Open-Source Software Companies Face Challenge to Build Business

By Charles Garry  |  Posted 2005-08-10

Open-Source Software Companies Face Challenge to Build Business







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For the real low-end customer, the one that would never pay for software regardless of the features it offers, open source is great.

Unfortunately, no new venture hoping to make a living can devote much energy on those customers.

The only hope is that the very low-end customer someday matures to a point where they require some feature or service they cant get for free.

Predominantly, however, open-source software companies, at least the ones hoping to make money, are forced to compete for many of the same customers that Microsoft, Oracle and IBM currently compete for.

It is this fact that leads me to believe that we can predict why some open-source companies will be successful and others will not.

Click here to read more about EnterpriseDB and PostgreSQL.

Take the supposed battle of open-source relational databases, PostgreSQL vs. MySQL.

I say "supposed" because ultimately the two are a false comparison.

PostgreSQL has been around much longer, is much more "mature" than MySQL, and yet the compelling difference in my mind is that one is a software project (PostgreSQL) while the other is a software company.

Now, its true that successful companies have been built around software projects before.

Red Hat and Linux are perhaps the best example. Does that signal a trend or simply indicate that no other alternative existed at the time?

In the database market, MySQL AB provided the market with an alternative.

It is a traditional software company that controls all development, support, marketing, partnerships and, most importantly, trademarks for its software.

It just happens to believe it can offer a strong product at a much lower price point by utilizing the strengths of the open-source model, low-cost distribution and an active community that helps to improve code quality while providing accountability to its higher-end prospective customers.

This enables MySQL to balance its perceived social obligation to lower software costs while maintaining a value proposition to customers who want a definitive version of the code and will pay both for the right to get support from a developer of the code and to influence the direction of the product.

Contrast that with the various companies that have tried to make a commercial company using PostgreSQL as the flagship offering.

Many have tried, such as Great Bridge and Red Hat, while others are still trying, such as Pervasive and EnterpriseDB. None have yet proven successful.

It begs the question: Can you build a business around a product you dont make or have control over?

Offering support services is certainly one model, but support without development is like kissing your sister; there is no hope of any future.

EnterpriseDB wants PostgreSQL to look and act like Oracle. That fact alone probably doesnt endear itself to the PostgreSQL community.

Indeed, EnterpriseDB does not even open-source its code changes to PostgreSQL, it sells the binary only.

So here we have an example of a company that could be seen as profiteering off the free labor of others without giving back to the community. Probably not the marketing message that EnterpriseDB would want to promote.

So if you are looking for winners and losers in emerging open-source software business models, my money is on the company that can achieve the right balance between the social responsibility of the open-source software movement and the desire for higher-end buyers to receive value worth paying for.

That, I believe, will be a very rare commodity indeed.



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