A friend recently bought a GM car. I proceeded to inform him that I am shorting GM stock (technically a put option). He was shocked. “But they make great cars,” he exclaimed. I responded, “I’m not shorting the cars, I’m shorting the company.” Why am I recounting this exchange? Because I believe that the new wave of NoSQL companies—as opposed to the rebranded ODBMS—presents the same situation. I am long the products, but short the companies.
Let me explain. NoSQL companies have built some very cool products that solve real business problems. The challenge is that they are all open source products serving niche markets. They have customer funnels that are simply too small to sustain the companies given their low conversion/monetization rates.
These companies could certainly be tasty acquisition targets for companies that actually make money. But as standalone

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The two predominant forms of open source licenses are BSD and GPL. PostgreSQL is licensed under the BSD license , while MySQL is licensed under GPL . While the details are arcane, the business impact is significant, and that is what this post addresses.

The BSD (or BSD-style) License: This license basically says: ‘This code is provided as is, do what you want with it, and include this copyright in your resulting product.’

The GPL License: This license, also known as the copyleft license, essentially says: ‘This is free and distributed as source code, and any addition or extension must also be distributed under these exact terms.’

BSD essentially says I prefer open source code, so I’m making my source code open





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Amazon’s SimpleDB isn’t a relational database, but it does provide elastic scalability and high-availability. Amazon’s recently announced Relational Database Services (RDS) is a relational database, but it doesn’t provide elastic scalability or high-availability. If you are deploying enterprise applications on the cloud (including Amazon Web Services), you might want to look at ScaleDB because it is a relational database and it does provide elastic scalability and high-availability.

Amazon describes SimpleDB by comparing it to a clustered database:

"A traditional, clustered relational database requires a sizable upfront capital outlay, is complex to design, and often requires extensive and repetitive database administration. Amazon SimpleDB is dramatically simpler, requiring no schema, automatically indexing your data and providing a simple API for storage and access.

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Amazon’s SimpleDB isn’t a relational database, but it does provide elastic scalability and high-availability. Amazon’s recently announced Relational Database Services (RDS) is a relational database, but it doesn’t provide elastic scalability or high-availability. If you are deploying enterprise applications on the cloud (including Amazon Web Services), you might want to look at ScaleDB because it is a relational database and it does provide elastic scalability and high-availability.

Amazon describes SimpleDB by comparing it to a clustered database:

"A traditional, clustered relational database requires a sizable upfront capital outlay, is complex to design, and often requires extensive and repetitive database administration. Amazon SimpleDB is dramatically simpler, requiring no schema, automatically indexing your

  [Read more...]

Normal 0 false false false EN-US X-NONE X-NONE MicrosoftInternetExplorer4 A core economic principle is the Complementary Good . In short, when two or more things are used together, they are complementary. When the price of an item goes up, the usage of all of its complementary goods goes down. Similarly, if the price of an item goes down, the usage of all its complementary goods goes up. An example is the computer printer. Printers and ink are complementary goods. Proprietary ink products are extremely valuable—at one point ink delivered 60% of HP’s profits —so HP,

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Normal 0 false false false EN-US X-NONE X-NONE MicrosoftInternetExplorer4 A core economic principle is the Complementary Good . In short, when two or more things are used together, they are complementary. When the price of an item goes up, the usage of all of its complementary goods goes down. Similarly, if the price of an item goes down, the usage of all its complementary goods goes up. An example is the computer printer. Printers and ink are complementary goods. Proprietary ink products are extremely valuable—at one point ink delivered 60% of HP’s

  [Read more...]

Where are you going to invest your time and money. You may invest in your kids, your work, your hobbies, and more. As you make these decisions, your passion is one consideration, but another is the return on your investment. Of course, you want your investments to be successful. The best way to ensure success is to bet on winners. In other words, you want to invest your time and money on things you are confident will be successful. This holds true in your personal and your professional life.

When Alexandre Dumas (on a side note, my wife refers to me regularly as a Dumas) said that "Nothing succeeds like success" he was encapsulating this same decision process and the conclusion that people want to bet on winners, and that by so doing, they are perpetuating that winning.

