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JUL 22, 2014 - NaN MIN

MySQL CEO on 2 Open Source Business Models

  • General Management

CEO of Eucalyptus.com and CEO of MySQL reviews the world of open source software – who is producing it, who is using it, and how they are turning it into a business. Using real-world examples, he will review various business models, looking at licensing, branding, governance, and proprietary add-ons to open source products.

  • Introduction
  • Open Source Business Models
    • The History of Open Source
    • Types of Open Source
    • Free vs Open Source Software
    • Open Source Business Models
    • Starting an Open Source Product
  • Q&A

My name is Marten Mickos and I'm the CEO of Eucalyptus Systems. As Tom mentioned, I was the CEO of MySQL for eight years. I was de facto the only CEO that the company ever had from 2001 to 2008 when it was sold to Sun, and then one year at Sun Microsystems.

I'm here tonight to talk about open source business models which is a difficult, complex, complicated nuanced topic that doesn't really allow itself to be structured and summarized, but I'll do my best anyhow.

I thought I would ask how many of you use open source software,and that's a silly question because everybodywould have their hand up.But, do we have open source vendors in the space, in the audience — people who are building an open source business?There's one, okay, two, three, four. Excellent!

We also have others who are using it ormaybe are participating in it. I'll try to coverall of that in the next 20-25 minutes and then we'll do questions and answers. Then, I do have a relatively hard stop, so if you see merushing out of the space it's notbecause I don't like the discussions,it's because I have something else I'm going to.But you can absolutely email me afterwards if you havesome question or something I can help you with.

I can tell you that when I joined MySQL in 2001,I knew practically nothing about open source.I knew something about databases, and I happenedto be friends with the founders of MySQL. They called me in December of 2000and said, "Marten, we are sitting here in the kitchenand we need a CEO and we think it's you."And I said, "No!"That was my first response.

It turned outthat I joined as CEO and I had to decide to learnabout open source, and I decided that yearto become an expert on open source business models,which back then practically didn't exist.

There was Red Hat out there, a famousopen source company, but those of you who remember andwho were there at the time know that their initialbusiness model was selling boxes with CD-ROMSand the reference manual and the box.That was the business they hadand they went public on it with a huge valuation.It took them several years to develop the realsubscription business model that they are now followingand that many open source companies are following.

So first quickly about Eucalyptus. It's an open sourceprivate cloud software platform.The name is an acronym which makes it easierfor you to remember what it does.EUCALYPTUS stands for an Elastic Utility ComputingArchitecture Linking Your Programs To Useful Systems.Yes, it's very funny, but it's true. That is what the software does.It is the only private cloud platform that behaveslike Amazon Web Services. If you run Eucalyptuson your own servers, you have a region that you control.It's like having your own Amazon region.

MemSQL did. They have 35 servers for dev andtestrunning completely in Eucalyptus and it all behaveslike Amazon which means they can move workloadsback and forth through the public cloud and the private cloud.

And I'm quoting myself here in a tweet.Just a few days ago I tweeted that,

"When you run on Amazon,you run on your credit card and when you runon Eucalyptus you run on your servers."And smart people want a choice of where they run.

There's huge convenience running on Amazon. There's huge control and power of running on yourown servers. And you can do both because the APIsare the same, EC2, S3, EBS and so on behavingthe same way on both environments.So that's what the company does.

Let's move over to the business models. I wantto set the stage here by noting that I think generally when the world evolves,and the universe evolves, we go from one stageto the next and what we solved in the old stagebecomes legacy, and it's used, but that's not the new thing.And for every new era we have some new thingsbeing invented. I believe that existseven on a physical plane. When the universe startedto exist, we had small particles then they said"Why don't we get together and become atoms?" And then the atoms said, "Why don't we get together and become molecules," and so on.

So in small scale in the software business,in the eighties, that's a long time ago but I was thereat the time, I joined the software business.It was all about the shift to client/server.From mainframes and mini-machines we shiftedto the PC era and the client/server era.And back then we said that the new process architecture,which then would be called x86,was an open architecture for everybody.

So the level of openness back then was the hardwarearchitecture, and everybody built operating systemsand software that ran on the same CPUs. It wasseen as a fantastic level of openness.

Then, 15 years later we got into the web eraand the big shift that disrupted half of client/server.It disrupted the client. In client/server you havean application running on your machine.On the web you have just the browser and everythingruns on the back-end somewhere and in the web at the same time. Open source happenedand openness was then about openness in the source code.

It's not an exact comparison because you can claimthat there was open source code before thatand it had different origins. But when you thinkabout the real mechanisms of the industry,it was in the mid-90's that people started waking upto open source software and we saw the birthand the growth of all these important products.Like Linux, started in '91, MySQL started in '95and Apache and PHP and Pythonand all those created at that time.

