The Challenge of Product Management in Commercial Open Source

Open source is a viable business strategy for software vendors to disrupt existing markets and conquer new ones. Just why is it easy in some markets and hard in others? I argue that you need to cut the product in such a way that there is a clear separation between what a never-paying community-user wants and what a commercial customer needs. In addition, you need to tie the commercial features closely to your company’s intellectual property and capabilities to keep competitors at bay. If you can do that, you are in the right place. If you can’t, you may want to get out of there.

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The Cardinal Sin of Commercial Open Source?

Redis is a popular open source database. Its proprietor, Redis Labs, recently announced that some add-on modules will not be open source any longer. The resulting outcry led to a defense and explanation of this decision that is telling. I have two comments and a lesson about product management of commercial open source.

The two comments are about messaging, both ways: What Redis Labs is telling the world and what the open source world is telling Redis Labs and the rest of the world.

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Talk Slides: The Commercial Open Source Business Model

For my AMCIS 2009 talk on the single-vendor commercial open source business model, first the abstract, then the slides:

Commercial open source software projects are open source software projects that are owned by a single firm that derives a direct and significant revenue stream from the software. Commercial open source at first glance represents an economic paradox: How can a firm earn money if it is making its product available for free as open source? This paper presents the core properties of commercial open source business models and discusses how they work… [more]

The talk slides are available as a PDF file and are licensed under the Creative Commons BY-SA 3.0 license.

For a discussion of the talk’s contents I recommend reading the original article.

The Intellectual Property Rights Imperative of Single-Vendor Open Source

I guess everybody knows it but nobody ever named it, as far as I know, so I’m doing it here:

The Intellectual Property Rights Imperative of Single-Vendor Commercial Open Source
Always act in such a way that you, and only you, possess the right to provide the open source project under a license of your choice.

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A Twitter Best Practice

There are many best practices of using Twitter for organizations. Here is one; I may post others in loose order as I have good examples at hand.

I was attending IBM’s NPUC:09. Like many, my first reaction when I’m unhappy these days is to tweet about it.

dirkriehle: Almaden is a great location, on top of a hill, but cell coverage fails and visitor wireless does not sustain livestreaming the speaker #npuc

Note the use of the event tag #npuc. It was being monitored by an IBM PR person, who I had never met and who I didn’t know. She responded promptly:

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Commercial Open Source: The Naming Confusion Remains

In 2004, SugarCRM coined the termcommercial open source“. This term was intend to separate the commercially-oriented open source projects of venture-capital-backed startups from the then dominant community open source projects. The term was picked up quickly, by many. I (as well as others) define it the following way:

“A commercial open source firm is a software firm that provides most or all of its product as open source while maintaining the relicensing rights to the source code.” (Maintaining the rights has the purpose of being able to sell the product to customers under a commercial license.)

This type of software firm has quickly become important and stands to gain even more ground. According to Gartner Group:

“By 2012, at least 50% of direct commercial revenue attributed to open-source products or services will come from projects under a single vendor’s patronage.” From: Mark Driver. “Predicts 2009: The Evolving Open-Source Software Model.” Gartner Inc, 2009.

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The Commercial Open Source Business Model

Abstract: Commercial open source software projects are open source software projects that are owned by a single firm that derives a direct and significant revenue stream from the software. Commercial open source at first glance represents an economic paradox: How can a firm earn money if it is making its product available for free as open source? This paper presents the core properties of commercial open source business models and discusses how they work. Using a commercial open source approach, firms can get to market faster with a superior product at lower cost than possible for traditional competitors. The paper shows how these benefits accrue from an engaged and self-supporting user community. Lacking any prior comprehensive reference, this paper is based on an analysis of public statements by practitioners of commercial open source. It forges the various anecdotes into a coherent description of revenue generation strategies and relevant business functions.

Reference: Dirk Riehle. “The Commercial Open Source Business Model.” In Proceedings of the Fifteenth Americas Conference on Information Systems (AMCIS 2009). AIS Electronic Library, 2009. Paper 104.

Available as HTML or PDF file.