So what does this have to do with open source software (OSS)? I received a note from

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Where are you going to invest your time and money. You may invest in your kids, your work, your hobbies, and more. As you make these decisions, your passion is one consideration, but another is the return on your investment. Of course, you want your investments to be successful. The best way to ensure success is to bet on winners. In other words, you want to invest your time and money on things you are confident will be successful. This holds true in your personal and your professional life.

When Alexandre Dumas (on a side note, my wife refers to me regularly as a Dumas) said that "Nothing succeeds like success" he was encapsulating this same decision process and the conclusion that people want to bet on winners, and that by so doing, they are perpetuating that winning.

So what does this have to do with open source software (OSS)? I

  [Read more...]

OK, you’ve released your open source product and built a huge userbase. Now your shareholders/investors are pressing you to monetize that userbase. How do you do it? There are many ways to monetize open source. For simplicity, let’s segment the revenue sources according to who is paying:

Users :
Your users probably downloaded your product for free. Some are willing to pay for certified/approved distributions, maintenance, updates, support and more. Because open source turns your product and services into commodities, you will need to leverage your brand, and the expertise that it embodies, to maintain premium pricing.

Another good revenue source is certified education. If you’ve built a large userbase, businesses clearly see value in your product. As a result, employees and job-seekers will enhance their personal value and marketability if they

  [Read more...]

OK, you’ve released your open source product and built a huge userbase. Now your shareholders/investors are pressing you to monetize that userbase. How do you do it? There are many ways to monetize open source. For simplicity, let’s segment the revenue sources according to who is paying:

Users :
Your users probably downloaded your product for free. Some are willing to pay for certified/approved distributions, maintenance, updates, support and more. Because open source turns your product and services into commodities, you will need to leverage your brand, and the expertise that it embodies, to maintain premium pricing.

Another good revenue source is certified education. If you’ve built a large userbase, businesses clearly see value in your product. As a result, employees and job-seekers will enhance their personal value and marketability if they are

  [Read more...]

In a prior blog post , I explained how the "open source + paid support " business model only works for software products that address extremely large markets. However, even those large market products rely upon a rich collection of niche market products that combine to deliver solutions.

As the book Crossing the Chasm explains, every technology product must make the move from its early adopter or hobbyist roots to a mainstream application. The hobbyists are willing to accept tinkering with the product to make it work, but the much larger mainstream market wants to buy proven solutions .

As John Donne once said, "no man is an island." Similarly, no software application is an island;

  [Read more...]

In a prior blog post , I explained how the "open source + paid support " business model only works for software products that address extremely large markets. However, even those large market products rely upon a rich collection of niche market products that combine to deliver solutions.

As the book Crossing the Chasm explains, every technology product must make the move from its early adopter or hobbyist roots to a mainstream application. The hobbyists are willing to accept tinkering with the product to make it work, but the much larger mainstream market wants to buy proven solutions .

As John Donne once said, "no man is an island." Similarly, no software application is an island;

  [Read more...]

We know that the open source + paid support business model works for software products that have extremely large numbers of users, but does it scale to products with medium or small numbers of users?

Software is often described as a stack (see the simplified version below).

Vertical Applications [Installed base = small]
————————–
Middleware (e.g. Database) [Installed base of MySQL = 12 Million]
————————–
Operating System [Installed base of Windows = 1Billion+]

Companies in the operating system layer typically have large numbers of users with a small license fee per user. This dynamic makes it relatively painless for a company to forgo a small license fee in exchange for a larger userbase, and then make money on support. For example,

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"The support model doesn’t scale well." - Matthew Aslett, The 451 Group

How do you make money with open source? I’ve written about open source business models previously, but I thought it might be valuable to quantify the impact of open source on your business model. The following analyzes the differences between a closed source model and an open source + paid support business model, using an apples-to-apples comparison based on a $100 license fee for the closed source product.

Option 1: Closed source
License Fee: $100
Annual Maintenance & Support: $18 (18%)
5-Year Present Value of License + Support: $175 (1)
Conversion Rate: 100%
Userbase: 1X
Relative Revenue: $175

Option 2: Open source
License Fee:

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I’ve been thinking about the business of what’s variously come to be called commercial open-source and enterprise open-source. I’m interested in the gestalt — the product, development processes, marketing, licensing and so on. MySQL has tried many different ways to earn money. These include dual licensing, support subscriptions, a knowledgebase, consulting, an Enterprise/Community split, [...]