The Business of Open Source

This week on The Business of Open Source, I spoke with André Eriksson, founder and CEO at Encore. We talked about how open source develops trust, something I also discussed in the episode I recorded with Reshma Khilnani. For Encore, it’s subtly different, though. In the case of Medplum, open source is a differentiator in a market that’s used to black boxes, for Encore, open source is tablestakes in a market that won’t adopt a completely proprietary software. We talked about: Launching with a cloud platform from day one — not the open source project. On the other hand, open source is also important because often users and customers have to modify things to get it exactly right; the flexibility is a critical part of the platform’s draw. The challenge getting contributions, which André doesn’t find surprising, especially because it’s a project/product that solves problems for companies, not hobby projects. Having one brand for the open source project and the product, which can make it hard to communicate the difference between them. Ensuring that the open source project and all of the features in it are useable without being dependent on the commercial product — which is not always easy. Finding the right balance between avoiding crippleware and still having enough of a difference in value between the open source and the commercial product to sell it is a core challenge. The biggest risks from open source, which André kicked off by talking about the difference between what you perceive as a big risk and what objectively is — this is a distinction that I think is super important to understand in life and business. Ultimately he settled on a big risk just being that you build something that isn’t valuable or differentiated enough for people to pay for. Communicating the value proposition clearly is their top challenge at the moment. Check out the full episode for some serious insights into what’s working and what’s a struggle at Encore. 

This week on The Business of Open Source I spoke with Saurav Pathak, chief product officier at Bagisto, about a very different kind of business relationship with open source — and open source software incubated in a larger company. There were tons of interesting nuggets in this episode, but some things I wanted to call out are:For open source projects, the tech stack that the project is built with can in fact be a differentiating feature. This is unique to open source (and has come up before, both in my consulting work and in podcast interviews). Users might want to choose a project because it’s written in the language they are familiar with, even if the functionality is exactly the same as a competing projectThe difference in needs between the merchants (who just want to get their ecommerce store up and running) and developers building ecommerce platforms, who was worried about being able to build extensions How an open source company like Bagisto fits into the larger commercial strategy for the parent company. Build a community of developers versus building a community of merchants, and why both are important for a project like BagistoHow Saurav manages the tension between adding features that people want and not building an overly bloated product, including how to manage this tension when someone wants to contribute a feature that the core team may or may not want. It’s always interesting to me to see different models for open source companies, and Bagisto certainly is a different model. Especially after last week’s episode with Tanmai Gopal, which had a much more classic story. 

This week on The Business of Open Source I spoke with Tanmai Gopal, co-founder of Hasura. We talked about how Hasura grew out of Tanmai’s previous company, which was a consulting company. I like to call out examples of really novel open source businesses, but in fact the thing that stuck with me from the conversation with Tanmai was that Hasura is going the ‘classic’ route… and it’s working. What does the ‘classic’ route look like to me? It’s an open source project that targets individual developers and a commercial product that targets teams and teams of teams. It’s having additional network security features in the commercial options. It’s using the open source project as a growth engine and getting leads from companies that depend on it. It’s also using the open source project as a way to get feedback on the product roadmap. Here were some of the takeaways from our conversation: It’s a lot easier to sell a product if your customers see it as mission-critical. One of Hasura’s first inbound leads was from a Fortune 100 company who said they’d be unable to ship any software for two weeks if Hasura went down — and so they wanted to make sure the team behind Hasura was serious and also wanted to pay them to make sure they didn’t go down. For Hasura, the first clear difference between open source project and commercial product was that the open source project is for individual developers but the commercial product is aimed at the team level.Even for the cloud hosted edition, the product with ‘developer-level’ focus is free. In fact, if you go to the Hasura CE product page, the CTA asks you to use for free on the cloud. Tanmai said this is an intentional choice because they want to reduce friction for people to test it out, and the fastest way to get up and running will always be to use the cloud version, not the open source. We talked a lot about the control plane versus the data plane — all the editions have the same functionality at the data plane level. But the control plane, where people are collaborating — that is commercial only. The open source project can be a great way to stay close to your users / customers and use their feedback to constantly refine your product roadmap. In fact, this can be a main advantage of being open source, because it is the only way you stay close to your users and get their feedback — otherwise you would often only talk to the buyer, who is likely an exec with a big budget but not using the technology on a daily basis. This doesn’t mean open source doesn’t create liabilities for Hasura — it does, and those liabilities have to be managed. And Tanmai is frank about the fact that creating enough value on top of the open source project without crippling the growth engine is a tough balancing act. Pay attention to what your best customers are doing! That has informed some really important product decisions for Hasura — and it took them way to long to figure out the unique way their happiest customers were getting more value out of Hasura than other users. Definitely check out the full episode for more insights from Tanmai! 

Reshma Khilnani, CEO of Medplum, talks about using open source for trust, not growth in the healthcare industry. She emphasizes the importance of compliance certificates and support guarantees for customers. Reshma's passion for building software specifically for healthcare sets Medplum apart in the industry. The podcast explores the challenges and advantages of open source in healthcare development.

Adam Jacob, Founder and CEO of System Initiative, discusses the difference between being a CTO and CEO in a startup, the importance of focusing on the whole product experience, and navigating various business models in open source companies. He shares insights on total addressable markets, serviceable available market, and serviceable obtainable market, emphasizing the need to create substantial value for sustainable business growth.