The business was about building web applicationsand the openness had moved from the hardware levelto source code and suddenly to be really creativeand to share things, you opened up your codeand the whole open source movement started then.Or, it didn't start then, but it became relevant then.It wasn't even originally called "open source."Just as Cloud wasn't originally called "Cloud."Why is Eucalyptus called a "Utility Computing Architecture?"Well because back in 2007 that's what we called it.We didn't really call it "Cloud" back then.It was called "Utility Computing."

Anyhow, back to the trend. So we got the levelof openness in source code and that's whywe now have open source businesses.I would now claim, that 15 years later againwe are now moving to Cloud and we take the final farewell to client/server.We are breaking the server side now as welland we are deploying our workloads in a way that'scompletely different from what we learned back in the 80's.It's again, a huge shift. It's disrupting everything.

New vendors are emerging, old vendors are strugglingand shrinking, and again there's a new level of opennessthat's emerging. I believe it is APIs where we seethe openness today.I think it's so early that we haven't really seen it play out.

For hardware, the name of openness was x86 — the architecture that then everybody started using. With open source, we had the licenses, GPL licensesand then the Apache license.For the API of today we haven't agreed on a completeopenness yet, but we can see how the innovationis happening on an API level. Whereas ten years ago,many of you, or whoever then were building things,were looking at source code. Now to get stuff done,you look at APIs because you have so many differentthings you need to work with.

MySQL grew on the notion of the LAMP Stack.Every website of any size or fame ran on the LAMP Stack.Google, Yahoo, Facebook later on, MP3.com,Wikipedia, all of those.And LAMP Stack was Linux, Apache, MySQL, PHP, Perl or Python.Today, in your applications you have many differentdatabases, many different languages mixedin one application, set up in one workload.And the question is more about the APIs.

This goes a little bit beyond the topic of tonight,but I'm throwing it out to you so that you can tell me: If sort of my generation built open source businesses,what kind of API businesses will there beover the next ten to fifteen years?I don't know. But you may know because you arethe ones building it. You are the Linus Torvalds-es of today.

If we then focus on open source softwares and say,"How do you build a business?What kind of business models are there?"

I believe that there are four types of playersthat you need to be aware of and they are partlyoverlapping and you can belong to more thanone of them. We have a big group of end userswho produce free and open source software.

FOSS stands for Free and Open Source Software.You have end users who use it, who are customersand users of it. Then you have vendors who produce itlike MySQL was, like Eucalyptus is.And you have foundations who produce them,like the Eclipse Foundation, the Apache Foundationthe Linux Foundation, the Open Stack Foundation,and so on. There is the Mozilla Foundationwho are building them.

It has meaning for the business models in that, in the closed source world it doesn't look like this.If you think about source code that's closed,there are practically no foundations for closed sourcedevelopment, collaborative development.And there are practically no end users who produceclosed source software and give it out to others.In the world of closed source softwareyou have vendors and you have buyers and that's it.But in the world of open source you have a muchmore dynamic environment and it's importantbecause the end users produce a ton of open source software.

If you are aiming to become a successful,profitable, fantastic open source companyyou must know that there can be software coming outof end user organizations that will affect your business.In good or bad.

Take Facebook, they needed a simple, scalable,powerful, reliable storage so they developed Cassandra.What happened to Cassandra?Facebook didn't need it anymore.Already from the beginning they open sourced it,gave it to everybody. Now we have a company calledDataStax that commercializes Cassandraand further develops it.For DataStax that was a fantastic starting pointfor a business — to take an existing product that hadbeen developed by somebody who really needed it. They knew it was a useful product. For them it was an opportunity,but for others it can be a threat.

When you are developing some absolutely amazingsoftware and you have five developersor eight developers, and suddenly it turns outthat the big end user organization is developingsomething similar and they have no limits ontheir resources, they can have 100 developers working on it; you must think about what kind of codeyou may get out from those end user organizations.

You could look at big data which you can traceback mostly to Hadoop, and you can trace Hadoopback mostly to MapReduce, and MapReduceyou can trace back mostly to Google who developed and perfected the algorithm.You saw several end users there. Googleand then Yahoo developed it, and now Hadoop is a project of the Apache Foundationand we have a number of vendors building a business on it.

This has remarkable influence on the ecosystemof open source software in a way that doesn't existin the closed source world.

I see it as the power of open source. Because we havealways said that the majority of all software developedin the world is developed by users, not vendors.In the closed source world you don't get accessto the productivity of end users.

Looking at open source softwares particularly,this is a fact that is probably useful to youif you are thinking about business models,many people don't care about it anymore.We talk about FOSS, Free/ Open Source Software,but if we really are strict there's a difference betweenfree software and open source software.On the left, I have Free Softwarewhich most typically is GPL software.Software where the license insures freedom.It gives freedoms to you as a user, but it alsorequires that the freedoms are maintained.

On the right-hand side, you have Open Source softwarewhich is open for all, but it also allows you to close it.So here we come back to the famous clauseof the GPL license, the reciprocity requirementwhich says, "If I am open, you need to be open."So software that comes under the GPL licensecarries with it something that other peoplecall a virus. I call it a blessing because I thinkit's great if all software becomes open.

