The Evolution of Open Source Projects into Successful Companies
I am a project manager at Starburst, a company that commercializes Open Source Trino. As I got into this big data world, the story of how a technology project becomes an enterprise became very fascinating to me, which I wanted to study and share here.
Today’s Status of Open Source Turning into Companies
In the contemporary Big Data startup world, a clear trend has emerged: transforming open-source projects into thriving businesses. Several high-profile examples illustrate this phenomenon.
These companies have effectively leveraged their open-source roots to create commercial enterprises that offer added value through managed services, enterprise features, and support. This model is not only favored by engineers for its flexibility and avoidance of vendor lock-in but also attracts significant interest and investment from venture capitalists.
History of This Trend
The roots of this trend can be traced back to the early days of open-source software, with foundational projects like Linux and Apache HTTP Server setting the stage.
Red Hat, founded in 1993, was a pioneer in monetizing open-source software by providing enterprise-level support, training, and consulting for its Linux distribution. Red Hat’s approach of offering a robust, supported version of Linux for enterprise customers while maintaining an open-source version for the community set a precedent for future open-source businesses.
MySQL became one of the most widely used database systems in the world. Initially, MySQL AB, the company behind MySQL, offered the software under a dual-license model — open-source under the GPL and a commercial license for those who needed proprietary features. This model proved successful, leading to MySQL’s acquisition by Sun Microsystems in 2008 for $1 billion, and later by Oracle in 2010. The success of MySQL highlighted the viability of combining open-source software with a profitable business model based on support and enterprise features.
Hadoop emerged from an Apache project, initially developed by Doug Cutting and Mike Cafarella to support the Nutch search engine project. Recognizing its potential for handling large-scale data processing, Yahoo! adopted Hadoop to build their web search index. The project’s success led to the formation of companies like Cloudera, Hortonworks, and MapR, which commercialized Hadoop by providing enterprise support, training, and additional features. Hadoop’s ability to store and process vast amounts of data using commodity hardware made it a cornerstone of big data analytics.
Apache Spark was developed at UC Berkeley’s AMPLab as a fast, general-purpose cluster computing system. Recognizing its potential, the creators of Spark founded Databricks in 2013 to provide a unified analytics platform based on Spark. Databricks offers enterprise-grade features, support, and managed services, which have attracted significant investment and customer adoption. Databricks’ success underscores the potential for academic research projects to evolve into commercial enterprises through open-source software.
Kafka was developed by LinkedIn to handle real-time data feeds. Seeing the potential for broader applications, the original developers founded Confluent in 2014 to commercialize Kafka. Confluent offers a managed platform and enterprise features, making it easier for companies to leverage Kafka for real-time data processing. Kafka’s success and widespread adoption illustrate the power of open-source projects to address complex data challenges and spawn successful businesses.
From Internal Projects to Open Source
Many successful open-source projects begin as solutions to internal technical challenges within large companies. Engineers at these companies develop innovative tools to address specific needs that existing technologies cannot efficiently handle. For instance, Facebook engineers created Trino to enhance big data analytics performance, while Netflix engineers started Iceberg to optimize query processes in Trino and Apache Spark. Once these projects prove successful within the company, the founding engineers often see the potential for broader application. They then open-source the project, typically by donating it to established open-source foundations like Apache or the Linux Foundation. This phase is crucial for several reasons:
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A project becoming a popular open-source project already overcomes significant hurdles toward becoming a successful business. Its widespread adoption and active community contributions indicate several key factors:
Additionally, the availability of the technology as a free open-source project allows engineers to avoid vendor lock-in. They can use the commercialized version but can also switch to the free version or other technologies based on their changing needs. This flexibility makes the projects more appealing and viral among engineers compared to closed-source projects.
What is Necessary for the Success of This Model
Despite its advantages, the open-source-to-business model faces several challenges that must be addressed to ensure success. First, there is the need to develop a compelling service layer that provides genuine value to paying customers without degrading the quality of the open-source project. Engineers involved in the open-source community are often highly skilled and may not see the need for commercial support, so the commercial offerings must include unique features or services that appeal specifically to enterprise needs. The service layer must provide added value, such as enhanced security, improved performance, or additional tools that are not available in the open-source version. This ensures that even skilled open-source community members see value in the commercial offering.
Maintaining a balance between openness and customer retention is crucial. Open-source projects inherently lack the “stickiness” of closed-source solutions, making it easier for customers to switch away. To counter this, companies need to create value that encourages long-term use. For instance, Databricks evolved its offerings to ensure they provide enough value to retain customers despite the open-source nature of their core technology. Providing seamless integration, exceptional customer service, and continuous innovation in the commercial offerings can help in retaining customers.
Ensuring development control and maintaining a monopoly over the project is essential. This helps preserve ownership, credibility, and the strategic direction necessary for sustained success. The collaborative nature of open-source development can lead to fragmentation, as seen with Kafka’s commercialization split between Confluent and Cloudera. To avoid this, maintaining a unified direction and ownership helps preserve the credibility and authority of the commercial entity over the open-source project.
Factors Necessary for Turning Open Source Projects into Successful Businesses
Based on my study of the history of this OSaaS model, here are the factors necessary to turn open-source projects into successful businesses. Developing a service layer that provides a sound and compelling reason to use the commercialized version without hurting the quality of the open-source project is critical. Keeping a balance between openness and stickiness is essential, as open-source projects are vulnerable to losing customers due to their lack of inherent retention mechanisms. It is also crucial to ensure development control and maintain a monopoly over the project to preserve ownership and credibility.
Moreover, the commercial version must offer features or aspects that are specific to enterprise needs and are not available in the open-source version. This differentiation can include enhanced security measures, performance optimizations, compliance certifications, and dedicated support. Engaging with the community and potential customers is crucial. This includes actively participating in community discussions, contributing to the open-source project, and gathering feedback to improve both the open-source and commercial versions. Addressing profitability challenges is another key factor, as open-source commercialization often faces challenges due to the lack of inherent stickiness compared to closed-source software. Finally, having a long-term vision and commitment to continuous innovation is essential. The technology landscape is ever-evolving, and staying ahead requires ongoing investment in research and development, adapting to new trends, and anticipating future needs.
Closing
Turning open-source projects into successful businesses requires strategic development of enterprise-grade services, a balance between openness and retention, and strong development control. These factors, combined with a robust and active community, can lead to sustainable and profitable businesses built on the foundation of open-source innovation. By addressing these challenges and focusing on these key factors, companies can successfully navigate the open-source-to-business journey and achieve lasting success.
As a player in the big data technology landscape, I am enjoying my career more than ever. This space is incredibly exciting, with a rich history, a pool of brilliant minds, significant financial interest, and immense potential. I feel fortunate to be part of this domain and am genuinely rooting for Starburst to succeed. So, ask me again in ten years!
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