
It Ain’t Easy Making Money in Open Source:  Thoughts on the Hortonworks S-1 - wslh
http://kellblog.com/2014/11/18/it-aint-easy-making-money-in-open-source-thoughts-on-the-hortonworks-s-1/
======
jeswin
My open source product is due out early next year, after well more than a year
in development. Whether it needs to be Open Source or not was a decision I
considered very carefully. In the end, I chose Open Source because:

a) My product is a application development platform that benefits from people
building on it and sharing the code.

b) I don't mind making money (at all), but I don't need _a lot_ of money.

c) I believe that the way we build companies today will change in future. We
might move to a world where something _like_ Wikipedia or Redhat or Mozilla
will be considered the benchmark for ultra-successful companies. Creators will
provide leadership and benefit from community participation, while the
community benefits from shared ownership of knowledge, code, ip etc.
Financially, it will be a transition from the high-risk & very-high-reward
system we have now, to a lower-risk, lower-reward system.

~~~
hyp0
Your point b) resonates with me... But my experience with the dual-licensing
model: it often took 3-4 months for companies to pay ($1,000-5,000 per
license). Because they already had the software.

------
roxmon
It also doesn't help that the Hadoop ecosystem is unstable, insecure, and
overkill for the vast majority of the use-cases out there. Cloudera can also
be thrown into the same bucket when they will no doubt file next year.

IMHO Hadoop just doesn't have a viable business model behind it. The people
that really need a big data solution will run it themselves, and the people
that don't (who will have it shoved down their throats all in the name of big
data anyways) will unsuccessfully run it for a year or two before scrapping it
for a better, more appropriate solution.

------
zrail
On a smaller scale it can definitely be done. See Mike Perham's success with
Sidekiq Pro[1], for example. I'm trying out this model[2] as well.

It's definitely not an easy road, but then again neither is starting a funded
startup.

[1]: [http://mikeperham.com/2014/10/01/the-path-to-full-time-
open-...](http://mikeperham.com/2014/10/01/the-path-to-full-time-open-source/)

[2]: [https://www.payola.io/pro](https://www.payola.io/pro)

~~~
wslh
> On a smaller scale it can definitely be done.

I think that is a pending discussion here on HN because it is considered a
lifestyle business instead of a startup that grows fast.

Many times the difference between success and failure is the size of the
business you have in mind.

~~~
zrail
Many times the difference between success and failure is your definition of
success. VC and an exit after years of grueling work is only "success" for a
small number of people who are disproportionately represented here on HN.

------
kolme
> it’s hard to make money when you give the shit away.

Well, it's also not easy when you charge for things. I guess the important
thing is to have a business model, regardless of the openness of the software.

~~~
davidw
It's hard in any case - yes - but it's even harder when you can't do the
simplest thing, which is selling access to the software you've made.

~~~
icebraining
Well, you actually can.

Between the two extremes of proprietary software and putting everything on a
public Github repository, there's a middle term: your software is FOSS, but
it's not publicly available - the source is only available to paying
customers.

I never see this model discussed, but I've actually seen it work fine for many
not very large software companies. They still get to sell the product, and the
client gets the peace of mind of knowing that they have an alternative if the
company goes under or discontinues the product. (This works better if the
development is done on a common platform like Drupal, instead of being custom
from the bare metal.)

Of course, the clients can still turn around and distribute (and even sell!)
the source, but in practice the average SMB isn't particularly interest in
going into the software reselling business.

~~~
davidw
Yes, Cygnus software used to do this with their stuff, a long time ago,
apparently.

[http://en.wikipedia.org/wiki/Cygnus_Solutions](http://en.wikipedia.org/wiki/Cygnus_Solutions)

It's valid, but not entirely in the spirit of open source software either, in
my opinion.

There are certainly various open source business models, it's just that they
require more thought and effort than simply selling the software, or access to
it. For some companies, that extra difficulty might be what makes or breaks
them.

------
pjmlp
Fully agree.

This is why I moved from being a FOSS zealot in the mid-90s during the .com
boom to a consultant in whatever software our customers ask for.

FOSS is nice when one is an university student with parents paying for bills.

It is a complete different matter when one tries to make money out of free
stuff and VC that give money for whatever idea are gone.

FOSS only brings money home in consulting, support and teaching, everything
else requires a second job to keep money around.

~~~
icebraining
_FOSS only brings money home in consulting, support and teaching_

No, it's perfectly possible to make money hosting FOSS SaaS apps, selling FOSS
apps on various App Stores, selling copies to SMBs, among others.

Evidence: my paycheck working for an (almost) 100% FOSS company.

~~~
pjmlp
Yes, I have forgotten about apps behind pay walls.

As for native apps, good luck with the business if the full code is available
and then you have to start fighting against clones that just relabel your
work.

------
cpach
This is a related HN discussion from a few months ago that I found
enlightening:
[https://news.ycombinator.com/item?id=8331465](https://news.ycombinator.com/item?id=8331465)

But of course being commercially successful is not the same as being ready for
an IPO.

------
cfontes
"That’s why there is no Red Hat of Lucene or Solr, despite their enormous
popularity in search"

You forgot ElasticSearch, which is not a Red Hat but seems to be doing fine
and working on getting there.

They have some interesting takes on open source, they give the dough for free
but the frosting like security and managing interface are
charged/subscription, I think it can work.

