Open Core Debate: The Battle for a Business Model

Is software truly open source if you pay for additional features? Your answer may depend on whether you side with the purists or the, ah, not-so-pure.

A recent trend entering the debate involves the marketing of so-called open core software. This morphed business model is not what many open source supporters consider "pure" open source. However, open core may come to be the standard bearer in the business software arena.

Open source pundits have been debating the question for about a year as they try to outline the best possible open source business model. Open core supporters suggest that this latest licensing model will satisfy those trying to balance customer value with investor return while not ignoring community facilitation.

"The merits of open core have been debated poorly until recently," Andrew Lampitt, cofounder at zAgile and director of business development for Jaspersoft, told LinuxInsider.

zAgile is a software company dedicated to unifying collaboration for software engineering environments.

Open Core Defined

From the outside, the differences between open source and open core appear relatively subtle, which makes the debate seem even stranger sometimes, according to Jaspersoft CEO Brian Gentile. For the purist in open source, the free software movement is really about having no feature differences between the free version given away under a General Public License and a version given to a customer who wanted to pay a vendor for support .

The distinction between open core and open source rests in what is actually licensed as free, he explained. For instance, in an open core model, the vendor gives away the bits to a foundation that is part of the architecture.

The vendor is saying to the customer: Here it is, it's free. The software is made available under one of the traditional open source licenses. Users can take the product and do whatever is available under that license, explained Gentile. However, open core then goes one step further.

"If you wish, here are some other features you could have that are only available under a commercial license. They provide you with greater capability, but you have to buy them or subscribe to them, and you have to abide by the terms of the commercial license," he said.

Fuel for the Fire

Gentile added a new round to the ongoing open core debate in February when he broached the topic in his blog. When responses started lining up both for and against Gentile's support of the open core strategy, Lampitt joined the fray by contributing his own.

"I was recognizing comments about open core and getting questions about scaling the business. I was simply saying there is a trend called 'open core.' People within the open source community and even proprietary vendors were saying that there was no [such] business model as open core," Gentile told LinuxInsider.

True to His Core

Lampitt argues that the open core model does exist and has served Jaspersoft well. The debate, he acknowledged, is a complex issue.

Open-core licensing (OCL), Lampitt said, might be the new standard as a dual license open source business model. The OCL is actually a General Public License (GPL) core with commercial extensions, he wrote.

There exists a sense among its detractors that the open core community is perhaps holding back some of the features from the community at large by offering commercial versions of the software, according to Lampitt. The paid versions have more features than the free version.

"This view is very contentious for some people. The key here is to deliver value. The crust or core features also have to provide value but probably in a different way. Enterprise versions have features that the average Joe User might not need but eventually might grow into," Lampitt explained.

The industry is replete with examples of successful use of the open core business model as a part of open source licensing, according to Lampitt. For example, Linux, Apache, MySQL, Eclipse, OpenProject, Talend, Mulesource, Alfresco, Drupal, Sugar and Jaspersoft all have absolutely thriving communities thanks at least in part to the open source model.

"I see a trend of open core. The bulk of new software companies are going to it," said Gentile.

Customer Satisfaction

Gentile claims that most of his company's customers actually want a commercial contract from Jaspersoft. The debate should really focus on how a company might get pulled into an open core model, he noted.

"Jaspersoft actually got pulled into it. Our customers came to us wanting a contract and features that were enterprise-strength. A lot of the community members and smaller companies wouldn't find much value in that. So the only way to deliver those enterprise-class features that really satisfy is to build them into an upper layer or add-on approach and then to commercialize them in a way that lets you add value," Gentile said.

The point often left missing in the debate about open core not being true open source software is that if a vendor has a product that does not offer value, nobody in the community would use it, according to Gentile. A natural market mechanism is at work, he said.

Mixing Meanings?

Open core is a relatively new term, and that may be what's causing some of the consternation.

"The push against it is due to the view that open source projects are open source end to end. It's open source across the whole stack. What's changing now is a mix with commercial software," Tom Berquist, CFO for Ingres, told LinuxInsider.

Open source vendors who can offer both models can work with other companies on a commercial basis. So it comes down to who owns the license. Most community developed projects cannot be commercially licensed, he said.

"Our product was proprietary, and we open sourced it. I foresee a continued mixing and matching. We can continue to argue about the merits of open source end to end. But the role of the economy is changing the realities. There are very few purist open source companies of any meaningful size. The concept is almost a religion for some instead of focusing on the money angle," Berquist said.

Open Failings

Opening up the core platform of what a company is trying to sell is extremely risky, according to Michael Krotscheck, senior developer for Resource Interactive. The risk is there because this action instantly changes their environment into a commodity market. Once that's done, the rules of business strategy are no different in an open core model than they are in any business environment.

The specific environment of software makes cost leadership a very delicate balancing game. If the product is too expensive, the open source community will undermine the vendor. If the product is too cheap, the vendor devalues the platform, he reasoned.

"At the same time, you essentially cede control of the platform to the community, so that the actual direction of your product is no longer under your control and therefore not predictable. That's where pure open source falls short of being a truly valid business model, which we're seeing with Red Hat," Krotscheck told LinuxInsider.

Opposing Models

The open source software concept has spawned five business models, explained Dave Roberts, Vyatta's vice president of strategy. One is the vendor giving away the castle for free. A second model is to give away the software and sell the hardware. This is common in applications like VoIP (voice over Internet protocol).

The third model is to give away the open source version and sell the closed source version. MySQL and Alfresco take this approach.

The fourth model is to offer a free download or paid features version. Examples of this are Zimbra and SugarCRM.

The fifth model is service-based. The vendor sells management services. Examples are Red Hat (NYSE: RHT) and JBoss.

"We see companies falling into several of these categories. The debate is the question, is it legit to do this? My response is yes. Open source can accommodate a variety of models. This is great for the industry. I see no need to pick sides," Roberts told LinuxInsider.