How We Run an Open Source Based Business.

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Posted by Aaron Contorer - 26 March, 2019

How We Run an Open Source Based Business

The global economy is changing to promote sharing, and free software is an important part of that. How do we run a business when important products are abundant and even free?

Long ago as cofounder of the shareware business model for software, and then an engineer at a public supercomputing center, I was lucky enough to be a part of this trend in its early days. Then as a Microsoft executive, I worked on strictly pay-to-use software, some of which that company now provides for free. As CEO of FP Complete, I now spend large amounts of costly staff time creating open-source code and free learning materials.

How can companies like FP Complete give away work, and still be a business?

The good news is we’re not crazy, nor are companies like Google, Microsoft, IBM, Red Hat, and Amazon—all of whom give away software. The Information Technology industry is moving to a model in which plenty of core software is free, and companies make their living with add-on software and services.

Functional Programming, Blockchain, FinTech, Cloud DevOps, and Data Operations (DataOps): in each of our main lines of business, companies are eager to adopt free open-source software like Haskell or Docker for enormous productivity benefits. While some components like Linux are very mature, others like Kubernetes are cutting-edge, with serious changes showing up every few months. Others like Rust or Haskell are in between: reasonably stable but with a significant learning rate. The newer a technology is, the more companies want help understanding it, getting around its weaker spots, and getting the most out of its compelling strengths.

That’s where we do business. As an engineering consulting company, FP Complete looks at the world as a series of chances to help other companies—ideally giving away work that has mass appeal, but selling work that’s focused and customized for paying clients. The paid work subsidizes the free work, which we give away to further grow the community, generating new adopters, a fraction of whom will buy something. When it works, it’s a virtuous cycle.

How much to give away / open source?

Often our hardest decisions are on the border: what tools or components do we reserve for our paying clients, and what do we give away? A compelling example happened a few years ago, when our Haskell engineering clients reported difficulty using a tool called cabal. This multifaceted tool is maintained by volunteers in the community, who had many different concerns in mind—understandably not making a top priority of our clients’ needs, in the timeframe our clients required. So our clients paid us to build another shared tool, called stack, which suited their needs better and let them get their projects done on time.

At this point our clients had their solution, and we owned some pretty attractive IP. Now should a tool like this be limited to our clients, or licensed widely as a paid product, or given away?

Fortunately we had conducted (and published) a large-scale survey of Haskell users worldwide, focusing on their practical needs. By far their top complaint was the same one our commercial users were facing, which they were calling “cabal hell.” (I’ve learned that unlike free beer users, free software users are as demanding and blunt as those who pay.)

We reasoned that fixing a top obstacle for all comers would let more companies deploy Haskell, increasing our pool of potential clients. Open-sourcing might also attract collaborators who could improve the tool. So with our clients’ blessing we decided to spend more, polish stack, and give it away as an open-source contribution to the community.

This went better than expected. Far from being a niche workaround, this tool was adopted by many commercial and non-commercial Haskell users, and the complaints about “cabal hell” reduced dramatically. The growth rate of commercial Haskell usage increased, including some companies who have gone on to buy training and engineering services from us. The cabal team saw that users were finding this sort of thing handy, and they were able to make big improvements to cabal, while other volunteers have been adding to the stack project. Now users have two productive open-source solutions to choose from, another good sign of community growth, and between these various efforts the lives of users were dramatically improved.

Helping the community and enhancing the free tools is good for business, because it gets companies past their old problems and lets them focus on getting work done—sometimes work that we can help with. We need to be careful not to overdo it, supporting the community wherever it’s willing to pick up the ball and run forward, yet being there for our clients when they need focused progress. That’s a constant balancing act, and we’re still learning.

What to charge for?

The rule of the sharing economy is: the larger the audience, the less you have to charge per user:

  • If everyone needs a piece of work, try to give it away.
  • If a few people/companies need a piece of work, try to charge for it.
  • If one company needs personalized or custom work, definitely charge for it.

After all the free IP they can download, most engineering teams still benefit from personalized, customized help. It speeds up the work, and is cheaper than building an in-house expert on every technology from scratch. Of course the more help they find valuable, the more we can earn. The price reflects the amount of custom help they get:

  • Free - online information and code
  • Cheap - One-on-one mentoring, getting them past the learning curve
  • Moderate - Hands-on engineering assistance, implementing specific bits
  • Midrange - Comprehensive code review, audit, QA
  • Substantial - Implement parts of their code or DevOps, augmenting their team
  • Largest - Design and build a whole solution

We charge for high-value time focused directly on problems of the client’s own choosing. Even though an hour of our time costs more than an hour of their staff time, it’s backed by hundreds of thousands of hours of cumulative experience and know-how, which clients are willing to pay for.

A corollary to the sharing economy: you can charge for specialized cases while you give away the base technology. For every user that pays for enhancements or assistance, you might expect 10 or 100 users to take and use just the free code or free learning materials. If you can make the numbers work financially, this can be a win for everyone.

A second corollary: by doing good work on free things, you earn the respect to work on paid things. We have spent little on marketing, because we build our reputation through our open-source code, our free learning materials, and happy users referring us.

Explore FP Complete’s Experience in FinTech Software Development

 The sharing economy is here to stay

Sharing lets companies build their business through earned respect, rather than just by making noise. That’s better for the world, because it’s a true win-win.

We find that sharing is also better for our company culture. People like to work at FP Complete because they can focus on actually solving problems, every day. And new clients hear about our work, and can even use our tools and lessons, before they contact us. They know we focus on fast-moving, smart, practical solutions, because we share our work.

My advice to any would-be open-source entrepreneur is this: jump in, but be prepared. Open-source users are technically savvy, and they expect excellent work. Don’t plan to be coddled just because you come bearing gifts. Do expect to spend a lot on serious, valuable community contributions. Remember it takes time to build a reputation and the respect of a technical community.

This year marks the 34th anniversary of my entry into the shareware industry, and this month marks the 7th anniversary of FP Complete’s founding. The sharing approach works. Dozens of companies have chosen to pay for our services, including over two dozen in 2018 alone. We are grateful to them, and to the thousands of engineers who use our code and our learning materials for free, and to the tens of thousands of engineers whose open-source code we use every day. We move forward together.

Topics: stack, Open source, business management

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