Ask HN: Is it foolish to open source your SAAS business source code?

[hoodoof]

Say you come up with some great productivity application. It's web based, has a back end and a JavaScript front end for browsers and mobile.

You put it on github under an MIT or BSD or similar license. So corporations or anyone else can download and install your software and use it at no cost.

On your main website, you offer the software but on a per-user fully hosted, running online basis. So your revenue will come from people signing up to use your fully hosted service where they don't need to make any effort to install or configure - it just works. You also make money offering support contracts to people who have downloaded and installed their own copies of the software.

The reason you have open sourced it is to spread the word, gather interest and build community around your product. The theory being that the vast number of free users will be the impetus that leads to a small number of paying people discovering and using your product. Maybe free and open source is more newsworthy, more likely to get press and blog coverage?

Theoretically anyone could take your code and set up in competition to you. Anyone could fork your code and rename it to something else.

So is open sourcing your SAAS application a good way to do business, or is it foolish and giving away the farm?

Is there any examples out there of companies that have actually made money taking this approach?

I'm scared that if I fully open source then I will somehow have given the value away.

[patio11]

Sidekiq (http://sidekiq.org/), a Rails job queueing system, works on related model: open core, paid subscription if you want to host a version with all the commercial bells-and-whistles plus get support. The author does well for himself, deservedly.

I'd consider shipping a bare bones version of the back-end under MIT, letting people spend their own two weeks getting one ready if they want to have it more useful in production, or give them the option of paying $500 per year for your back-end. That's an easy, easy call for a lot of companies to make.

Just to set expectations: just OSSing your thing is not going to cause the world to beat a path to your door. You're going to have to go bang down doors to get this adopted, whether it is 100% free, 100% paid, or some combination of the two. Unless you put in the marketing and "sales" work, you will probably build no community, receive no buzz, acquire no press mentions, and get no meaningful support from other developers. Be ready for this, because three months from throwing most projects on Github you can expect a deafening cacophony of absolutely nothing at all unless you find the people it solves a problem for and, with the best of intentions, shove it down their throats.

[beck5]

We did exactly this with ShareLaTeX.com (https://github.com/sharelatex) we are a bootstrapped SASS business that started a couple of years ago and now supports 3 people full time.

We have open sourced 95% of our code, which gives people a really great product they can install on their own servers. Along with our hosted version, we have a premium self hosted version with a few things that only the big users would want. I would not personally want to build my business around support/contracts as it is really pretty close to being a contractor.

We were already an established company before we open sourced so I can not speak for how many users it got us. I don't think its foolish todo but at the same time it is not going to make your business.

Be aware open sourcing will add extra burden to everything you do. But starting open source is going to be easier than doing it retrospectively.

discourse.org started life open source and they are doing very well but have some big hitters and finance.

[JosephRedfern]

ShareLaTeX is awesome - thanks for creating such a cool service.

[hoodoof]

I'm interested to hear more of the story.

How long did it take to start making money?

Do many people download and install?

Have you ever felt concerned you'd be forked by competition?

Where does the income come from primarily?

[DennisP]

How does open source add extra burden to everything?

[Eduard]

I'm as well currently thinking about open-sourcing components of my web application. "Open sourcing" comes in many flavors, and the one I'm mostly favoring right now (for one of my particular components) is a dual license, "GNU AGPLv3 / commercial" combination.

https://en.wikipedia.org/wiki/Affero_General_Public_License

Metafizzy's Isotope goes a very similar dual-licensing way: http://isotope.metafizzy.co/license.html

Isotope's author has written about how commercial support has worked for him in his particular context, search for "support" on his blog archive: http://metafizzy.co/blog/archive.html

While an MIT and BSD license is (among other things) good for monetizing on consultancy (... not easy for a one-person project), a GPL-including multi-license may additionally allow to monetize on third party modifications of a software component (... that's way easier for a one-person project).

If someone sees a fallacy or gotcha in my monetization reasoning, please comment.

[davidroetzel]

One problem with dual-licensing though is that open source contribution becomes unnecessarily hard. Every contributor will have to sign a Contributor License Agreement, that at the very least allows you to dual-license their code. Many CLAs even have the contributor sign over her copyright to you.

