Free-to-Use, Unless You Are a Cloud Provider (The New Strategy?)

On the heels of my talk about the current licensing challenges to single-vendor open source firms, I want to discuss the resulting strategy for vendors selling to developers.

Single-vendor open source firms go to market by providing software they developed to the world under an open source license. The goal is to create a large non-paying user base, from which customers are acquired using a variety of incentives. One type of single-vendor open source projects are application component projects like MongoDB (a NoSQL database) or Confluent Platform (a stream processing platform based on Apache Kafka). It is these types of companies which ran into licensing problems.

Single-vendor open source firms typically use an aggressive copyleft license like the AGPLv3 to make it unattractive to compete with them. However, to drive adoption, some of these firms decided to license at least those parts of their software permissively that are touched by application code.

This permissive licensing not only drove developer adoption, but also allowed cloud providers to compete with the vendor by offering the software as a service. Firms like MongoDB and Redis Labs responded with a license change that can be succinctly reduced to this (imaginary) license:

This code is licensed to you under the Apache Software License 2.0 unless you are a cloud provider, in case of which you are not allowed to use it.

This is not an open source license, which created a backlash by the open source community at large. Nevertheless, it does the job: Application developers can use the software without fear, and cloud providers cannot use it to compete.

Does this have to remain the only license? I don’t think so. At some point of time, the vendor’s primary concern will switch from adoption (growth) to conversion (revenue). Then, the vendor will change to an aggressive copyleft license. This will still keep competition away but also force developers to either open source their applications, or to abandon the single-vendor open source, or to pay for a commercial license.

This then is the new licensing playbook of software firms who are developing and selling application components to developers:

1. Use a proprietary license that drives adoption with developers but prevents competition from cloud providers
2. As the market is maturing, switch to an aggressive copyleft license to convert users either into customers or ex-users

Clearly, before step 2, these are not open source firms, but rather traditional proprietary software firms trying to utilize some of the benefits of open source.

The approach may strike some as evil. If transparently communicated from the beginning, however, developers get a chance to understand what will happen to them, and then I think this approach is an acceptable business strategy.