The Continuing Evolution of Open Source Business Models

First published on the Actuate blog on July 25, 2014. Reproduced here in full. 

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Quentin Hardy, the deputy technology editor at the New York Times, published a blog post last Wednesday concerning a subject that’s important to us at Actuate: Open Source and the Challenge of Making Money. In the post, Hardy writes that it’s a “trend of businesses to start with open source models and then switch to more proprietary offerings,” and that this perceived shift “raises the question of whether it makes sense to build free stuff at all.”

I’m not so sure that free vs. proprietary is an either/or proposition. Yes, it makes sense to build free stuff, if it’s also great stuff. It also makes sense to sell great stuff. Actuate (with BIRT) and other open source-based companies demonstrate that the two are complementary – it’s good karma and good business to create compelling products and services based on open source.

If you’re reading this blog, you may know that it’s been a little over a decade since BIRT launched as an open source project. Actuate, already a 10-year-old company at the time, co-founded the BIRT project in 2004 (through the Eclipse Foundation) and has since provided continuous and substantial support and intellectual property to the project. We’ve also built a solid, profitable business on the open source BIRT foundation. We’re proud to support an open source project that’s widely used and loved – an independent survey shows that 3.5 million developers worldwide use BIRT – and we believe that our revenues enable us to better support that project.

Our profits don’t diminish Actuate’s commitment to the open source community as a whole or the BIRT project in particular.  Indeed, at Actuate it’s a business imperative for open source BIRT to be as solid and reliable as it can be. But we’re also motivated to create commercial products that add so much value to open source BIRT that our customers can’t afford not to use them. Companies that want enterprise-class features (including interactive reports instead of static ones, scalability to millions of users, and page- and user-level security) but can’t invest the time or money to build them from scratch see Actuate’s value.

Our model is precisely what venture capitalist Peter Levine described on TechCrunch earlier this year in a piece about the economics of open source: “Build a big business on top of and around a successful platform by adding something of your own that is both substantial and differentiated.” (Italics his.)

Actuate’s open source roots also motivate us to experiment with novel ways to get BIRT into the hands of users. Our latest venture along these lines is BIRT iHub F-Type, a free server that incorporates all of the functionality of BIRT iHub (Actuate’s commercial deployment platform), limited only by output capacity.

Yes, BIRT iHub F-Type is “free stuff.” But it’s also great stuff. I can personally assure you that people have devoted, and continue to devote, countless hours and considerable brainpower to creating and refining BIRT iHub F-Type. We believe developers will build and deploy many great customer-facing applications using it.

And we believe that some of those developers will build such great applications with BIRT iHub F-Type that their users will demand more capacity (which we make available as an in-app purchase) or those demands will require that they upgrade to the full commercial version of BIRT iHub.

We’ve made this creative move because we believe that there is no single way to make money on open source. This meshes with the thinking of one of Hardy’s interviewees, Drupal creator Dries Buytaert (now CTO of Acquia), who wrote a blog post responding to Hardy’s Bits Blog piece. Buytaert described evolving open source business models and wrote, “Rather than an utopian alternate reality as Quentin outlines, I believe Open Source is both a better way to build software, and a good foundation for an ecosystem of for-profit companies.” Buytaert’s piece is a good counterpoint to Hardy’s, and worthy of careful reading.

Open source and its related business models will continue to evolve – and be debated – and that’s as it should be. We welcome the debate.

Open book image courtesy of Opensource.com

Reproduced in full from http://blogs.actuate.com/the-continuing-evolution-of-open-source-based-business-models/#sthash.0J2jMWZi.dpuf

A version of this article also appeared on LinkedIn: https://www.linkedin.com/pulse/open-source-business-models-fred-sandsmark

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