It practically says that if you are distributinga derivative work — so two D's,Distributing Derivative works — they have to be licensedunder the same license.If you don't distribute them or if they are notderivative works, you're fine, you don't need to shareanything. But if you distribute derivative worksthen they have to be under the GPL license as well.

This is a very powerful constructthat Richard Stallman and others came up withcalled copyleft which insures that the openness persists.There are huge debates aboutwhether that's good or bad.

Some people say the open source software is morebusiness friendly because it puts less requirements on you.Other people say, no, we must insure openness,because otherwise it will not continue and persist.

Take an example: How many of you have Apple laptops?Is the operating system open for you?No, but what was it originally built on?The BSD operating system which was open source.But BSD was licensed under its own licensewhich didn't require derivative works to be open,so Apple could take it, modify it, add their own stuffand keep it completely for themselves.

If you take Linux and modify it and create a new forkof Linux it must continue to be under the GPL license.That explains the power of Linux — you can take it,you can do anything you like with it, you can fork it,you can modify it, but it must always remain GPLwhen you distribute a derivative work.It ensures and maintains the openness.

Examples of GPL software for each of those groups,there are tens of thousands of examples,but some of the most famous ones are: Linux, Java,MySQL, Asterisk, the PBX software.Eucalyptus is GPL licensed.And the other examples of permissively licensed onesthat have the Apache or the MIT or the BSD licenseor one of the other permissive licenses, are: Apache, everything under the Apache Foundation, the Open Stack Foundation, the Cloud Stack,which is part of the Apache Foundation and so on.

With everything I say here, there arevariations and exceptions. A variation of the GPL licenseis the AGPL license, the Affero GPL license.It takes the requirement on openness one step further.MongoDB is probably the most famous exampleof an AGPL license product.

Where I previously saidthat GPL says, "If you distribute derivative works,then it has to be open." In AGPL you don't even have to distribute. If you make public use of AGPL softwareand you have made modifications,those modifications must be open as well.

Then you have Android which is a mix of GPLand Apache license which is perfectly alright,you can mix the two — you take the Linux kerneland the stuff from Linux and there's Apache licensestuff built around it, perfectly okay.The GPL part will always have to be kept openand the Apache parts don't have to. On the other side, variations and exceptions, there is the BSD license, the MIT license. There's a long list of open source licenses.I simplify it for you by talking about the Apache licenseand the GPL license, in reality there are tens of them.But those are the most prominent examples.

Then you have really extreme ones like SQLite,an amazingly popular, lightweight databasethat Richard Hipp developed and that he operatesand develops in his own little company.He decided to put it in the public domain.All the others when they come under an open source license,they are still owned by somebody.And you as a user or a company, when you use themyou must explain under what right you are using them.You say, "I'm using them under the right of the Open Source license."

But Richard Hipp put SQLite under the public domain.He says, "This is owned by everybody and nobody."There's absolutely no restriction because he'salready made it common property of all citizenson this planet or the whole universe.There are exceptions like that.

Broadly speaking, there are two types of open source software: The free software,which has a reciprocity requirement in it.Open source software which doesn't.

We can have debates about the meritsof those two groups for the whole evening.I think both of them are needed and it dependson the usage and the purpose of your project.

When we come to making money on open sourcesoftware, at MySQL we had about 15 million usersof our product and 15 thousand paying customers.That was likethe needle in a haystack. In a haystack of a thousand userswe would find one paying customer, and we made it work.We had a business that produced cashand paid for our expenses, but that'sat the extreme end of open source software.

We always debated on how to balancethe act between who should pay and who shouldn't?We boiled it down to a principle which is hereon the slide saying:

There are always peoplewho will spend any amount of time to save money, and there are other people who will spend moneyin order to save time.Typically in your life, or in the life of a company,you go from one to the other.

"Why does Facebook run on MySQL?"I asked Mark Zuckerberg a long time ago.

And he looked at me and said, "Marten, I grew up on MySQL."

So when he was 15 or 14 or something, he startedusing it, so of course he would build Facebookon the LAMP Stack.They were a big non-paying user for the longest time,and one day they came to us and said,"Our business is growing so fast, we have so muchto do. Why do we have all these people heremaintaining our MySQL databases? Could we buy a support contract and the servicesfrom you to keep the site going?"

Then they became one of our biggest customers.They shifted from these mindset of saying"I'll do anything with my bare hands to save money,"to "I have other more important things to do, so I'll pay money to get it done."This is a philosophical principle,it's not a business model, it's not a licensing term.But it guided us and it has guided many open sourcecompanies in figuring out how do you figure outhow to make money and who you think shouldbe paying for your stuff.

Because if you can't live with the fact that 999out of 1000 of your users are not paying you anything,you will never succeed.You must love those who are not paying you anythingas much as you love your customers.

