCF, eclipse...
May be actors in the community that have roadmap influence.

10. Types of Stewardship
Key cases:
● In-house project goes open source e.g. netflix microservice components and
Spring Cloud.
● OSS aimed at promoting an ecosystem e.g. google-led OSS in kubernetes
space. The incentive is to indirectly promote the platform.
● The OSS is offered free but a related paid-for option is available e.g. hosted

11. Stewardship and Monetisation
OSS might be developed with the intention to monetise e.g. MuleSoft.
Or it may be developed for a use-case and later monetised e.g. Kafka - developed
at LinkedIn and now offered by Confluent.
Sometimes companies monetise an existing open source e.g. WSO2
Whoever controls roadmap is best placed to monetise.

12. Open Core
Open Core means optional paid-for add-on components under a restrictive license
e.g. JetBrains, nginx, Elasticsearch or MongoDB
OSS is provided as-is = not open core. Monetised services. Examples are
RedHat, WSO2 and Hortonworks
Open core is the most common

13. The Open Core Bargain
Open source users use the project for free.
The steward effectively gets their contributions (PRs and bug reports) for free.
These can feed into the paid version.
The dynamics can vary a lot.

14. Spectrum of Open Core
Source:
Joseph Jacks on
Open Core

15. Open Core Licensing
Open source = permissive license e.g. Apache, MIT
Paid-for will likely fall under a Master Software License Agreement. This will
encompass some mix of:
- SLA-based support
- Access to enterprise/premium features
- Integration Services or Customer Success
- Training
- Premium materials

16. Enterprise Differentiation
Features available only in premium and not in open source are enterprise
differentiation.
Can be add-on tools.
A commercial driver for offering this can be to persuade buyers that they are
getting tangible value for money.

17. The Tightrope
Too much in enterprise and you’re not really open source. Engagement drops.
Not enough in enterprise = no money.
Transparency is important. Unexpected enterprise lock-in leaves users feeling
misled.

18. Pitching Enterprise Features
Enterprise features could be pitched at corporate users for:
- Scale
- Visibility
- Governance
- Multi-tenancy
- Security
Chimes well with a tiered pricing model.

19. Case Studies

20. nginx
Nginx-plus is differentiated from open source by:
- Built-in openid-connect
- Extra Metrics
- Sticky sessions and persistent sessions
- Bandwidth controls for MP4s
- And others
So focused around high availability, high use and monitoring

21. docker
Basically docker EE is an orchestration platform with built-in:
- Image scanning
- LDAP integration
- RBAC features

22. Elasticsearch

23. GitLab
Weighting for issues
CSV Export
Burndown charts
Multiple reviewers in code reviews
More

24. MongoDB
Enterprise server offers:
- Encryption
- LDAP integration
- in-mem storage
Plus you can get a bunch of install, monitoring, maintenance and backup tools

25. Adapting to Cloud
● Cloud already changed the rules for open source projects
● Pricing based on clustering/replicas or CPU
● SaaS for OSS

26. Growing Open Source Communities
Not everything is about making money.

27. Join Open Source Projects