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How Can We Fix The Broken Economics of Open Source? (medium.com)

"The economics of Open Source software are fundamentally broken," argues Matt Klein, a senior software engineer at Lyft (who created Envoy). Here's a heavily-condensed version of his essay on Medium: If we take consulting, services, and support off the table as an option for high-growth revenue generation (the only thing VCs care about), we are left with open core [with some subset of features behind a paywall], software as a service, or some blurring of the two... Everyone wants infrastructure software to be free and continuously developed by highly skilled professional developers (who in turn expect to make substantial salaries), but no one wants to pay for it. The economics of this situation are unsustainable and broken...

[W]e now come to what I have recently called "loose" open core and SaaS. In the future, I believe the most successful OSS projects will be primarily monetized via this method. What is it? The idea behind "loose" open core and SaaS is that a popular OSS project can be developed as a completely community driven project (this avoids the conflicts of interest inherent in "pure" open core), while value added proprietary services and software can be sold in an ecosystem that forms around the OSS...

Unfortunately, there is an inflection point at which in some sense an OSS project becomes too popular for its own good, and outgrows its ability to generate enough revenue via either "pure" open core or services and support... [B]uilding a vibrant community and then enabling an ecosystem of "loose" open core and SaaS businesses on top appears to me to be the only viable path forward for modern VC-backed OSS startups.

Klein also suggests OSS foundations start providing fellowships to key maintainers, who currently "operate under an almost feudal system of patronage, hopping from company to company, trying to earn a living, keep the community vibrant, and all the while stay impartial..."

"[A]s an industry, we are going to have to come to terms with the economic reality: nothing is free, including OSS. If we want vibrant OSS projects maintained by engineers that are well compensated and not conflicted, we are going to have to decide that this is something worth paying for. In my opinion, fellowships provided by OSS foundations and funded by companies generating revenue off of the OSS is a great way to start down this path."

15 of 203 comments (clear)

  1. Open source doesn't mean free software by Anonymous Coward · · Score: 4, Interesting

    Just because people can build the software from source if they want to doesn't mean you can't get them to pay you for it.

    1. Re:Open source doesn't mean free software by wierd_w · · Score: 4, Insightful

      A better way to put this:

      Even if milk, flour, eggs, and sugar could be obtained for 0$, people would still buy cakes from the store.

      Why? People will pay for convenience. Specifically, the convenience to free up their time for other, more desirable or productive tasks.

      So, even if all the ingredients could be obtained for a genuinely 0$ price point, mom will STILL pay to have a cake made for her, for her little girl's 6th birthday party, because mom is busy doing other things and can better use the hour of her time that would be spent making the cake and (trying to) frosting it herself. Instead, she could be arranging for the party, or checking invites.

      Same is true in software installation settings. Sure, the source code and tools are freely available. Do you have the time to spend every month or so vetting the compilation chain, building the suite you use from source, then vetting all the components built right? Or-- would you rather pay a nominal fee to a trusted source--- specifically, the very same group that maintains the free software you are using?

      Right.. Exactly.

    2. Re:Open source doesn't mean free software by Dasher42 · · Score: 4, Interesting

      It's true. I want that open source quality even if I'm not going to personally audit most of the code that I download on the system. I'm happy trusting a source that has a good track record for that practice. I *do* still care about the standards being open and being set by developer mindshare, what engineers are excited to build, because you can get pretty burnt when the health of the platform you run depends on suits and marketing divisions that don't really care about it. Every Amiga fan knows what I'm talking about. After I had to jump ship from that platform, I ran Linux almost entirely to this day, because no CEO has the option to sink that ship.

    3. Re:Open source doesn't mean free software by SuricouRaven · · Score: 4, Insightful

      But in software, someone has to pay.
      Fix your cake analogy: The cakes are made in a batch now. Once they are made, everyone gets a cake... but whoever wants their cake first needs to pay for the entire batch, and watch everyone else enjoy the cake they just paid for.

      Everyone is going to do the economically sensible thing: Wait until someone else is hungry enough to foot the bill for the entire batch, and then enjoy free cake.

