Open source is NOT a business model (and your business will fail if you think that it is)

Consider this conversation:

Person 1: Did you know that 60% of restaurants close within three years of opening?

Person 2: Oh no! We should change the fundamental definition of “food”. That will fix it.

How does that sound to you? Ridiculous? Good, because it is. Now compare this conversation:

Person 1: Did you know that a lot of “open source” companies can’t make money?

Person 2: Oh no! We should change the fundamental definition of “open source”. That will fix it.

This conversation is just as ridiculous, yet I’ve seen many versions of it recently. Some misguided souls are saying that the Open Source Definition must be changed to include matters of revenue and profit (AKA “how to make money from open source”), because open source is a business model. Let’s just get this settled once and for all, OK?

OPEN SOURCE IS NOT A BUSINESS MODEL.

According to Harvard Business Review, it’s difficult to define ‘business model’. Some of the definitions they’ve collected over the years are:

• “All it really meant was how you planned to make money.”
• “…assumptions about what a company gets paid for…”
• “…a good business model answers…How do we make money in this business?”

There is a great number of potential business models, but “open source” is not one of them. It is, instead, one of the many tools that can be employed in order to make a selected business model work as expected. The most common form of employment here for open source is in open core, which is itself just a variation on the freemium model. In this model, the open source is the tool that is used to entice potential customers to come to the company and hopefully to hand over their money for additional features or advanced support.

Going back to the restaurant example above, saying that open source is a business model is like saying “food is a business model.” Both are things that can attract potential customers, but each is just one of the tools that get customers there. Usability, suitability (market fit), advertising, good service, open source… Each of these is among the many elements that can help convert a prospect into a customer, and each is employed differently depending upon the market and business model.

Therefore open source has not, does not, and should not concern itself with business any more than food concerns itself with business. If there is a business that has a business model that is not living up to expectations, and if that business model uses open source as one if its tools, it’s illogical to blame open source for the failure. That business is asking the tool to do all of the work, rather than learning how to use the tool effectively.

The best way to have a successful business is not to rely on trendy business models and buzzwords. It’s to learn and practice business administration, to learn what the customer needs and values, and then to find a business model that will deliver that value while also supporting the profitability of the enterprise. For some companies, that business model may be open core, but it’s worth researching the past performance of open core companies before taking that plunge.

In 2015 John Mark Walker published a series of articles on Linux.com under the title, How to Make Money from Open Source Platforms. In the first article of the series, he makes the astute observation that no successful product has come from an open core company. The rest of the series investigates other business models that companies can explore related to open source products and projects. He shows how it’s possible to make money and build a successful business around free and open source software, but that success is due to savvy business acumen and not necessarily due to the free and open source software itself.

So, please, take more care when selecting a business model for your company, and please stop thinking that open source itself is anything more than a tool to help execute that business model.