Not everyone will be happy to sign something like that. And integrating a pull request on github suddenly becomes a tedious excercise in international copyright law :)

So dual-licensing gives you all the publicity-related and try-before-you-buy advantages of open source. But you will probably miss out on other great aspects, especially community-wise.

[hoodoof]

Doesn't Affero turn people off?

Affero means you really can't work with the code in any effective way cause anything it touches becomes Affero.

Personally I found Affero repellent when considering which open source software to download and install.

[julienmarie]

I've been asking myself the same question.

The conclusion I'm leaning towards is that the Saas version should, on top of the hosting/maintenance, offer some distinctive features ( it depends of your product, but on an Saas model, your architecture can be more complex than a Backend/Frontend/DB architecture, thus allowing more advanced features ).

In my view there is three layers, that could be seen as three steps ( but maybe I'm wrong ) : open source ( great for WOM if well managed, great to harden the software ), enterprise-behind-the-firewall license to make recurring revenue and build a sales pipeline, Saas once the architecture is stable enough to handle hundreds/thousands of customers with acceptable costs of operations.

Someone can take your code and set up in competition to you using the OSS version, just changing the logo. But the software is at the end only 30% of a company. What makes a great company is how it evolves with its market to serve and nurture better its customers. Economy is not about selling products, it's about exchange between humans. The real product is in the experience ( the software, the tone, the customer service, the email, the documentation, the ads... every little byte, pixel, sound that your company emits ). A company that steals your OSS and monetize on it without making it a new experience is just like a guy around the corner selling Rolex replicas.

[themartorana]

And let's be clear - you can open source license it however you want. So you can, in fact, allow corporations to run their own installs while still disallowing those companies from reselling the software.

[czr80]

And if they are better at you at the experience side?

[js2]

Sentry is both SAAS[1] and open source[2], but has an interesting history.

It was originally started as an internal tool at Disqus[3]. Its developers were able to open-source it, and spin it off into a side business. The developers then moved on from Disqus to other companies but kept getsentry.com running till it was profitable enough them to go full-time on it.

I'm using the open-source version as part of a solution at $dayjob. So how does this benefit getsentry.com? Well first of all, I'm talking about it here. They could also potentially sell my employer a professional services contract if I needed some level of customization that I can't do myself. Finally, I've contributed bug fixes and code changes which benefit my use cases, but also make it a better product for other sentry users.

So, win/win.

As an aside, the sentry developers are great to work with. Very responsive to issues on github and they seem to be available on the sentry IRC channel almost all the time.

[1] http://getsentry.com/

[2] https://github.com/getsentry/sentry

[3] http://blog.getsentry.com/2013/07/17/sentry-at-disqus.html and http://stackshare.io/posts/founder-stories-how-sentry-built-...

[jbrooksuk]

Thanks! I've just updated my applications license to match Sentry's since it seems to cover everything you'd need being in the same situation?

[Mahn]

> Is there any examples out there of companies that have actually made money taking this approach?

There are many, whether it fits depends a lot on the product but this open source first, business second approach is definitely not new. See for example MongoDB, WordPress, Vanilla Forums or Discourse.

Or here: http://en.wikipedia.org/wiki/List_of_commercial_open-source_...

And see also: http://en.wikipedia.org/wiki/OpenSaaS

[hoodoof]

+1 for the Wikipedia link.

Mongodb uses the Affero GPL license which is distasteful to many and my concern is using Affero would not REALLY be going open source but would be a way of trying to protect my business/my source code from being hijacked and renamed. Thoughts?

[nmarcetic]

Your developing process with opensource model will be much faster, you will always be few steps ahead with your community. Theoretically yes, but those people who will fork and "steal" your project are not your clients you are not targeting such audience, they will never pay for your product (hosted service, support etc...). If they are capable to fork you project, improve and change you code, develop the product faster then you, become your competition, you should hire them :). This is a signal you are failing, something is wrong in your organization/team and you should quit.

Ask your self,Do i ever heard for such story ?

[alexggordon]

Open-sourcing your code is a big step, and in doing so, you're essentially gambling on the fact that the services you provide are what's worth money, not the platform you do it on and even if someone else had your tools, you could still do what you do better.

