The Benefits of Open Source and the Risks of Open Core

Chapter 2. Why Companies Find Open Source Daunting

The previous chapter showed why open source is popular. Vendors want to be accepted by communities clamoring for open source, so they promise an open source solution. But it’s harder than it looks to build a company on open source.

The following list describes the main factors that give companies pause. Most of these problems focus on the failure to develop a community around open source. If a company can’t develop a healthy developer community, it is left having to fund all development itself and enjoys no gain over proprietary development.

They Are Working from Old Revenue Models

The old, shrink-wrapped CD model of software distribution had a simple business model: each user paid for a copy. In some parts of the modern software industry, the pay-per-use model still applies. Enterprise software companies license “seats” and mobile device users pay the Apple App Store or Google Play for a download. But the model is breaking down. For instance, very few teams that develop mobile apps cover their development costs by charging a dollar or two for each download. Often, they offer the apps for free and link them to backend services.

A great deal of ingenuity has gone into deriving revenue from software. You could spend years studying the business models of industry giants such as Google and Facebook. Many companies use the freemium model, giving you a certain set of features and disk space and expecting some users to pay for upgrades. ...