We said that! We said, "We love you, we really love you,but until you pay us money, love is all you get."Meaning if you need support or anything else,then you pay us.And you must also know that no matter how muchcustomers love you because they said,"I love your product it's fantastic!"They don't love you as a vendor.They have no mercy with you. If they can get awayby not paying, they will.They can be the nicest people, the most fantastic company. There's nobody who will pay voluntarily.

We had one customer at MySQL who paid us voluntarily.Craigslist.So Craig Newmark sent us $10,000 saying, "I don't find anything to buy in your offerings, but I love you guys and I would like to support you, so here's $10,000."And that was thereminder to usthat we had no good business model. We had to figure it out and we had to build that which we called hard differentiation that said, "If you don't pay you get this, if you pay you get this.You can take it to your boss, because it's yourboss who is the problem."

When you sell, it's never a problem of sellingto the person you're selling to;it's that person who has to go up to the budget bossand say, "Boss, I just paid $50,000 for something I could have gotten free of charge."You can't do that.You must say, "I just paid $50,000 for something we uniquely get as a paying customer." You must build that differentiation.

You must be comfortable being on both sidesof the fence. If you don't like your free users,you won't have a business.Then you shouldn't be open source.You should be a closed source vendor.So, do it only if you are really committed to being open.

I was checking through some old documentsand I found an article written by somebodya few years ago that had a list of 17 open sourcebusiness models.That again is a description of the trauma of open source.We struggled for so long to figure out how tomake money and in some cases we couldn't. And there are companies who didn'tand who went out of business. I've again tried to simplify it for youand I believe that there are two broad modelsfor building an open source business.

The one is the foundation-originated modelwhere you have some non-profit organizationor place that spits out code all the time.And then you have a set of vendors around themwho take the code, turn it into a productand sell it to their customers.Linux is the best example, we have Kernel.org,we have Linux Foundation producingthe main Linux Kernel and then we have distrosturning it into products and selling them.But they all say we sell Linux.There's Red Hat Linux, there's SUSE Linux,there's Ubuntu Linux and so on.That's one business model.

The other business model is the singular onewhere the open source project and the open sourcecompany is practically the same thing.I would say that MySQL was the prime exampleof this. We had the Swedish company MySQL AB that had the whole project in its hands and it maintainedboth MySQL.org and MySQL.com.And there are many others, MongoDB is such a thing.Eucalyptus is following that. I have a lot of namesthere on the list, but it's a one-to-one relationship.Of course, others can fork it and they do.

Take MySQL, there are forks of MySQL sold by others.I'm not saying that it's strictly a singular, I'm saying it'sbasically a singular model.

I've now learnt only later that when you do makethat choice you're sort of forced to a certain business model.

In the foundation-originated one, and here Hadoopwould be an example, there are many Hadoop vendorsbut they draw the Hadoop code originally fromthe Apache project.In the foundation-based model, many differentiatefrom each other through the binaries.

Take Red Hat. Can you get access to the binariesof Red Hat Enterprise Linux?No, you can't. But it's open source, why can't you?Well because they have perfected their modelin a way that their best binaries are given outonly to paying customers and if you want somethingfrom Red Hat that doesn't cost you anything,it's called Fedora and it's different binaries.

When you have that common platform called Linux,the way they differentiate is through different binaries and the fact that they are tested, certified, trustworthy,they're maintained, they have security fixes and so on.When you're a singular vendor, you can't do that.At MySQL if we had said, and we tried but it failed, that the best binaries are for our paying customersand our community gets slightly worse binaries,we wouldn't have had a community.Because nobody else was providing it.So at MySQL we had to give our best binaries,the best executable to everybody.

If you give that to everybodyhow do you make money?That's where I think the only viable modelis to have commercial add-ons that you give onlyto paying customers.Some of you are saying,"But Marten, we can sell support can't we?"Absolutely you can, but that's not a scalablebusiness model. I'm assuming you're buildingscalable businesses.

It's great if you build nice businessesthat don't scale, there's nothing wrong it. But I'm talkingabout scalable business models and therefore,I believe you must build a commercial differentiation.You see that Cloudera has that,Eucalyptus has that, MySQL has it. If you goto Acquia, because you're a Drupal user, Acquia in their commercial offering has stuffthat you don't get if you are not a paying customer, features and characteristics of the product.You must have some sort of hard differentiationthat comes on top of it.

The open source product is fully-fledged,ready-to-go, mission critical, capable, stablemature, tested, all of that.It's an amazing platform. But it lacks somethingthat appeals to enterprises, something that appealsto those who are ready to pay moneyin order to save time.I think this is how it's happening nowin terms of business models.As always, there are always exceptions.

Take Mozilla Foundation, how did they make money?Selling ads. Well they gets tens of millions per year,maybe a hundred million per year from Googlefor having the Google toolbar in the browser.Then Mozilla isn't technically a for-profitorganization, so you could say, "Is it a business modelor is it just a funding model?"We could go deep into those questions.

