Open source is free for users and developers basically a community project to advance the code for various software applications.
Proprietary vendors claim that the future for open source is only in niche projects: branded software vendors will take control of handling the critical software development and project support.
Only the most successful open source projects will be asked by a large company for support.
Or, if the open source provider is one of the luckiest such as XenSource it might be acquired through a “strategic” acquisition.
However, the vast majority of open source companies won’t ever experience this kind of luck. The probabilities of going public and building a large standalone company almost zero.
Is open source economically condemned to failure?
The success or failure of open source is not related to the software itself but in the underlying business model.
So what works?
One example is Red Hat.
Red Hat is a Linux operating system company that pioneered the open source business model. This company provides open source software for free. However, if support is needed it charges a fee as well as there are charges for maintenance, support and installation.
Many startups took example in Red Hat’s success story and started to provide open source offerings with associated charges for support and maintenance such as MySQL, Revolution Analytics, SugarCRM, Ubuntu and XenSource.
So far, most adaptors of the Red Hat business strategy failed.
Today, there is no other public standalone company that was able to provide an alternative to their branded counterpart.
And even, focusing on Red Hat’s market cap and revenue compared with Amazon, Microsoft or Oracle, Red Hat doesn’t look successful at all and its success story rather a disappointment.
Core issues for failure of this traditional open-source business model are:
- No adequate funding of ongoing investments
- Minimal product differentiation resulting in limited pricing power
- Product roadmaps and requirements often left to a spread group of developers with hinders growth
- Co-opt the code base of successful open by large companies that soon get ahead with higher development capabilities
- Competition not only with proprietary companies but also with the open source community itself
Thus, open source is providing great free software for users and developers but each open source provider is living a difficult fight to survive against the big brands with higher development power, which makes the future of so many open source companies uncertain.