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Says the former CEO of MySQL Mårten Mickos, “In 2000 when I joined MySQL I knew practically nothing about open source.” Nevertheless, with Mickos at the helm, the company went from garage start-up to the second largest open source company in the world.
According to Mickos, the trick to making an open source business is that you need a business model. Mickos admits that most users, “don’t love you as a vendor… if they can get away with it, they won’t pay money. Craig Newmark sent us $10,000, and he was our only voluntary customer. It was a reminder that we had no good business model. You must build a differentiation and be willing to work on both sides of the fence… If you don’t like your free users, you shouldn’t be open source.”
Today, the now CEO of Eucalyptus Systems knows a ton about open source including the business models that have allowed some of the best and brightest in the ecosystem to thrive. In a recent Heavybit presentation, Mickos outlines two broad models to building an open source business.
Two Models of Open Source Businesses
Foundation Originated: This is where a nonprofit organization spits out code and a series of vendors around it build tools that they then sell to customers. For example, Linux Foundation produces a certain amount of code and then Redhat Linux or Ubuntu Linux is the commercial and third party wing of that. Explains Mickos, “Many differentiate from each other through their best binaries — Redhat for example can’t offer you access to the binaries of open source Linux. Instead, you get Fedora as an unpaying users.”
Singular Project: This is where the open source project and the company are the same thing. For example MySQL AB, MongoDB and Datastax/Cassandra. Others can fork these projects, but it’s basically a singular and 1:1 model. Says MIckos, “At MySQL if we’d said our paying customers would be the only ones to get the best binaries, we’d have had no community. Here the only viable model is commercial add-ons. You can sell support, but that’s not a scalable business. Look at Cloudera, Eucalyptus and Acquia. All of these have a hard differentiators once users choose to pay. In this case the open source platform is fine, but it lacks something that appeals to enterprises and those who are ready to pay money.”
For the full version of Mickos’ talk, check out the Heavybit library.