I'm saying, broadly speaking, generally speaking,if you are building an open source businessyou choose between the foundation basedwhere many companies draw from the sameupstream place or the singular where it's one company with one product.

Like NGINX is a new one, for the last 15 years,we've all used Apache as the web serverand now slowly but surely, and maybe not evenso slowly, we're seeing the market share of NGINXgrowing in the world of web servers.Because NGINX is more performantthan plain Vanilla Apache.The company NGINX is nowbuilding a business around it.

So you have those two models,and you have to have hard differentiationthat you can sell. I have gone through allthese tests and experiments with MySQLand I've taken all the flack that you can getfor doing it. Wherever I go, there's alwayssomebody who thinks that it's bad what we are doing. Because we are building a business, we have to adda closed source component. We're doing somethinglike that.

I believe that's the only way to buildan open source business.And you must have the courage to standin front of the crowd who's demandingthat you give away everything for free.

Because customers have no mercy with you,they don't mind if you don't make money.They have demands and you must havethe courage to say, "I do all of this for you, but thisI need to make money on."I think you have to have that sort of a mindset.

You can also say that commonly,if you are building a product and nobody is againstyou, if you have no detractors,well then you are not really being popular.A measurement of popularity is that you havedifferent groups and some of them criticize you wildly.That's a sign of success in a way. But as an open source vendor you have to havevery thick skin for all that input you have.

Once you say you are an open sourcecompany they will assume that you are readyto share everything, your thinking, your plans,your finances, your product, your code, everything;and they will have a sense of entitlementto what you are doing. It's sort of true, and you have to live with it.

At MySQL we had so many people who came to usand said, "We made you successful."Like, "Okay, but we've been working hard herefor ten years and we did all the code, coded everything and tested everythingand fixed all the bugs and you just helped ushere and there."No. They believe and sort of know that they made ussuccessful and it was true.MySQL couldn't have been successful withoutthose passionate users all over the place.

Like once when we were in Rio de Janeirowith the MySQL founder. He had a MySQL t-shirton him and we were down in Ipanema Beach. And you would think that young men on Ipanema Beachwould be focused on something other than middle-aged men. But, once they saw this MySQL t-shirt and realizedwho it was, they were just all flocking around him. They forgot all the fun stuff and all the girlfriendsthey had there because it was so amazing to meetthe founder of MySQL. It sort of shows this weirdrelationship that they completely buy into itand are passionate about it, and then they say,"It's partly mine, I have an entitlement to it."You must live with it.

I wrote something about the foundation-originatedbusiness model. I wrote, "Winner takes all."Then I thought I had to write it on the other side as well.And this is a little bit disturbing, but I sort of grew up in the open source businesswhen there was a number of Linux distros.Turbolinux, we had Mandrake, we had the one in France,we had SUSE, we had Red Hat, and so on.Today, 90 percent of all money that's made in Linuxis made by Red Hat, so you can say it's a winner take all.

Then you say, "Okay, but now we have Android. Everybody is building something on Android."Well guess what, 95 percent of all profitsin the Android world are going to Samsung.Samsung is the one that makes real money on Android,and Google on their ads, but actually using Android.

I'm not sure it's completely true, but there'sa trend of winner takes all in that space that can bea little bit challenging for those who knowthat by definition there are many vendors there. Long term it seems that only one can really win.

Then I was thinking about the other side,the singular ones. There it's also winner take all,because either you win or you don't.If you are MongoDB then, if the open source productis successful the company will also be successfulat the same time.So you could say it's a winner takes all.But what then when there are different vendorsin sort of the same category? There I don't think we have an answer yet.We have a traditional example of JasperSoft and Pentaho — both in practically the same space, both are open source,both are doing well, neither is killing the other.So there you see a healthy ecosystem.

Or you could take the new NoSQL Databases,sure MongoDB might be the biggest one,but you have CouchBase, you have Cassandra,you have Neo4j. They are smaller and largerand they have different styles, but in the new worldof databases there is a healthy ecosystemof different players that seem to be doing well.I'm hoping that would happenbecause that gives more hope to all the entrepreneursin that space.

If you are starting an open source projectand if you decide to turn it into a business,here's some key things to think about:

First, why are you producing open source code?Some share it to make it technically even more viable.Facebook when they shared Cassandra, they thought,"Hey, if others start using it, it will evolveand we will benefit from it."Netflix open sourced Chaos Monkey and Asgard,Edda and all their cloud management toolsfor the same reason.So there's a lot of good stuff coming out from users there.I don't need to make money, I just want to insurethe longevity of this product.

B) is build a business on it, like MySQL.MySQL always wanted to build a business. Always.The purpose was always to build a business.And there are many others, MongoDB and so on.They are building a business.And then there is C) grow and install basefor some benefit or monetization opportunity.

When Google came out with Android they were notplanning to make money on Android. They were planning to make money on thosewho make money on Android.Meaning when you sign the Open Handset Allianceand you start using Android in your phones,you bind yourself to using Google services,Search and so on, and that's business for Google.

