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Attendees flock to Amazon Web Services’ re:Invent conference party in Las Vegas. Open-source projects have become a big focus for AWS and other big cloud companies, making it harder for smaller open-source companies to compete. (Chris Yunker Photo, via Flickr.)

There’s no longer any point in ignoring the truth: during the age of open-source software, which was supposed to democratize software development and usher in a new era of community-driven advancement, the most powerful companies in technology have consolidated their power and become the most important economic forces on the planet.

It has always been hard to create and build an enterprise technology company on the back of an open-source software project, but as we approach the end of the decade, the idea is starting to look foolish. The ease at which the big cloud platform tech companies can legally leverage open-source projects to add to their already massive list of services is removing the financial incentives for startups and investors to make big bets on unproven open-source technology.

Open-source software is an important philosophical movement that actually changed the world and continues to be a vital part of modern software development. At its most basic, it’s the notion that software development should be a collaborative process between members of a community with little or no direct compensation but the satisfaction of contributing to an important improvement in the history of computing.

This movement profoundly changed the order of the enterprise tech world more than a decade ago. And the explosion in demand for open-source projects set off a gold rush in enterprise tech startup investment, assuming that you could sell shovels to gold miners; in other words, you could build a business on providing services around an open-source project or releasing your own commercial product based on an open-source core.

But in 2018, as companies jump at the chance to let Amazon Web Services, Microsoft, or Google manage their IT infrastructure, there’s nothing stopping Big Cloud from tapping the basics of a promising open-source project and offering it for a fee as a service to those customers, undercutting smaller vendors without their price leverage. After all, that freedom was offered to anyone, by design.

Bain Capital managing director Salil Deshpande believes the open-source community needs to think differently about how it presents its work to the world. “Money is changing hands between AWS and AWS customers, and some of that money needs to change hands with the people who created the software,” he said.

The sharing economy

The notion of “free software” has been around since the 1980s, but the more practical concept of “open source” started to gain traction in the late 1990s, right as Microsoft was at the height of its power. Simply stated, open-source software licenses allow anyone to access the source code and software libraries that make up the core of that software, build their own projects around that code, or make changes to the underlying code as long as they contribute those changes back to the community project.

Microsoft spent enormous amounts of money trying to destroy the very concept of open-source software in the early days of the century, both in the courts and in the court of public opinion. But the idea just made too much sense in the enterprise tech world. And it continues to make sense as companies pursue hybrid cloud strategies and need inexpensive and consistent tools to operate across multiple environments.

Sarah Novotny, head of open source strategy for Google Cloud. (Google Photo)

As distributed computing began to really take off in the wake of the first dot-com bust, developers working with lean budgets realized there was no point in writing custom software to do everything a new web application needed to do; there was a very good chance that an open-source project could fill the gaps and allow you to concentrate on your unique application. That allowed web companies to focus more on their products than on the laborious process of getting them running.

“One of the things Google sees as the benefit of open source (is that) we don’t have to spend as long training new engineers, because we’re not doing everything completely differently than the rest of the industry,” said Sarah Novotny, head of open-source strategy for Google Cloud.

And developers were smitten with open source, which appealed to the hacker mentality inside many of them. Anyone with a cool idea that advanced the state of computing could get it started and show it off to the world, and others who liked what they saw could contribute their own code toward improving the project. Untold numbers of software developers jump-started their careers by working on an open-source project, and big companies often donate homegrown infrastructure projects to the open-source community.

Red Hat executives celebrate 10 years as a public company in 2006. (New York Stock Exchange Photo)

Open-source software exploded, and dozens of companies rose to prominence by promising to do the hard work integrating these projects into IT departments that wanted in on the action, or by releasing commercial versions of open-source projects backed by technical support. Red Hat is probably the biggest and best-known open-source company to emerge from this era, currently valued at just over $26 billion, but Xensource, the company behind the most popular Linux hypervisor, sold to Citrix for $500 million in 2007, and pioneering database startup MySQL sold to Sun Microsystems (now Oracle) for $1 billion in 2008.

Over the last few years, however, the road for enterprise tech open-source startups became much harder. Several important open-source startups emerged during that period, including MongoDB, Seattle’s Chef, big-data stalwarts Hortonworks and Cloudera, and Docker, one of the most quickly adopted enterprise tech open-source projects ever.

But none of these companies is generating profits. And the highly-profitable cloud platform companies have grown to the point where they have the resources and recruiting advantages to easily come up to speed on promising open-source projects that are gaining traction, with the intent of offering those services directly to their customers once those projects are mature.

“We don’t have a lot of models of open-source companies that become very large companies,” Novotny said.

Lies, damn lies, and pull requests

When it comes to the real story of open-source computing, there has always been a heady blend of heroic myth and cold reality, said Luke Kanies, founder of Portland-based open-source DevOps startup Puppet.

“There’s one side of the conversation where we like to talk up the moral value of what we do, but the other side of the conversation is that we live in a capitalist world, and that has a lot of consequences,” said Kanies, who is currently advising several open-source startups while remaining on the board of directors at Puppet.