    4. Re:Open source doesn't mean free software by vlad30 · · Score: 4, Insightful
      Which leads to Bill gates recent rant on capitalism without capital , software breaks the capitalist idea of supply and demand once made software has virtually unlimited supply and any demand can be supplied through almost instant duplication. Until we make replicator technology from star trek the same won't happen for the manufacturing industry. And although manufacturing techniques have improved dramatically (imagine the tech involved in producing hundreds of millions of smart phones annually now) there is still a limit on raw materials driving up costs.

      The raw material in software is programmers time and creativity they should look to publishing for inspiration there.

      Yes I just quoted Bill gates and defended publishing and copyright. sosumi

      --
      Your'e all thinking it, I just said it for you
    5. Re:Open source doesn't mean free software by rtb61 · · Score: 5, Insightful

      Whilst all that is true, seriously why would you expect those who have infinite greed as they core motivator, to stop complaining about FOSS. They want monopolies, they want to pay bribes to government to use their proprietary software and then force end users to buy it to access government information, they want to lock down your data, they want to own the copyright on the content you create when you use their software, they want you to pay a fee again and again and again for nothing, just pay.

      Closed source proprietary software is all about infinite greed, no limit to profits, total world dominance, absolute power. Come on seriously, look at the crazy way M$, Google, Apple, Facebook et al have behaved, absolutely insane psychopathic greed on full public display again and again and again. Always after they go public and the psychopaths from the major banking investors take over.

      --
      Chaos - everything, everywhere, everywhen
    6. Re:Open source doesn't mean free software by jellomizer · · Score: 4, Interesting

      Microsoft business model of the time was to sell packaged software. Open Source was a risk at the time, because it offered alternatives. However it has changed to Cloud and software as a service, So people will be paying monthly fees and Open Source isn't as much a threat.

      --
      If something is so important that you feel the need to post it on the internet... It probably isn't that important.
  2. There is no economics by Billly+Gates · · Score: 5, Interesting

    That requires both a buyer and seller. FOSS is free.

  3. Trash Writing by Anonymous Coward · · Score: 5, Interesting

    The point of working on something for free is the work, not some sly method of monetizing something that is labeled "free."

    Might as well write an article about how soup kitchen volunteers can sinergize to maximal returns with Soup as a Service open core pricing.

    Trash writing from a human being with trash ethics.

  4. A fundamental misunderstanding. by Gravis+Zero · · Score: 4, Insightful

    There is nothing wrong with how open source works, it works fine. The problem is what some people want from open source.

    Everyone wants infrastructure software to be free and continuously developed by highly skilled professional developers (who in turn expect to make substantial salaries), but no one wants to pay for it.

    Here's the conflict, people want something for nothing and that can work out sometimes but it means you are at the mercy of people you have no control over. That said, since it is open, you can hire people that you have control over to contribute to the code. The fact that few chose to do this demonstrates a failure in leadership rather than a failure in open source.

    TL;DR: you dumbass MBAs are shortsighted nitwits who deserve to bear the responsibility for every security breach that happens under your blind-leading-the-sighted leadership.

    --
    Anons need not reply. Questions end with a question mark.
    1. Re: A fundamental misunderstanding. by astrofurter · · Score: 4, Interesting

      I know a little about this first hand, from experiences I choose not to share.

      Using real big-F Free Software is orders of magnitude more productive than using proprietary crapware. Many companies running on Free Software generate prodigious economic output. No CTO under fifty wants even to touch âoeenterpriseâ software, much less build business-critical systems around it.

      However the men who actually write that Free Software capture almost none of the value they create. Many struggle just to make ends meet. Those who do earn a comfortable (never handsome) income do so at the cost of proletarianization. Work for Big Capital or starve.

      Consider the depency chain of a typical production web app. The application code alone may have hundreds of direct and indirect library dependencies. Thousands if it's a Nodejs app. ;) Probably a quarter of those libraries are already abandonware. Almost all of them will be abandoned in a few years, because they take time to maintain yet bring no income to their authors.