You can build an open source productthat indirectly serves you. This is important to knowif you are in that space because you can haveasymmetric competition from somebody.You can have competition from somebodywho doesn't have to make money on what theyare doing because they are open-sourcing it.So you need to know why you are doing it.

Then you need to decide on what the governance is.How do you govern the roadmap?Meaning you have a great open source product, who decides what happens with it, what features getput in and what features won't?Who decides on what contributions you'll takeand what you won't take?

There are many models here and the great thingwith open source is that it has figured out waysto handle it, but it's a choice you have to make.

In a company like MySQL or in Eucalyptus, it's easy.We have a hierarchal organization, at the endof the chain is a CEO and he can make decision.You can get very fast road map developmentand you can be customer-focused,you can do a lot of that.Others take a different approach. Take Cloud Stack,which was a company like Eucalyptus,now they donated the code to the Apache Foundation.Which means governance of the roadmap is nowin the Foundation's hands.

When Citrix, from where it came, want to implement a new feature,they go to the foundation and they have asteering committee that votes about it.They've given up control of their roadmap,counting that the support they get is more valuablethan the control they lose.

It's for you to decide what you want.And some of you are passionate founders,and you will never give up control of anything.Linus Torvalds is like that, he's not buildinga business but boy 20, how many years is it —22 years after he started the project, he's stillthe guy who makes the ultimate decisionson what goes in and what doesn't.He really is passionate about his project.

You have to know, is fragmentation good or bad?In Android we have fragmentation. People say,"Is that good or bad?"In the Open Stack project there's fragmentation,is it good or bad that they are mutually incompatible?Some say it's good because it expands the ecosystemsome say it's bad because it disables compatibility.

What does community mean to you?Community is an overloaded word,it can mean anything.Community can mean just people who use your product.Or maybe it's those who build your product,or maybe it's the business partners who are using it.Or maybe it's those who are blogging about it.

Decide what kind of community you like,because there are different ones.Again MySQL had a total of maybe 100 contributorsover its lifespan of code and we hired many of theminto the company.That part of the community was relatively small.The community of users was enormous and still is.And the community of those who build an add-onto MySQL was enormous. You have different ways of doing them.

Then finally, and this is perhaps the mostremarkable insight I've made about open sourcelicensing models and governance,it's very much about branding.

This has to do with the fact that an open sourcelicense stipulates nothing about the name.If they do that, it means the name isn't free,it is protected by copyright.

So, if you use Androidand you take it and fork it and you refuse to signthe Open Handset Alliance, you're not allowedto call it Android, you must call it something else.You could use the code because the code is open source,but you are not allowed to call it Android.

That's why Amazon took the Android codeused it in their Kindle Fire, I think,but they can't call it Android because they didn't signthe Alliance that would have forced them to useGoogle Services.If you take Red Hat's code and distribute it,you can do that, but you're not allowedto distribute anything that shows the brandor the logo. The name Red Hat Enterprise, Linuxand all the marks that go with it, the visual,the JPEGs and PNGs, and the pictures,they are all proprietary.

I'm not surethe open source gurus who inventedthe licensing models and governance 20 years ago thought about this, that actually brandingbecomes the control point of how it works.

Similarly, the Apache Foundation had set a smart rule. They say whatever is in the Foundation has a nameand those names must not be used commercially.If you use Hadoop, you can say this is builton Hadoop, but your commercial productcannot be called Hadoop.It has to be called Cloudera or Hortonworksor MapR or something.Branding actually becomes the way you controlthe behavior of the ecosystem.

We had that in the MySQL where we are holderof the brand, both the commercialand the non-commercial, and we were thinking,"Should we split them up?"Because we're looking at Red Hat saying, okay Red Hat, they took the Red Hat namefrom the community and turned it commercial only.And the non-commercial name is Linux or Fedora. We asked ourselves at MySQL should we alsosplit up the branding and have one namefor the open source thing and one namefor our commercial offering.And we never believed it was the right thing to do,but we spent a lot of time thinking about it.

We had our challenges either way.The fact that we had them together gave uscertain challenges, and also certain benefits.So branding is more important than I realizedwhen I was in the middle of it.

Here is some further reading if you are interested. The one up there written by Matt Asay is an interviewwith me that he did just a couple of weeks agoso there's more about my thinking about open source.Feel free to use them. I think the slideswill be distributed to you, that's why I didn'tshorten the URLs. I thought you would get themor somebody would take a picture or something.

So with that let me stop here, I'm ready for questionsand discussion with you.You'll find my Twitter handle there and my email address, if you would like to get in touch with me after this. Thanks for listening actively and intently,and now I'm ready for your questions.

Q: When you have a commercial product, what do you do if someone contributes a similar product that is open source?