Additionally, I think it depends on how likely your clients are to use that code, IE the model of your business. For example, if you have a time tracking software, a good portion of your clients are probably not strong technology companies. In this case, open-sourcing it, while continuing to develop it, could create an excellent open-source project that is maintained through paying subscribers.

A few examples:

OpenStack[0], is a huge open source[1] cloud operating system. Rackspace runs on them. They've fostered a huge community, all through original backing by Nasa and Rackspace[2]. Essentially, OpenStack is now used by Rackspace to fund their for-profit business, while OpenStack is being actively developed by thousands of people.

Sidekiq[3] is an background job processor, that sells a pro[4] version on top of the open source library. This pro version provides additional user functionality at a cost, allowing funding for future development of the open source library.

Essentially, both these platforms use open source to sustain for-profit businesses, and both had a long term plan for why they wanted to open source a big part of their business. While I think a lot of planning needs to go into open sourcing it, it's definitely sustainable and doable.

[0] https://www.openstack.org/ [1] https://wiki.openstack.org/wiki/Getting_The_Code [2] http://en.wikipedia.org/wiki/OpenStack#History [3] http://sidekiq.org/ [4] http://sidekiq.org/pro/

[caw]

It depends on the business. That model definitely works, and another variant on the model where paid solution users get additional enterprisey features also works (single sign on, Active Directory integration, etc). Take for example Chef, which has a paid version and an open source version. Paid Chef comes in 2 flavors, hosted and on-prem. There's also Nagios and several other IT monitoring solutions.

You may want to double check on which license is best to use in this scenario, but it definitely is possible to grow a business using it.

[bhouston]

Does Chef make money though?

[sytse]

GitLab B.V. CEO here, our business model is to charge the largest organizations that run GitLab on their servers. Our SaaS GitLab.com is free to use for almost all (there is a plan if you want personal support). More than 100,000 organizations use the open source version for free. But our paid offering that offers features that are most useful for organizations with more than 100 people is where we generate revenues. Don't underestimate the needs of larger organizations to run software on their own servers.

[williamstein]

In December, I open sourced SageMathCloud (https://cloud.sagemath.com), after it had been closed source for years. SageMathCloud (SMC) is a "SaaS product" in which you collaboratively edit IPython notebooks, LaTeX documents, Sage worksheets, R code, etc., in a browser. It is not yet a business, though it may become a business soon. Here's what happened with open sourcing.

It was politically contentious for SMC to be closed source, due the connection with the Sage open source math software project (see [1] for a big thread attacking SMC for being closed, and [2] for a rebuttal). SMC was closed source for years, primarily because my university commercialization office wouldn't work with me unless SMC was closed source.

In December 2014, I discovered that SMC had received some development support from NSF grants that had explicit requirements that all code written under those grants be released under the GPL (very few NSF programs have open source requirements, but the SI2 NSF program recently added them [3]). As soon as I realized this, I complied with the conditions of those grants and open sourced everything. This has had no real impact on SMC development. This didn't surprise me -- many of the other responses in this thread express the same expectation. I wasn't surprised because I started the Sage math software project back in 2005, and grew it from 0 to hundreds of developers (over many years), so my expectations for what it would take to get useful contributions to SMC were realistic -- massive, insanely hard work over many years, many workshops, writing lots of documentation, recruiting developers, arguing for why my project is better to contribute to than the many competitors, etc. Building an open source project is like building a company -- you have to recruit and train every new "hire" (contributor), build up process, sell a vision, etc.

My situation is unusual, since I am balancing simultaneously being both a (tenured) mathematics professor at a university and founding a company. Technically the university can assert ownership over anything I write using university resources (see [4]). However, due to the viral nature of the GPL, it doesn't matter who owns what I write, since I (and everybody) can still use it. I didn't want to use the GPL for SageMathCloud (I much prefer the BSD license), but technically I have no choice.

[1] https://groups.google.com/forum/#!topic/sage-devel/ojLOJaxIh... [2] http://sagemath.blogspot.com/2014/08/what-is-sagemathcloud-l... [3] http://www.nsf.gov/pubs/2014/nsf14520/nsf14520.htm [4] http://www.washington.edu/admin/rules/policies/PO/EO36.html

[swirlycheetah]

Ghost is probably a good example to investigate.

