Death by Cloud - How Amazon is Killing Open Source Software
The mood at last week's Open Source Think Tank was surprisingly somber. Two years ago, the open source community was celebrating huge acquisitions such as Sun's purchase of MySQL (and even the VMware acquisition of WaveMaker). This year, the consensus was that the economic model which led to success for companies like MySQL and RedHat is being fundamentally disrupted by cloud computing.
For example, Amazon recently launched a successful Relational Database Service (RDS). This hugely profitable service is based on MySQL, but Amazon doesn't pay MySQL a penny for it. This spells death for the traditional open source business model.
To understand why, let's look at how the open source model used to work. The open source business model has traditionally been based on two revenue streams: 1) revenue from OEMs who embed an open source product into their commercial offering and 2) revenue from providing support services for production systems that embed an open source product.
Whenever a company embedded MySQL into their commercial offering, they had to either license their own product under an open source license like GPL or buy a commercial license from MySQL. Just as importantly, a company using MySQL in a production environment would purchase support from MySQL as an insurance policy.
Now let's look at Amazon RDS. First of all, Amazon gets around the GPL license because they are not delivering binaries to their customers. This means that Amazon can deliver a commercial service without being forced to open source their own software. Next, Amazon has sufficient internal expertise on MySQL that they can provide their own support.
The open source community has tried to fight back. For example, the new Affero GPL license (AGPL) was supposed to fix the loophole which allows Amazon to deliver MySQL as a commercial service. However, since almost nobody is using the AGPL license, every OSS project faces the prospect of seeing someone else deliver commercial services based on their product for which they don't get paid.
New open source companies are trying to get ahead of this trend by offering their own cloud-based service - such as Cloudera (Hadoop). This is a good idea, but it is not clear how these stand alone services will be able to compete with Amazon's Elastic Mapreduce service, also based on Hadoop.
Of course, none of this is going to stop the success of the open source movement in general. There are many projects which have no commercial aspirations. However, until open source companies can articulate a business model that can thrive in the cloud, this does cap the potential valuations of open source companies and hence their access to venture capital.