Also their software is built on top of SOLR/LUCENE but with lot more
enterprize keywords thrown at it (Distributed,Clustering....) So makes it
easier to sell for the

~~~
arafalov
Well, it's not that simple.

Elasticsearch seems to have shifted their positioning from pure Search Engine
to the log analytics with strong emphasis on the ELK stack.

They had early advantage over Solr by addressing the Innovator's dilemma and
tackling things Solr did not touch (better clustering, JSON interface, smaller
initial downloads, dynamic configuration, etc).

But the actual commercial entity on top of Solr (LucidWorks) has finally
noticed that and has put some resources in closing the gap and maybe even
getting ahead of Elasticsearch. And, of course, their own commercial product
(Fusion) has all those enterprize keywords covered as well.

Also, LucidWorks is not the only commercial company putting money into Solr.
Cloudera (yes, the one with 1.2 billion $ of investment) is fully committed to
Solr and is contributing to it as well.

I'd say LucidWorks wants to the be The Red Hat of Solr, while Elasticsearch is
trying to take over Splunk in that very specific (and, as Splunk proved,
fairly lucrative) part of the log collection/analysis business.

~~~
AznHisoka
log collection? eww.. that's so boring. For a company that's trying to focus
on log analysis, they sure have a much better search engine than SOLR (see
percolation, sharding, distribution capabilities, REST interface)

~~~
arafalov
I did look for a while. Even got to present on it:
[http://www.slideshare.net/arafalov/solr-vs-elasticsearch-
cas...](http://www.slideshare.net/arafalov/solr-vs-elasticsearch-case-by-case)
(video out soon)

# The percolation apparently does not scale: (as compared to
[https://github.com/flaxsearch/luwak](https://github.com/flaxsearch/luwak) \-
Not in Solr yet, granted ),

# The sharding and distribution has (in ES 1.3) serious issues due to the in-
house implementation ([http://aphyr.com/posts/317-call-me-maybe-
elasticsearch](http://aphyr.com/posts/317-call-me-maybe-elasticsearch))

# The REST interface is nice but is also coming to Solr really fast

# The rivers are deprecated. The scripting (enabled by default originally) had
to be reworked due to Amazon shutting down every EC2 Elasticsearch instance
they detected.

# Some other features have been deprecated and now are basically the same as
Solr (e.g. copy_to vs. copyField). The production recommendations from
Elasticsearch specialists are to disable dynamic schema, _source, and _all
fields.

Not that Elasticsearch is bad. I just feel it is not fair to compare a
commercial solution (that does not even give you admin console for free) to a
fully open-source solution (that does). If you are planning to pay money for
commercial solution, then compare it with another commercial solution (e.g.
LucidWorks Fusion). Or at least compare latest Elasticsearch (1.4) to the
latest Solr (4.10.2 currently).

------
hyperliner
Some people say open source is a business model.

It's not.

Figure out A) is there something customers value B) would they pay money for
it C) how much and for how long D) is the value something you capture (how
much would YOU keep) E) would the money you capture allow you to survive for a
while based on your capital and shareholders and give them (or yourself)
something back

Otherwise you are not building a business. You are just keeping busy or worse
wasting someone's money.

This applies whether you open source or not.

------
agibsonccc
Running an open source company myself (also somewhat overlapping with the
hadoop ecosystem). First of all, we can all be armchair analysts so take this
with a grain of salt.

I think Horton IPOed too early.Their alternative may have been an acquisition.
I would say wait till cloudera IPOs before we really judge the market on this
one. As I said before though: I'm biased.

I work with a number of the big open source players and I'd say there's real
revenue here, especially in machine learning.

Software at the end of the day isn't about whether it's open or not, it's how
you sell it and package it.

A great alternative example to this is docker. Their registry is a great way
of monetizing open source while working towards a scalable business.

I think we will see innovation in the open source business models come out
here in the next few years. The best is yet to come imo. I wouldn't be doing
an open source business if I didn't see the potential.

------
bryanlarsen
$33M of revenue is unsuccessful? That should be a very comfortable revenue
stream for a small-medium software company. Not every company needs > 200
employees, not every company needs to IPO for billions.

It also seems obvious that they'd be making far less than $33M in revenue if
they weren't open source. If Hadoop was not open source, everybody would be
using the open source competitor that would magically spring up, not Hadoop.

~~~
dagw
_$33M of revenue is unsuccessful?_

It is if you need over 500 employees and lose $54M while making that $33M
revenue.

~~~
bryanlarsen
That's what should be questioned in the article, not the open source nature.
Hortonworks is in the consulting business, but they don't seem to suffer from
the perennial consulting problem of variable revenue. So why aren't they
printing money?

~~~
davidw
It looks like they're also spending money developing stuff. If you want to
optimize for profits, you need to let other people actually work on the free
code and crank up the billable hours.

Of course, then the actual products don't get developed as quickly, so it's a
bit of a paradox.

From what I've seen though, consulting is not necessarily a very good way of
producing open source software.

------
lumberjack
Part of the added value of open source is that you are giving away part of the
product for free. It's intrinsically less profitable than closed source
presuming the consumers are willing to buy the closed source alternative.

But if consumers start deciding that closed source software is unacceptable
then the situation will change.