A: A good question, when you have commercial add-ons,what do you do if someone contributes an open sourceproduct that does the same?We have decided to just welcome it; we did it at MySQL,and we are doing it at Eucalyptus.I'll give a Eucalytpus example.

When you run Eucalyptus on Linux and KBM, you neednothing else and you can run massive clouds on that product.If you need to run it on VMware hypervisor,you need our commercial plug-in.Now we think if you're paying VMware all thosemillions you might as well pay us a few thousandbucks as well so we think it's fair.And we also say, "Or then you write that plug-in yourself. If you think you can do it, then go ahead."Because the platform is open and the API is openso anybody can do it.

That means that if somebodywould contribute a competing component we would welcome it.Because we believe that, for those who do go throughthe work it will have benefit for them. For most customersthey'll say, "Yeah I know there are open source alternatives.I would like to have the one which comes from Eucalyptus Inc., which is tested and proven."So we welcome those happenings.

That's whatI tell customers, I say, "We have these commercialadd-ons but you can develop your own."We saw it at MySQL where we developeda management tool that you paid for to managelarge MySQL installations and many others developedtheir own commercial ones and non-commercial ones.And they existed in the ecosystem.

Of courseI had sales people who came to me and say, "Marten, we must crush this competitor to our commercial product!"

I said "No, we don't have to crush them, this is partof open source. There's always an ecosystemof small players out there. They serve to demonstratethe openness and the lack of lock-in."

And the majority of customers will always cometo the main vendor and say, "Okay, I understand I canget it cheaper or for free somewhere, but I wantto deal with you guys."

You have to have that conviction, but you can easilyget tangled into sort of distrustful relationshipsif you don't go all in with this.

Q: What are the advantages or disadvantages of having a singular product with multiple brands?

A: The question was what was the benefitsand disadvantage of having one brand for both sides.If you go to a branding expert who knows nothingabout open source and you say,"Should I have two brands or one?"They would say, "One, of course!"

People have a limited attention span,they can't remember two brands. Don't make itcomplicated for them.

We had huge benefit of thiswith MySQL because anybody who said "MySeQuaL"or "MySQL", it came to us always, it was always ours.So we saw that benefit. But we had the problemswhen let's say somebody built something on MySQLor forked it, and wanted to call it MySQL or wantedto call it the MySQL Administrator. We had to go to them and say, "We know you love us,and we know you did it with good intentions, but the naming convention 'MySQL something' is ours. You can call it 'Administrator for MySQL' that's fine,but it's only us who can call it 'MySQL Administrator'."

Sometimes when we did that we gotvery negative reactions because they say, "What is this, I'm helping you and you are ungrateful."You have to deal with them softly and firmlyat the same time.

I forgot to say that if you go into open sourcebusiness models you are asking for a lot of trouble anyhow,so you might as well get used to it but you're alsoasking for the most powerful disruptive force in the world.It's well worth it in my mind.

Q: How much code was contributed to MySQL?

A: The question was how much was contributedto MySQL or MySeQuaL. It's amazing how little it was.When I joined in 2001, 90 or 95 percent of the codewas written by one single man.And over the next eight years when I was in chargeof that place, like I said I think we had a hundredcontributors. In terms of percentagesor meaningfulness, it wasn't meaningful.

I've told the world, I myself am of the firm beliefthat when people say open source they easily thinkabout contributions."Oh that's what open source is about. Everybody is contributing and everybody is happy."That's not true! Open source is not necessarilyabout contributing code. There are many other thingsthat you do in the community: you use the code,you test the code, you write add-ons. The actof contributing has both benefits and drawbacks.

We all know, I think we all know, that some of the bestdesigns of the world are made by small teams.Steve Jobs said, "Small teams of A-players will runcircles around large teams of B and C players."And it's so true.

If you're building a monolithicproduct like MySQL with huge demands on concurrencyand synchronicity and stuff, you should keep the teamsmall to make a fantastic engine.Then everybody else is building around it.I happen to believe in that model. But we haveother projects like the Apache Web Server wherewhen you go and say, "Who was the chief designerof the Apache Web Server?"They all point at each other.You know you can talk to the founders and they don'thave a view of who the main designer was.They say, "Well we did it together."

You have examples of projects that are very successfulwhere there isn't strict design governance, but I happento believe that the most artful things must havea core philosophy and maintaining a core philosophyis very difficult if you don't have a chief designerlike Linux has Linus Torvalds, like MySQL had and has,and like others have that.

That's why to me, if I could choose for an open sourceproject, I don't need code contributors. I need peoplewho do something with the code. That's more valuable. In my mind.

Q: How do you determine what to keep closed source?

A: Right, so drawing the line between what's paid forand what's not paid for is really difficult,and whatever you do you will regret it. And if you do nothing you will regret it even more.So welcome to the club.

I think we developed a goodprinciple at MySQL which we are now using at Eucalyptus.We said, "We believe in open source.We will do open source as much as we can." We also believe like with food, food without salt,may not taste that good. Maybe it's healthyto not have salt, but add just a little bit of saltand it's amazing. Similarly we think that with an open source product you can addcommercial plug-ins that add something to themwithout being the major part.

