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Who's Making Money From Open Source in the Cloud?

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Event moderator Bernard Golden, GigaOM Pro analyst and CEO of HyperStratus; SugarCRM CEO Larry Augustin; and Jim Zemlin, executive director of the Linux Foundation

At this morning’s Bunker Session, the central question of the relationship between cloud computing and open-source software was answered early and often. The one thing everybody agreed upon is that most clouds of any appreciable scale are built on open-source software and, in fact, might not even exist without it. As to whether there’s any money to be made with open source, however, there was enough contention to go around.

The rub, as posited by Citrix’s Simon Crosby, is that everybody making money with open source actually has a proprietary angle. Open source is a great tool for advancing products, branding a company and expanding its reach, but vendors make their money with proprietary solutions. This holds true for companies ranging from Citrix with XenServer to Amazon with EC2. The numbers actually back up this proposition: Jim Zemlin, executive director of the Linux Foundation, pointed out that the leading open-source investors aren’t VCs, but large IT companies like IBM, Intel and Google. Investment in open-source projects helps these companies crowdsource R&D — which saves time and money — before rolling out a commercial offering based on the results. This isn’t an indictment of vendors’ use of open source, by the way, it’s just reality –- not to mention smart business.

However, as Om pointed out from the crowd, there is a big difference between helping vendors make money and actually making money yourself. Save for Red Hat, most truly open-source companies don’t last too long before they’re snatched up by proprietary vendors that want to leverage the associated momentum and product capabilities in their own businesses. But the definition of success isn’t universal. SugarCRM CEO Larry Augustin countered this argument with the position that open-source companies like JBoss and SpringSource, which did great things and built huge communities, are no less successful because they exited via acquisition rather than IPO.

Despite debate over what constitutes a viable open-source business model, the area from where we can expect to see one emerge is cloud computing. As I discussed recently in a GigaOM Pro column (sub. req’d), open-source products are building momentum in private-cloud settings especially, and the reason might be that they help users achieve the same efficiencies as large IT companies that invest in open-source projects.

Another possible avenue for open source success in the cloud is interoperability. When Yahoo’s Tom Hughes Croucher asked the Bunker crowd what the most likely solution to lack of interoperability among public clouds is, open source won by a landslide over vendor-developed standards. Opscodes’s Jesse Robbins buttressed this opinion by pointing out that many concerns over cloud interoperability and application portability can be addressed in the planning stages and by utilizing automation capabilities from companies like RightScale. Another possibility is to use an open-source interface like libcloud, which simplifies movement between clouds.

Where the money comes into play is when CIOs demand these types of capabilities before moving to cloud delivery models. As Accenture’s Joe Tobolski noted, they want to leverage the cloud, but they want to know there’s a workable Plan B and Plan C in case the primary cloud provider goes down. Cloud platforms don’t necessarily need to be open source if they’re open enough to work with third-party managements solutions. If an open-source company can build a cross-cloud automation product that lets businesses tweak it to suit their specific needs, that company might find itself in a position like Red Hat did when users were searching for a viable alternative to Windows.

Check out response to the event on Twitter via #fosscloud.

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9 Responses to “Who's Making Money From Open Source in the Cloud?”

  1. Derrick – This sounds like a fantastic session that sparked lots of healthy debate about the role of OSS in cloud computing. I agree with the sentiment expressed by the Bunker crowd that open source is the most likely solution to lack of interoperability among public clouds, as well as an antidote to potential vendor lock-in to platform as a service (PaaS) cloud offerings. This aspect of the discussion interests me the most rather than the debate over who is or is not making money from OSS in the cloud. At the end of the day whether you’re a developer or a software vendor, it all comes down to enabling greater efficiency and swifter innovation, and OSS is playing an increasingly important role in fueling both.

  2. Eideard,

    You make a valid point.

    However, ask yourself why open source has “won” as being the platform of choice for the next generation of Infrastructure service providers.

    Cost is certainly part of it, but it is not the primary motivator.


    Raj Dutt
    Voxel dot Net Inc.

  3. Some truly silly logic here.

    “everybody agreed…most clouds of any appreciable scale are built on open-source software and, in fact, might not even exist without it”

    Humbug! All that’s described is what has been built used currently popular software. Just as earlier advance used DOS or Unix or whatever.

    Not a new logical fallacy; but, one that seems to keep some members of the Open Source community in VC money.