      In the short term this is great for companies. They pay nothing and get a lot of value. Free (like beer) software = profit! The capital owners would just as soon get rid of the free like speech part of Free Software. Thankfully we have some bold and incorruptible champions, like St Richard of Boston, standing up for software Freedom.

      In the medium term this situation is a maintenance and security nightmare. Our production applications are like houses of cards. Propped up atop layers and layers of increasingly unmaintained software. At first we can work around this. We replace components that have become unsupported, either with newer FOSS components, or with home rolled software.

      In the long run this is a potential disaster. More and more FOSS projects, having failed to provide material support to their maintainers, fall into abandonment. At some point the rate of abandonment surpasses companiesâ(TM) ability to keep up with maintenance. Rot starts to set in. Like aggressive termites or an invasive mold. The profit-generating superstructure sitting on this rotting base starts to become shaky, unstable.

      I don't know how to fix this mess. At a high level we must either figure out how to ensure authors of Free Software area able to earn a good living *for their Free Software work*, not incidentally to it. Or we must accept a permanent secular decline in software development productivity, because the rich commons of Free Software will have fallen into ruin.

    2. Re: A fundamental misunderstanding. by turbidostato · · Score: 4, Interesting

      "Tragedy of the Commons (Look it up; there is a good read on Wikipedia.)"

      Exactly that. And then moronic egotism (its near relative). Just look at the entry: "Broken Economics of Open Source" but, then, what that "broken economics of Opern Source" means for the author? It basically ends up "I want tons of money from VC for something that will never have so much value form them" -it seems his target is "billionaire or nothing"... and even he has the guts to say "If I take out all the ways I know I can make money off of open source (consulting, services, and support), then there is no other way to make money that I know about". Simply brilliant, Monthy Python level, "what have the romans ever done for us?"

      Now, what *should* be the proper way to make money out of open source? Well, it's right there, open to anybody to see, as long as they want to: software takes effort to write, but it doesn't take effort to replicate, then the answer is obvious: bill the "writing code" fact. In no part of any open source license says the code needs to be written for free; they are only about what you can do with that code *once* is already written (basically being "you can't control it anymore").

      Now, the problem comes from the fact that people (not only corporations: people) very much prefer acquiring things they can already see better than things that are in the future. It's not only a thing of software: i.e.: most millionaires (specially unknowledged ones) will prefer paying, say, 5000$ for a pret-a-porter suit than 3000$ for a bespoke one and that says all.

      Add to this the myopic greed of most corporations: right now I'm working for a big bank on an Openstack deployment with a strong backing from Red Hat (and quite a few in-house consultors from them). What's the best value those consultors bring? Being able to talk about our common problems with other Red Hat consultors working on very similar projects on other industries, even competing banks, and sharing the solutions they find. Of course, if we were clever, we could get rid of the middleman and just set our own communication channels with our competitors: there's even a MBA-buzzword for that: coopetition. But, of course too, we prefer paying money through our noses to Red Hat better than sharing efforts with our competition.

      The very same idea could be expanded to the production of the software itself: take the common software requirements of Fortune 100 corporations: they could build an alliance and pay for the common software they need on themselves; it could be open source and developers could be payed for the part that takes the effort -it won't happen in a million years. Not because "open source is broken" but because *we* are broken.

  5. Stacking the deck by mvdwege · · Score: 5, Insightful

    I generally stop reading if the opening argument starts by stacking the deck:

    If we take consulting, services, and support off the table as an option for high-growth revenue generation

    "but apart from better sanitation and medicine and education and irrigation and public health and roads and a freshwater system and baths and public order... what have the Romans done for us?"

    --
    "I know I will be modded down for this": where's the option '-1, Asking for it'?
    1. Re:Stacking the deck by Anonymous Coward · · Score: 5, Insightful

      Maybe that means the economics of VC's are broken and that the economics of OSS are fine.

  6. Excerpt says it all by SlowDancing · · Score: 5, Insightful

    >>If we take consulting, services, and support off the table as an option for high-growth revenue generation (the only thing VCs care about)

    As if high growth, and the concentration of wealth to those that drive it, were worthwhile goals for all human endeavours.