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Ben Halpern
Ben Halpern

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How to forget about being commercial open source, and sell Coca Cola.

First of all, welcome to the COSS Community Forem. I'm happy for @jj and folks for getting this live, and I'll definitely be hanging around. Consider installing the Chrome extension for multi-Forem browsing made more straightforward.

Here at Forem, we LOVE open source. It runs everything we do, and we default to open with almost everything we do. That being said, we don't think too hard about the fact that we are open source when it comes to business model. We use open source to drive our mission, but we deliberately try to set ourselves up for scenarios where it doesn't really matter that we're open source— That's just a competitive advantage in and of itself.

We try to serve a product and charge for use of it in simple and straightforward ways. We want a business that is understandable both for our most technical users, and our least technical.

We as technical entrepreneurs can sometimes look with jealosy to organizations that sell a physical product that people want and have a basic markup. Basically, if you are selling Coca Cola around the world, your success metrics are obvious: More sodas sold.

What I want to tell you is that you can aspire to metrics as simple as sodas sold. You can take your open source product, wrap it in a service, and sell it like Coca Cola. It's an aspirational idea, and the steps to accomplish it may be non-obvious, but I believe this mindset has been helpful for us.

Just like Coca Cola has metrics that certainly go deeper than sales, we care much more deeply about the proliferation of healthy communities as a leading metric for our success than paying customers. We want self-hosting to be as easy as humanly possible for the ecosystem to be its best self, but we know there is no shortage of customers willing to pay for what we offer in an uncomplicated way. And at the very least, thinking aspirationally in these terms grounds us.

All the Forem code is open source. Our core business is the hosted version of Forem— which we call Forem Cloud— and we have some additional services based on the needs of some creators. Hosting is no small undertaking, but it lets us put all of our work into the cost structure, user experience, and excellence of the product. This means that the dynamic of what we "ship" is a little more cut-and-dry than a model which dangles the open source string, pulls just enough value back out.

Companies whose business center on the development of open-source software employ a variety of business models to solve the challenge of how to make money providing software that is by definition licensed free of charge. Each of these business strategies rests on the premise that users of open-source technologies are willing to purchase additional software features under proprietary licenses, or purchase other services or elements of value that complement the open-source software that is core to the business. This additional value can be, but not limited to, enterprise-grade features and up-time guarantees to satisfy business or compliance requirements, performance and efficiency gains by features not yet available in the open source version, legal protection, or professional support/training/consulting that are typical of proprietary software applications.

We study the market, our customers, and value in general, we don't study the endless list of open source business models. Our approach touches on a lot of them, but it's truly an incidental outcome from first-principles thinking.

This advice won't apply well to everyone, but I hope this has been useful food of thought if you're working on a commercial open source project or company. It's a windy road and you have to find your own way down it.

Happy building ❤️

Discussion (4)

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Michael Bromley • Edited

Hi! I've got an OSS e-commerce framework (vendure.io) and I've been giving thought to the various options for monetization. Right now I've settled for open-core rather than a hosted version, mainly because currently it's just me, and I don't want to be on the hook for the uptime of other people's shops.

Any thoughts on the minimum requirements to responsibly offer a hosted version of your product? I.e. what staff, what expertise etc?

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Ben Halpern Author

Hosting definitely does take at least one systems engineer to do really well— But honestly, it's helpful to do hosting in order to serve your customers ideally. You're going to encounter problems when you try to host that will help customers in all capacities.

I'll also say that business model discovery takes a long time and a lot of false starts. It took a lot of discovery for us to understand how obvious the hosted option was for our customers— so I don't want to make the process of discovery seem overly simple, even if the ultimate model is more simple.

But think about it this way: Your market is probably a lot bigger if your service isn't just open core. Because the subset of customers that have any appreciation for what that concept even means is so much smaller than the set of folks who understand more typical models for software distribution. I wouldn't say avoid open core at all costs, but consider whether this is even what you want to push if your product is going to become more mainstream.

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Michael Bromley

Thanks Ben, that's useful insight. In my ideal open-core situation, I've built up sufficient adoption that I have a large pool of users to potentially sell to. The particular appeal of open core is the ability to create software and then scale at minimal marginal cost by selling licenses.

Of course, time will tell whether there is sufficient market for this, and also how much time & effort will be required to make sales. I've spoken to other projects in the same space and they found that selling the "plus" version took a significant enterprise sales cycle, which is a scenario I really want to avoid.

Well, as you say - there will surely be many lessons learned along the way to sustainability, but I'm looking forward to the challenge!

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Ben Halpern Author

Yup. Every path is its own. We like to describe our model as a "success-based business model" where our customers' success is highly aligned with ours, and that is a principle to build off of regardless of the specifics. But companies like Shopify and AirBnB could both easily be described on these terms and I think it's a great idea for any open source organization— and then there are the details to back it all up.