There are at least four main business models for open source products:
Note: Github is specifically a massive winner of the Open Source movement. And it’s not Open Source. It’s enterprise SaaS.
Note: Some products - like Docker - created a new category (“containerization”) - quickly filled by the new genre of products like Kubernetes. There’s no discussion - as a business, it was not able to achieve its full potential.
I think you should make your company/project investable. However, when I’ve spoken with Gabriel Engel of Rocket Chat, he said, you don’t. I mean, they’ve started without a business model - finally getting into hybrid Cloud + Open Core. He said that they’re seeing a bi-polar dissection of the users: African community projects using the chat platform to enable a digital transformation of schools vs. Audi, Deutsche Bahn, and US Department of Defense paying enterprise licenses.
What Gabriel’s saying is that Open Source gives you the innovation and community vibe - these folks won’t buy the software no matter which licensing model you have. On the contrary - enterprise customers need to have something that just works. They’re ok paying for it just for the sake of not owning the software. Owning a thing always comes with a burden of maintenance.
It’s like accessing the Early Adopters and Innovators from Crossing the Chasm with the Open Source while making the real money on the Majority and the late majority. They want to have the thing up and running.
“Catch the Tornado” is named after Geoffrey A. Moore’s book Inside the Tornado. He also wrote another classic: “Escape Velocity,” where he’s pointing out your company's success is often multiplied by the category you choose to dominate. It seems it works the other way too.
Sasha Vidiborskiy of Atomico told me something like this: look, you need to have at least an idea of how you will make money on your software. I think it means: choose the category wisely. Building Core Infrastructure projects like OpenSSL are probably a huge benefit for the entire INternet but not the best business model. By the way, Sasha made a great post on why and how to build a successful Open Source product.
Open Source is a model which is naturally adopted by all the crafting parties of the Software ecosystem. System Integrators and agencies are just some of them. They use it; they contribute to it. They sometimes create it. Because it’s like demoing your product in public 24/7 (everyone can try it out of Github) - when the product is good enough, it provides you with virtually free marketing leading to free leads for the expert services. Very Tempting.
Services around your product make the business model murky waters. It makes it way more challenging to get the funding, primarily because of the broken cap table. It’s hard to fix it, but it’s doable.
Github is a multi-vendor, bi-lateral marketplace. Clone or Fork is a transaction, the Pull Request is the transaction as well - done the opposite direction. This is why it works so great for marketing purposes. Open Source without Github is not working that well for products.
There are different marketplaces for software products. The first traction of Shogun was created on Shopify Marketplace. Shogun is great, but it’s not open source. You don’t have to be Open Source to choose the marketplace distribution model. Remember about it.
Shogun is super interesting bc. It’s a kind of developers’ tool - but it’s not open-source while most developers' tools are.
The next episode of the CTO-CTO podcast is just about it - including an interview with Finbarr Taylor, the Shogun founder.
I used Open Source as a Marketing & Sales strategy as well as a Product Strategy multiple times. This is how we build two successful Professional Services Companies and two successful Product-based companies. We are also the co-creators of two large commercial open source projects - one for SAP, one for Shopware.
Crafting a software product, like Vue Storefront, is a pretty rich experience. Many different factors contribute to the success of an endeavor — or its failure. It’s like mixing lean startup, project management and coding altogether :-)