Luke Kaines, founder of Puppet. (Puppet Photo)

Successful open-source projects like Hadoop or Kubernetes love to praise the value of the individuals in their communities, but increasingly, these projects are commercial operations. One of the “dirty secrets of open source” is that a relatively few number of people make a significant impact on a successful project, he said.

These days, key developers on important open-source projects tend to work for a big corporation, or at the very least, a startup with generous funding. There are still lots of hobbyists, but their role has changed.

“Ninety-eight-point-five percent of the code ever put into the core of Puppet was put in there by somebody I paid,” Kanies estimated.

And so as power in enterprise technology has shifted toward a new generation of centralized vendors, we’ve entered this weird era in which the outsider revolutionary movement has been completely co-opted by big corporations.

Google’s open-source bona fides date back to its earliest days, but Google’s role in shaping the future development of important open-source projects like Kubernetes is outsized: it still contributes the majority of engineering time and code to that container-orchestration product. Microsoft has fallen over itself atoning for its past sins toward open-source, embracing Linux and other open-source projects to an astonishing degree for anyone who remembers its tooth-and-nail legal battles against the very idea while making it very clear that it intends to embed itself in the enterprise tech open-source community.

AWS has been a little more circumspect about its views on open source, which earned it a fair amount of criticism in 2017. The company seems to have made open-source participation a bigger priority in 2018, but its penchant for siphoning off the best parts of open source for commercial gain (which, to be extremely clear, is a perfectly legal practice) has left many a company trying to build a business around an open-source project with a bad taste in its mouth.

AWS and Microsoft did not respond to requests to comment on their current open-source strategies.

License to steal

And that gets to the heart of the matter: if open-source projects are increasingly built by paid developers, and if funding dries up for open-source enterprise tech startups, will the future of open-source software development be driven primarily by massive tech companies?

Salil Deshpande. (Bain Capital Photo)

Bain Capital’s Deshpande isn’t sure that’s the best way to go, and that’s not only because he’s invested in several enterprise tech open-source companies. He’s convening several startup founders and other industry types to discuss the issue and plans to launch some sort of campaign later this year calling for a new type of open-source software license that directly addresses this issue.

“The intent of open source software was not so that someone else can take the exact same software and offer it as a service,” he said. “There’s one simple change that could be made to a liberal or permissive license, which is just one more clause; you are not allowed to offer the same software as a service.” Or, cloud companies that want to use open-source projects as part of their services would need to work out some sort of financial arrangement with the project leaders and maintainers, he proposed.

The most popular open-source licenses currently in use were not originally developed with the cloud as-a-service era in mind.

The GNU General Public License, one of the earliest open-source licenses, basically requires you to distribute anything you do around a licensed project with the same freedoms you were granted to use that project, which can make it hard to release a unique commercial product based around such a project. The MIT and Apache licenses make it easier to commercialize an open-source project, but still allow end users of software under those licenses to do pretty much anything they want with it, including offering it as a commercial service.

Jim Jagielski, one of the founding members of the Apache Software Foundation, thinks project creators need to understand what they hope to get out of the project from the get-go. If they’re thinking about building a business around the project, that should be part of their licensing decision.

“People who are creating these open source projects have to be a little more circumspect about what aspects are under the open-source licenses they’re providing and what isn’t,” he said.

You didn’t build that

This situation could go a number of ways over the next few years.

Emerging open-source projects could become increasingly directed by companies with the most resources, who will inevitably attempt to shape those projects based on their business needs, as massive corporations tend to do with anything they touch. This could make it harder for startups and individuals to get innovative ideas in front of a large audience, and that isn’t good for anybody in the long run, according to Deshpande’s view of enterprise tech.

But Google’s Novotny thinks there are some clear benefits to top-down open source that could also apply to Deshpande’s paid licensing ideas. For one, creating a proper compensation system for independent open-source developers, or paying staff contributors, paves the way for the notoriously white and male open-source community to become more diverse. Women who have to work the “second shift” caring for their families, as well as people from poorer backgrounds, don’t necessarily have the luxury of spending their unpaid free time tinkering on open-source software, she said.

Tidelift, a relatively new organization founded by several open-source veterans, is hoping to build support for a subscription-style service that lets open-source users subscribe to updates to projects they’re using, giving maintainers of those projects a cut of the subscription fee. On Wednesday, it announced three new subscription packages for the React, Angular, and Vue.js projects.

If Puppet’s Kanies was starting a company like Puppet today, he thinks he would either avoid open-sourcing his work entirely or at the very least, have an clear for-profit distribution strategy baked into the business model from the first day, he said.

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Back in 2006, when open source was really starting to shake up the old guard, Oracle co-founder Larry Ellison thought he knew how this would all play out.

“So the great thing about open source is nobody owns it – a company like Oracle is free to take it for nothing, include it in our products and charge for support, and that’s what we’ll do,” Ellison told the Financial Times. “We don’t have to fight open source, we have to exploit open source.”

Nearly twelve years later, the cloud platform companies are walking a very fine line between supporting and exploiting open-source technologies. Open-source software has always faced this existential dilemma around dogma and money, and as cloud vendors continue to add services that entice their customers to retain and expand their businesses, the outlook for entrepreneurial open-source advocates that might dent their power looks grim.

(Editor’s note: This post was updated to correct the spelling of Puppet founder Luke Kanies’ last name.)

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