We always said that the main open source productmust be fully ready for mission-critical heavy use.You mustn't take away something that's vitallyimportant because then you are questioningand second guessing yourself and your ambitions.You have said that open source is fantastic,so you should show it.

But then you go beyond thatand say those who use it, some of themwant convenience, some of them want assurance,some of them want ease-of-use,some of them are in a commercial settingand you find those borderline cases wherethey are actually looking for a reason to pay.We had many customers who came to us and said,"We would love to pay, give me something I cantell my boss that I'm buying and I will buy."It wasn't a difficult value proposition at the endof the day, you just had to have a clear distinction.

If you listen to Mike Olsen, he was interviewedsomewhere recently, he said exactly the same thing,maybe even stronger. Mike Olsen has an even longerexperience from open source than I do.

It's a constant debate and you can move thingsfrom proprietary to open, you can't really movefrom open to proprietary. That's like shooting yourselfin the foot.

But you can move the other way, and you can build new things over timethat are useful but that are not essentially neededfor the production workload.

Q: What advice do you have for a cloud-based service built to run on open source software?

A: Okay, yeah we have an example.Amazon, AWS RDS is MySQL as a service.Do they pay anything to the owner of MySQL, to Oracle?No.Is it bad?Maybe somebody thinks it's bad, but the oneswho created the product, meaning us whenit comes to MySQL, we decided to make it open sourceand we have to stand our choice and our selection.

I don't think you have to worry. You're justmaking use of the license the way it was supposedto be made and if the originator doesn't want you to do it,he or she should have picked a different license.I don't see any moral question there. You use it under the contract that has been given to you.

Of course if you do build, if I were now to build,if I start a company to sell MySQL as a service,I would absolutely go to Oracle and say,"I'm going to do this, I would like to have a commercialarrangement with you so I get quick bug fixes, I get your help."I would actually establish a business relationshipbecause I think it makes sense.

I don't thinkthere's an obligation moral or otherwise to do so because those of us who have produced open source codewe exercised freedom zero, the freedom to setthe license. The license then dictateswhat can be done and what can't.

Q: What defensibility and strategic concerns are there for a cloud-based service run on open source software?

A: Yeah defensibility is difficult if you are notat the core of the development because we all nowknow that there's a lot of software in the world,and owning the software is just one partof your business. You have to show that you candevelop it and that you can keep it competitive.

I sort of think, yes you can drill into allthe questions and you get these weird, sort ofdifficult questions. But at the end of the dayit's very simple. If you do a great job and you innovateyou will have a business and if you don't, you won't.

It's easier if you own everything, if you have controlof everything and you own the brand name,you have much more control. That's why MySQLbecame such a valuable property.MySQL was acquired for a billion dollars.Postgres has never been acquired by anybody.Technically Postgres is as good as a productas MySQL. Some people think it's better and that's fine.

MySQL became a business wortha billion dollars because there was a concentrationof brand and skill, and innovation, and marketingand sales, and leadership and technology,and everything in one place.It does add up, but there are components. You can go either way. There arecompanies who are building businesses on MySQLwithout owning the code.

Q: How do you price support contracts for free software?

A: Right, how do you price support contractsfor free software.

I'll start by saying I don't believesupport is a scalable business, so I don't knowhow to price just support.

At MySQL and at Eucalyptus we price subscriptions.An annual fee that gives you everything you need: the features, the support, the legal indemnification,the priority with consultants, and so on.And we price it, we don't know, somewhere, and then we look at the marketand see how it reacts and we go up and down.

I'll give you a wonderful example though. Our general counsel at MySQL, who would think that a lawyer would come up with it,but he's amazing. He came up with the bestmarketing idea. He said, "We should sell somethingcalled MySQL Unlimited."And everybody said, "What is that, we can't do that!"Because the idea was to sell an unlimited licensefor a fixed price, as many servers as you had.We priced it at $40,000. We wentout to the world and said, "If you pay us $40,000 per year you get an unlimited subscription to MySQL.You can have one server or a million servers and we willtake care of you."And $40,000 is the priceof Oracle Enterprise Edition on one CPU.

That whole marketing trick was so powerfulin the industry, that was the best thingwe ever did with pricing.Then in reality we started building tiers into it,and said, "Okay, the 40 thousand is for companiesup to 400 employees and then it is 400 thousand."And we built a great business around it,nobody was disappointed, it was still a huge saving. Our fear that it would cannibalizeour support ability didn't happen because in realitycompanies don't grow their installations that fast.If somebody really has a huge number of MySQLservers, you want them as your customer anyhowbecause they're a great reference.

We had a lot of pricing power becausewe had a business model and we could play aroundand test the pricing in the market. We didand it worked well.But you must have that courage to do some testingand experiments and apologize when you priceit incorrectly, and come back and price it in a new way.