Gartner questions the novelty of the open-core biz model

Gartner's Brian Prentice calls out "open-core businesses" as...     ...software vendors.

"Let’s keep in mind that when we start talking about business models, what matters is not how a vendor generates incremental revenue but how you generate incremental value. In order to understand whether that’s going to happen or not we should start with the foundation of the open-core model – the distinction between a full-feature proprietary version and a free, open-source functional subset of that offering.

[...] That’s called “freemium” in the consumer world. In the corporate market, attempting to broaden the appeal of a software solution by parring back the functional footprint into a low cost alternative has been a staple mid-market strategy of enterprise software companies for over a decade. [...]  By and large, organizations want products that represent a nuanced understanding of their needs rather than a product manager’s arbitrary functional pruning process.

And arbitrary is the operative word. A couple of years ago I looked at a number of open-core providers and found that none of them had a consistent decision framework in place nor any publicly available covenants that explain to potential users the criteria they use in determining which new capabilities will be made available only in their commercial version. [...] The minute you require a feature only available in the full version then the entirety of your commitment needs to be scaled up and re-costed to the full-cost offering.

[...] This is where the hype starts to creep in. The idea that a functionally complete, proprietary solution is somehow unique because it was built atop an open source base fails to recognize the fact that many proprietary solutions are being built using open source components."


Read the full post at:
gartner.com/brian_prentice >> open-core-the-emperors-new-clothes

Discussing "open"

The whole discussion seems to be built on a very strange misunderstanding. A lesson I learned from reading about cloud computing and intellectual capital is: there is not always a definite need for a strict definition. Let broad concepts be broad and learn to treat them as an adjective. The latter is especially useful for cloud-related discussions but makes the venture to define "open" very strange. It is already a perfectly useful adjective to start with...

Google's started things of with his manifesto of openness Meaning of open, simply declaring that "open systems win."

Others have joined and built upon the discussion and to some degree objected to the self-declared dedication to openness. Many have noted that while Google is certainly not the worst, the firms bisggest successes (search and advertising) is definitely closed.

Gartner's Brian Prentice (gartner.com > Brian_Prentice > The truth of open) notes that "the truth is that closed systems still win. Open systems, practically speaking, are basically good for making others lose".

Harvard Business School Professor Tom Eisenmann shows his work investigating open platforms (platformsandnetworks.blogspot.com):


Figure courtesy of Tom Eisenmann

Chris Dixon (cdixon.org > google should open source what actually matters their search ranking algorithm) sees Google's openness as “commoditizing the complement" and their closed search and advertising algorithms as "security through obscurity".

The sometimes harsh language aside, this a very interesting subject: what is the lock-in of the open-source software era...

Also read: techcrunch.com > google open when convenient