Has Open Source Failed Commercially?

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I just read in Business Week‘s Technology at Work Blog, a post by Peter Yared, The Failure of Commercial Open Source.

Yared argues that companies aren’t making money from open source, because:

  1. Open source only works for commodities (e.g. operating systems)
  2. Open source is as expensive as proprietary software to develop
  3. Selling software is miserable
  4. Customers are switching to software as a service (SaaS)

He argues that open source is only successful when it’s free and supported by a broad community of developers, and argues that only a handful of commercial software companies based on open source have had “liquidity events” (did I mention this was in Business Week?).

I replied (perhaps into the ether given their moderation):

We are operating under a MySQL-like model, but with even more restrictions on our source code. We have no marketing or sales department (but then we’re only 2.5 people full time with an additional 0-2 contractors at any given time). A paycheck and a job I love with lots of flexibility is the only “liquidity event” I’m looking for.

It helps having the source out there, even if it’s not covered by an official open source license, because then developers can kick the tires, go beyond the doc, and help fix bugs. And users can try it and inspect it before they buy.

We don’t need help patching the bugs, but we do need help finding them. As much as we unit test, bugs wind up in production code, and users find them. When they report source code locations and suggest patches, it really does save us time.

We’ve dealt with several Fortune 500 companies, but only the U.S. government has put us through the “approved vendor” mill, and only the U.S. defense department was ever interested in security audits (and then mostly to make sure you weren’t sending packets out over the net).

A big issue for sales is that companies want indemnification against lawsuits, mainly for patent infringement.

Are SaaS businesses really taking off? All the big companies we talk to are too paranoid to let their data offsite.

8 Responses to “Has Open Source Failed Commercially?”

  1. Dan Says:

    On SaaS: Can the push to SaaS not be interpreted as result of the success of Open Source, not failure? It feels to me like SaaS is being foisted on us, to achieve new levels of lock-in. As you imply, it seems top down, not bottom up. The traditional software lock-in is made progressively harder given the FLOSS alternatives.

  2. David B Says:

    Interesting to hear about your experience and business model at LingPipe. Would be interesting to hear more!

  3. Ken Says:

    Once everyone can download a piece of software then the vendor is mainly in a support role. This means that the choice for users is to use the vendor, do it themselves or use a third party, so unless the vendors familiarity with the software offers some cost advantage, there will be a cheaper alternative.

    LingPipes model presumably works because it is a market where commercial customers are not going to misuse a free license, so need a paid license. David B see http://alias-i.com/lingpipe/web/download.html

  4. lingpipe Says:

    Ken’s exactly right. Same as the MySQL model in that respect, which also had a dual license. You could negotiate a license with MySQL for rights to include MySQL in a non-open-source product that you distributed. They could do this because, like us, they owned their whole code base. That is, they didn’t base MySQL on other GNU packages. Similarly, there are no dependencies other than Java for the LingPipe jar.

  5. Jochen L. Leidner Says:

    It is my experience from talking to management in various companies that people have a hard time understanding dual licensing and open source in general.

    In my view, open source is a great model to outsource/”crowdsource” maintenance work (in addition to the “more eyes see more” bug scrutinizing function on the technical side). Whether or not it works for niche markets depends on whether you find enough buyers (if you’re on the selling side) and whether you find somebody who produces what you need (if you’re on the buying side).

    MySQL proved not only does the model work, it can even lead to an exit by acquisition from Oracle :)

  6. Raul Says:

    Let me first of all say that we admire your lib.
    We have considered in a few occasions using lingpipe for some of our SAAS products.
    Its licensing is a little more restrictive than any of the other libs we are currently using. I’m not saying it’s not the right model and if it works for you I think it’s great.
    I have several cases were the company would like to use NLP as a commodity but its not part of the core business and they can’t justify paying $9500 per production license. In many other cases just smaller devs wanna use it to make a few bucks with it in small apps or widgets.
    Some of these companies would be happy to pay for troubleshooting, extensions, development, help etc… but not for the library itself starting at $9500.
    As far as I know there are no NLP libs out there as mature as yours under a BSD or less restrictive license but you know it’s a matter of time.
    NLP although still an obscure topic and not easily understood by most programmers but is getting momentum and more companies are coming out with their own implementations.
    If your lib had a more open type of license you’d have a huge community jumping to contribute and clients wanting your consulting since this is much required for the new Semantic Web.
    Some companies like Google or Yahoo are actively developing in the NLP field and there has been rumors of them exposing their intelligence as part of their set of free tools or cloud type services.
    My guess and this is just an opinion is that lingpipe will slowly fade out unless there is a community behind it and your current license does not allow it.

    • lingpipe Says:

      Thanks for the thoughtful response.

      I think you put your finger on the real issue facing us and other packages: NLP is still out of reach for most programmers.

      I’m curious as to what the cases were that a company wanted to use as a commodity. If we could prepackage some functionality and sell just that, we could price it even lower than our startup license cost.

      We’re also open to OEM deals. That’s why we’re building plugins for Endeca.

      There are packages for things like CRFs, HMMs, and classification that have been around as long as LingPipe and have more open licenses, like OpenNLP, NLTK, and Mallet. There are also some nice recent packages for large scale classifiers, like Vowpal Wabbit, BMR, and SGD.

      • Raul Says:

        Thanks for the references, I check some of those out and since I’m no NLP expert they sound like a lot of work to learn or get into.

        Here is a common use case.

        With the growing sites offering social capabilities companies need to analyze user content extracting named entities out of arbitrary messages and text. A company may also decide to crossreference the NE with Sentiment detection to offer certain options as to what promotions, contacts, or topics to offer to their users. Each one of those companies is solving a core problem totally unrelated and not necessary involving NLP in the implementation but that could have been better implemented with lingpipe.

        The price and licensing is stopping devs from commiting to lingpipe as a lib and they end up implementing their own less accurate solution using lucene with some stopwords. The same apply for tagging and many other aspects that one can find today in social enabled sites.
        While most devs would preffer to have lingpipe open source running internally they would either come up with a workaround not using NLP for the task at hand or delegating to a “free” service like the Alchemy API or OpenCalais hoping that they can justify the cost of exceding the API limits once their volume is high enough.

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