Open Source Systems: Adoption and Impact

This paper is based on personal experiences in building a venturecapital backed Open Source company, starting in 2005. WSO2 is now a company with hundreds of customers including major brands like eBay, Boeing, Fidelity, Trimble, UBS, and many others. For example, eBay’s systems running WSO2’s servers handle more than 6 billion requests per day. In that time there has been a significant shift in the business models, approaches, funding and valuations of Open Source Software companies. 1 Choosing a Business Model The first challenge of creating a company around Open Source is choosing a business model. There are multiple options. You can create a company that mainly does support for an existing project, which is fundamentally a Professional Services company. This reduces the valuation of your company1, but is quicker and more cost-effective to get started. However, most companies aspire to be Product companies. Ten years ago the most popular approach for this was to use the GPL license and to offer companies a more “business-friendly” proprietary license to those who would pay. This model was used by MySQL. Since then a more popular model has emerged often called “Open Core”. In this model there are two versions of the product: a “community edition” that is licensed as Open Source, and an extended version that is proprietary. WSO2 actually did not choose any of these options: we chose to use the Apache License and only have a single version, which is completely Open Source without using the GPL license, and WSO2 maintains this approach to the present day. This approach does leave the possibility that people will use the full enterprise-class product without paying. But in return it simplifies the model: when working with a community; accepting fixes; and encouraging true partnerships with customers who become more willing to contribute to the codebase. It also creates a model where the success of the company is based on contented customers, not on license terms. 2 Changes in Open Source World In the ten years since we started WSO2, there has been a large shift in the perception of Open Source. It is both better understood and less hyped. There is much more casual 1 Industry standard valuations of Professional Services companies are roughly 2 – 3x revenue, whereas “Product” companies or companies with recurring revenue usually attract a valuation of 10x revenue.