Over on LinkedIn, former OSI president Stefano Maffuli asked, somewhat exasperatedly:
“Customers seem to believe open source solutions should be cheaper than comparable closed source solutions. Should they?” (Short paraphrasing by me)
Obviously, they should not. Assuming feature parity, an open source solution has more to offer than a closed source solution, most notably the option to show the vendor the middle finger and migrate away from the vendor’s commercial license. So it should be more expensive.
Let me unpack this.
The first rule of pricing is: Charge as much as you can get away with. This is based on the logic that you should charge your customer what your offer is worth to them, not what it costs you to provide it. (A principle badly ignored by most of my academic peers.) The second rule is that you should optimize for lifetime value, which implies that you shouldn’t necessarily squeeze your customers so much that they start hating you.
When you compare a traditional closed source solution with a product where there is also an open source version of the involved software, and they have feature parity, i.e. the use value is the same to a customer, their price should be the same, because it doesn’t make a difference to the customer which they are buying.
However, the open source solution is not the same as the closed source solution: It offers the option to migrate away from the commercial version of the open source product to a self-managed version: This is the very meaning of a (true) open source product. This is an added feature that is worth something! This feature is a promise to customers and they should pay for this insurance. The closed source solution does not offer it. Thus, the open source solution should be more expensive.
Framed in the context of digital sovereignty: In the short run, it may appear to cost more to be digitally sovereign than to be not, but in the long run, the total costs will be so much lower.
A true open source solution has an upper cap on how much you can charge for it: The cost for a user to host and administer and keep secure the open source version themselves.
I don’t know why some customers might think that an open source solution should be cheaper than a comparable closed source solution. Maybe these customers assume it is cheaper to the vendor to provide the open source solution, which may or may not be true. In any case, it is irrelevant to the price.
As always, in a specific situation, the devil is in the details. The most obvious question to ask is whether a so-called open source solution is a true open source product or whether the vendor is holding something back or provides complementary services that are not open and hence will lock you in, like a closed source vendor, even if maybe less so. After all, business is business, and most companies exist to make money.
I discuss this situation for the specific situation of venture-capital funded open source startups in a recent article. Check it out!
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