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Acquisition of Open Source as a Tactic
Ben writes with these thoughts: "It’s possible the companies could use the model of tiered support to generate revenue. For example, purchase a one-year contract of support for a single instance of mysql at $10K – renewable. Sure you can use the db for free but if you need pro support you’ll have to pay. They’ll have experts that have combed through all the code and know everything there is to know about the various versions.
This gives small companies and chance at professional growth without killing them with fees in the beginning. They can then upgrade to pro support level that is suitable for them.
Taking this a bit further, if for example the development ‘got away’ from them (not likely in a well managed solution’), they always have a closed db system and could upgrade their customers to that version instead.
I tend to think that open systems (GPL’d and derivatives) will be equally popular because of the number of programmers constantly reviewing code, the reliability, the initial cost being zero, and allowing varying learning curves for upstarts without the cash outlay.
This could be a smart move for these companies. Time will tell."
…and Billy writes: "Interesting segment you posted today on open source. As a vendor that provides tools for open source as well as commercial databases, I can share with you some things that I have observed.
First, your assumption that the goal is to move the users to the paid version of the database is a bit ambiguous. What do you mean by “paid”? If you mean a branched version that has more features than the pure open source version, then I agree that is a very tough strategy. Often the reason customers have moved to open source in the first place is for “good enough” functionality at greatly reduced cost of ownership. But there is another way to move to the “paid version” and that is to move people to their support offering. Such was MySQL’s strategy, pre Sun acquisition. Now, they did appear to muddy the water a little when they started to do a little of both, i.e. charge for their support offering *and* start adding functionality into the commercial version that was not in the open source version, but that’s another story altogether.
Second, often the goal isn’t to build a profit model based on the product itself. It’s about getting the community and your product adopted en masse. Some believe it’s a lot easier to make a profit once you have a couple hundred thousand customers using something you make for free, rather than trying to start acquiring paid customers from scratch. And remember, the goal of many of these companies is profit via acquisition or IPO, not direct profit from the product itself. In this regard, MySQL certainly was faithful to its investors when it completed the $1B acquisition with Sun. One step further, Oracle just bought Sun partially to get at that Java community and own the whole stack. They put some internally-calculated dollar value on the community, even though that community doesn’t directly generate profit in the traditional sense.
Third, it’s not uncommon at all for an open source vendor who has reached critical mass to start extracting material revenue largely hidden from the public eye in the form of OEM arrangements. To use MySQL again as an example, there are a lot more apps out there running an embedded MySQL database than you probably realize. Why? Because it was free, small, fast, and easy to learn and use when folks where playing around with prototypes for new products. And the reason they knew about it was because of the market dominance. One feeds the other."
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