When The 451 Group approached Marketcetera 2 months ago to contribute to a commercial open source report, we weren’t quite expecting the end result to be titled, “Open source is not a business model.”
The analyst firm surveyed 114 open source companies, including Marketcetera, on their business strategies. They sought to answer the question that plagues every open source vendor at cocktail parties and VC pitches alike: “How DO you make money if you give your product away for free?”
The answer, it seems, is not simple. The title tells us briefly what open source is not, but the report takes 71 pages to approximate what it can be. Matt Aslett lists the highlights on The 451 CAOS blog, and sums up the larger idea by saying,
“Open source is a business tactic, not a business model. Open source is not a market in and of itself, nor is it a vertical segment of the market.”
At Marketcetera, we’ve taken the stance that open source should be considered more from the customer’s point of view than the vendor’s. As I wrote in last week’s blog post, open source is a disruptive force in the financial services industry that shifts leverage back to the customer and allows them to define what constitutes value. We’ve already seen this with Linux and are now seeing penetration at the application level.
And from the customer standpoint, open source is what makes our product more valuable than those of our proprietary competitors. For example, if your automated trading system is saving you $10K/day in mere efficiency, why wait 9-12 months to get your system running when open source offers the ease of integration and customization to get you up in days or weeks? This is especially relevant for financial services organizations that demand both a high level of customization as well as the fastest possible implementation of their proprietary trading strategies.
Aslett further notes that the line between open source and proprietary software is blurring as the former is incorporated into the latter’s hardware and software. We can’t disagree. Our Eclipse front end and Java back-end allow our customers and partners to build onto and integrate Marketcetera with proprietary systems.
But, all of this isn’t to say that open source is no longer a business model. We find it a great way for financial services organizations to get comfortable with our software before they need to make significant financial commitments, but it’s also a mindset and a way of approaching what software could – and should – be. With our upcoming 1.0 product launch, we’ll show just how sustainable open source as a business model can be.