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The shortsightedness of open source business models

Chef Software founder Adam Jacob on the struggle of getting an open source business model right and the licensing approach for his new venture, System Initiative.

Before HashiCorp's license change in 2023 and $6.5 billion acquisition by IBM in April, there was Chef Software.

But unlike HashiCorp executives, Adam Jacob, founder and former CTO of Chef who is now co-founder and CEO of System Initiative, has the benefit of hindsight. One thing that's clear to Jacob: Open source business models are immature.

Chef, an infrastructure automation startup, was founded in 2008 and sold to Progress Software for $220 million in 2020. Along the way, Chef executives tinkered with the startup's business model, which included an open core version at one point, productizing analytics and adding to its product suite. But they eventually realized that keeping the thing Chef did well -- configuring servers -- freely available to customers stunted its growth.

In 2019, Chef underwent a license change, where the source code continued to be released under the Apache 2.0 license, but the binary or executable code was packaged and released under subscription licenses. The decision left the Chef community feeling "a little betrayed," Jacob told TechTarget Editorial's Beth Pariseau in Episode 4 of IT Ops Query: Tech's Tragedy of the Commons.

But, Jacob added, a long-term business model was not top of mind when Chef launched -- nor did he know he needed one, given the morality trap attached to profiting from open source software, as well as the lack of collective wisdom and resources available to him.

"Open source business falls into this trap when we say open source isn't a business model. Which is true, as a sentence," he told Pariseau. "And as soon as we say that, what we're really saying is, 'That part is on you -- you figure it out.'"

To avoid these "rug pulls," Jacob calls for open source companies to talk more about business models and business dynamics ahead of time to consider how businesses can succeed long term -- even when the market gets saturated or growth slows.

In this podcast episode, he also talks about how his experiences with Chef Software affected his approach to System Initiative.

Nicole Laskowski is a senior news director for TechTarget Editorial. She drives coverage for news and trends around enterprise applications, application development and storage.

Beth Pariseau, senior news writer for TechTarget Editorial, is an award-winning veteran of IT journalism covering DevOps. Have a tip? Email her or reach out @PariseauTT.

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