Their software is open sourced and easy for anyone with a server and some technical knowledge to get up and running. They offer a paid for hosted product which is reasonably priced and offers automated updates.

Here's[0] a report on their progress in 2014, as you can see their model is working very well for their product.

[0] http://blog.ghost.org/2014-report/

[avinassh]

btw Ghost is a not for profit organisation. Does that make any difference?

[simonswords82]

Like the other responder caw I think it depends on your business, and it also depends on your target audience.

Open sourcing the wordpress blog platform? Sure that makes sense, the target audience for wordpress are largely technical (to a greater or lesser degree), and want to see what they're putting on their servers. More importantly they want to customise it without limitation.

Open sourcing a productivity application? Hmm, not quite so clear cut. If the majority of your users are technical that's good. But are your users going to want to fiddle with it to the extent that they want it open sourced? I'm really not confident that they will unless you know something about them that I don't? In other words, what is the benefit to your customers in your app being open source?

To answer your other questions...I don't think that you'll get more press coverage about your project just because it's open source. Open source isn't a new thing.

My personal view is that I would launch your app paid for using one of the standard pricing models. See if you can gain traction on the benefits of the app alone, rather than trying to put an open source twist on it at the outset.

[icebraining]

(Disclaimer: I work for one of partner companies)

Odoo[1] (an all-in-one platform for companies) has been having plenty of success using the open source model. There's a community of partner companies which contributes bug reports, fixes and modules, and builds upon the base platform, and then when selling those solutions to other companies, those contracts often include an yearly support fee for Odoo (the company) itself.

Regardless of the technical merits of the platform (I think it's actually pretty decent, but some disagree), the business model has been working. Some of the clients using it for core business functions include companies with revenues in the hundreds of millions, as well as official organisms.

Odoo (the company) has also recently raised $10M from European VCs.

[1] https://www.odoo.com/

[JonoBB]

There are plenty of businesses running on this model. Wordpress is probably the biggest.

[davidroetzel]

I always wanted to try and test this approach, as I am convinced that a lot (most?) of the value in SaaS is in hosting. Operating your own servers is a huge hassle, and many people will gladly pay someone to do it for them.

Also if you open source your code and offer customers a full export of their data you have two advantages over closed source SaaS: Customers do not need to worry about vendor lock-in. And they can depend on being able to continue using your software even in case you ever go out of business.

[sredfern2]

For the Open Bank Project ( http://www.openbankproject.com and https://github.com/OpenBankProject/ ) we use AGPL + commercial + Harmony CLA. We have tech partners but so far we've done most of the master development ourselves. Time will tell if this is a good approach! :-)

[ig1]

I wrote a piece on open source business models that you might find useful:

http://blog.imranghory.org/open-source-business-models

The big risk with your suggested approach is that you have no defensibility as there's nothing stopping someone else offering a hosted version of your software. Because of this it's hard to maintain the high-margins typically required to grow a software businesses.

Open sourcing your product also isn't going to magically make it more popular; unless there's strong reasons why a customer would prefer an open source version (i.e. if you're making infrastructure software which you're asking your customers to bet their business on) it's unlikely to have a significantly greater marketing impact than other freemium strategies.

It sounds like what you really need is a go-to-market strategy. Most SaaS is sold through traditional online marketing (ads, seo, whitepapers, etc.) and sales and those are probably the main options you should be evaluating.

[rakoo]

Are you selling Service as a Service or Software as a Service ?

If you're selling Service, you're selling the infrastucture, the ease of use, the support, the knowledge in the domain, and the scale you have as being the original player gives you insight into the changes needed in the software. At this point the Software is only a tool for your business, but that's not what your clients want.

Maybe some people will use the Open Source version without paying you. Maybe they will install it for their pet project, or for a prototype at $dayjob. And maybe one day they will want to go in production, won't want to be hassled by all the sysadmin gory stuff associated with running their own machine, and will just come to you.

You have to remember that you're selling a service, competitors will come and challenge you whether they have your code or not. Make your service awesome, the people will still be coming for you.

[pasharayan]

As mentioned in the comments here, there are companies like MongoDB, Wordpress & Spring Framework (of which its parent company was sold for 420 million dollars) which have open source products at their core and have been successful companies financially.

I would argue though, that many of these successful companies are more platform providers than SASS.