This week on The Business of Open Source, I had a very different sort of guest — Mark Boost, the CEO and founder of Civo. We talked not only about Mark’s history as an entrepreneur, but also Civo’s recent acquisition of KubeFirst. This topic caught my eye because it’s not often I get an offer to talk with an acquirer of open source companies, and I wanted to take him up on it. (Though if you missed it, I also talked to Thomas di Giacomo about this topic, and it was fabulous). The that is different about this case is that Suse is fundamentally an open source company, but Civo is not, and this was the first time that Civo had acquired an open source company. We talked about:How the relationship started long before anyone was thinking about an acquisitionWhat the 1 + 1 = 3 equation looked like in this particular caseHow it makes sense for an infrastructure company to acquire a complementary software company What it means to hire a pre-revenue open source companyIt’s a relatively new acquisition, so we did a pre-mortem on it together, and Mark talked about what could go wrong — a super interesting process. Lastly, we talked about Civo’s open source projects and what business value the company gets out of it’s relationship with open source in generalCome join me at Open Source Founders Summit if you want more conversations about building open source companies! 

This week on The Business of Open Source, I spoke with Brian Fox, co-founder and CTO of Sonatype. In addition to having a really interesting discussion about the usual topic of how to build a business around open source software, we also had a good conversation about security — it was hard to avoid, because we recorded this right after the xz backdoor discovery, and software supply chain security is kind of Brian’s thing. Business-wise, though, we also covered some really cool topics. Including: The tension between an open source project that’s “too good” and yet the need for the sales team to close dealsIn some ways, the fully commercial, closed-source products in Sonatype’s product line are more straightforward… but there are challenges that go along with a pure closed-source approach, too, especially for a DevTool company. Choosing your relationship with open source depending on who your target user / target buyer isPivoting to a top-down sales motion because the bottoms-up motion just didn’t work; and how that means the features that sell aren’t always the features that get usedWhat Sonatype gets out of it’s relationship with Apache Maven and open source NexusHow do we solve real problems, and how do we solve them for real? Keeping in mind that no one buys what they need; they only buy what they want. Check out the full episode, and come to Open Source Founders Summit if you want more opportunities to talk about about business and open source. 

This week on The Business of Open Source I had Rod Johnson, founder/CEO of Spring Source and creator of the Spring Framework (as well as board member of many other open source companies) on to talk about Spring, monetizing open source and what’s changed in the open source ecosystem since 2008. Key takeaways:Consulting was burning the entire team out, and that threatened the health not just of the consulting business, but of the open source project as wellAn amazing salesperson can often sell anything, but that doesn’t mean that you’ll be able scale, because your entire sales team is not likely to be incredibly brilliant Spring Source ended up not monetizing Spring at all — but rather worked on monetizing with products that were complementary to Spring. “We monetized Spring by not monetizing Spring, by using it to open the door” The moment that the company really started to see success as a product company was when the team stopped thinking about what they wanted to build and instead focused on what customers where telling them that they wanted.The risk of having a bunch of very good engineers on your team is that they’re excited about solving hard technical problems — but your customers might want something that is not very technically challenging or interesting. A major part of the job of a company leader is to talk to your team and get them on board with your plans The environment around monetizing open source projects has changed — there are things that worked in 2008 that wouldn’t work today, and things that didn’t work then that would be fine nowIf you love (insert your favorite open source project here), it has to have a sustainable economic modelIt’s really critical to have a rationale behind what functionality goes in your product and what goes into your open source projectAt the end we talked briefly about Open Source Founders Summit, a conference for leaders in open source businesses happening this May 27th and 28th in Paris. 

This week on The Business of Open Source, I spoke with BoxyHQ co-founder and CEO Deepak Prabhakara. We talked about a number of things, from BoxyHQ’s relationship with its open source project, called SAML Jackson to how to build a growth flywheel and how that flywheel does and does not depend on a community. Is BoxyHQ a security company? Does it matter either way? Starting the open source project at the same time as the company, and why they did it that wayThe relationship between the user community and the customer communityBoxyHQ as the anti-platform — instead of trying to build a platform, which is the default goal for a lot of companies I speak with — they are explicitly trying to build a more a la carte experience for usersThe challenges of community building around a project that isn’t sexy and how to build community that isn’t project-focused, but rather that’s focused around a problem spaceMaking the mistake of assuming your startup is completely unique and unlike any others! We talked about much more as well, and it’s definitely an episode you should check out. 

In the second episode that I recorded on-site at KubeCon EU in Paris, I spoke with Alex Olivier, CPO and co-founder of Cerbos. This was not a general discussion: It was focused on the process that Cerbos went through to figure out pricing. Here’s what we talked about:The first step of figuring out your pricing is not the number, but rather what you’re charging for. Is it API calls, or amount of data you’re processing, or monthly active users, or monthly active principles… that last one is what Cerbos is charging forWhy it’s important to have a pricing system that allows potential users to be able to roughly estimate for themselves how much using your software is going to cost themYou also want to avoid pricing models that encourage people to look for ways to hack around to find ways to lower their monthly costsWhy your pricing model should be about the value you’re providing, not about how much it costs you to run your systemDiscovering what your price anchors are / what your customers are comparing you toCheck out the full episode for more details! And join us at Open Source Founders Summit for more discussions about the specifics of pricing for open source companies.