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My company has invested a lot in R&D over the past 3 years. It led to the development of a system we can use as a base to build custom software for our customers.

More and more customers want their produced software to be open source.

While we use a lot of open source components ourselves, we are a bit reluctant to release the result of 3 years of investment. Also, we currently have no other source of income and this system became our main product.

What do you think we should do? How can my company switch to developing open source software without too much damage?

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    We couldn't possibly know enough about your situation to provide a proper answer. It's very dependent on what you're selling and what your customers mean by Open Source. For example, I know of a company who is outsourcing development of a product. When the executable is delivered, so is the code. It was contracted this way so that product development could continue internally after delivery. As was pointed out in an answer, this cost significantly more. I think it's likely they want to be able to see the code and not the definition of Open Source that you'll find on this site.
    – RubberDuck
    Commented Jan 10, 2016 at 2:06
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    This is a giant consulting question about your market, product, and competitors. I'm with @RubberDuck
    – bmargulies
    Commented Jan 10, 2016 at 19:28
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    Some products are delivered with source to their customers, and they are encouraged to share modifications and adaptations among themselves (but not with third parties). Some add ons are taken over and become part of the official package. I.e., sort-of open source, but only among customers, provider keeps all rights on changes.
    – vonbrand
    Commented Jan 11, 2016 at 1:10

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Probably not a Politically Correct answer for this site but ...

JUST SAY NO

Of course that isn't going to be enough for your customers, you need to present a good business case for them to continue using you even if it's not open source.

Consider why the customers might be asking:

  • They are afraid you will go out of business, and they will be left with a product which is no longer supported.
  • They want to use someone cheaper to do future work on the product.
  • They want to be able to customize the product for future variants - beyond the one they are purchasing.

You need to have good answers to all of these.

  • For continued support, place the source code in Escrow with a clause to release (under suitable license) to registered clients should your company fail.
  • For them wanting to use someone cheaper: you are not in the business of enabling your competition. You need to find a way to make this palatable to the customer, but you have a right to protect your own future.
  • For them wanting to do their own customization in future ... sell them a (more expensive!) source license - again suitably licensed.

Nor are you solely selling a service, as Mnementh suggests. Your 'product' is a combination of existing proprietary technology/IP with services to customize it. You need to protect that.

Now, you may lose some customers who are adamant on a FOSS solution. But others will see the advantages. If your product is better than the 'free' alternatives, clients will come, and clients will pay.

However, that's not to say you can't identify portions of your framework which are generic, and don't contain any particularly valuable IP, and open source those. Then you get the best of both worlds, as you can (hopefully) leverage the community to reduce your own maintenance costs while giving something back.

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    Thank you for your examples of answer to customers. At the same time working on the the extraction of portions that we could release could be the start of a solution.
    – Julien
    Commented Jan 11, 2016 at 17:06
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    You're welcome. But those aren't exhaustive. You will need to listen to their objections and develop good answers over time. Some will just be answers, others will mean you coming up with different solutions.
    – kdopen
    Commented Jan 11, 2016 at 19:47
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    When you say "good answers", I assume you mean answers that are "good" not only from the producer's perspective, but also from the customers' perspective. With that in mind, I have severe doubts about "For them wanting to use someone cheaper: you are not in the business of enabling your competition." First, customers who want a software to be open source want the freedom of choice of who provides future modules. In other words: They seek to avoid vendor-lock-in. By stating you are not in the business of enabling your competition, you essentially say you want to force them into a vendor-...
    – O. R. Mapper
    Commented Jan 11, 2016 at 21:51
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    ...-lock-in situation. There is no way this could be considered "good" from the perspective of the customer. Furthermore, it is you who brings up the idea that your direct competitors are going to be involved. If your competition can do the same future improvements in your software that you could do, but they are better and/or cheaper at it, and your only way to keep your customers is to (from their point of view) patronize them, you are directly pushing them into the arms of any less-shady-seeming competition. Lastly, from the customers' perspective, their request is not unreasonable and ...
    – O. R. Mapper
    Commented Jan 11, 2016 at 21:51
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    ... in turn, your statement "you are not in the business of enabling your competition" could seem unnecessarily inflexible and narrow-minded. After all, any company providing an extensible framework, and even more so, any company providing compilers or other software development tools is effectively "enabling their competition". Sorry for expressing these comments in a rather direct manner, but I'm trying to illustrate that your suggestion for answer #2 could easily evoke some unintended, but severe backlash.
    – O. R. Mapper
    Commented Jan 11, 2016 at 21:51
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Can you share more detail about what your customers really want when they ask if your product can be more open source? There are various open source strategies and depending on what your customers are asking for some may be mutually beneficial.

Open code, Restrictive license: It is possible to share source code while keeping that code licensed under a commercial license so that customers can customize your product. Atlassian does this for some products. Epic Games provides full source code access for Unreal Engine. In both cases, customers must first buy the software and are not allowed to copy it. Clearly, it helps to have some money and lawyers to enforce such agreements.

Open API: Many web companies release free, open source code libraries that make it easier for developers of other software to build custom applications on those APIs.

Open framework: Basecamp is the best (and maybe a unique) example of a company that extracted a generic framework from its commercial applications and distributed that framework as open source (Ruby on Rails).

Open tools: Facebook, Twitter, Google, Apple, and others open source tools that help run their businesses or help to make software, without releasing the specific code they make money off of.

Open product, Commercial service: Wordpress is the best (and maybe a unique) example of an open product that is supported by a paid service business. As with Wordpress, hosting of complex or mission critical installations is a typical service offering. Wordpress also demonstrates two additional ways to open up a product: themes and plugins. Themes allow artists to customize software at a UI layer, decreasing work for the core team. Plugins allow developers to extend functionality. You'll find a mix of open source, closed, free and commercial themes and plugins.

Warrantee, Support, Upgrades: Red Hat resells open source Linux, adding a warrantee and support contract and consulting services. You'd be surprised how many businesses there are that simply won't use open source without buying it from a third party. Some companies will choose an inferior product because there is a customer support representative they can call. So, while you may lose revenue from small businesses or hobby projects it is possible to retain revenue from large corporations that have a lot to lose financially.

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    You might read Chris Anderson's book, "Free" for a survey of open source and freemium business models. While I agree with other posters that it's perfectly fine to refuse to open source anything, you might find inspiration in "Free" that opens up a new way of looking at your situation.
    – Michael Hogan
    Commented Jan 9, 2016 at 12:51
  • Some of our customers are not necessarily asking for open source with something in mind specifically for our softwares. We noticed that for some of them it's just because of recent change in their company policy that now defines that all contracts should lead to open source software… Thank you for your presentation of strategies and the book reference.
    – Julien
    Commented Jan 11, 2016 at 17:05
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Well, this is basically a question about how to change the business model. Because a software company CAN make money with open source software, but it probably cannot do it always the same way.

But first a question for clarification. You write:

It led to the development of a system we can use as a base to build custom software for our customers.

So you have a basic software, but every customer orders the development of modifications to customize the software for own use? If that is the case, you already sell the software less as a product, but instead you sell your service (making modifications to the software). I assume this for my answer, if it is different you should clarify your question.

If you already sell a service instead of a software, which risk you face if open-sourcing the software? As you don't sell the software per se, you don't lose sales. You face instead the risk of competitors that offer what so you offer: to modify the basic software for the needs of the customer. Without open sourcing the base it wasn't possible, a competitor had to start from scratch (or his own base software), but with open-sourcing your base that is easier. You can still win, if you simply know your base-software better than anyone else, but it gets important to keep this advantage up.

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  • Thank you for the clarification, it is what I wanted to say. We are afraid it will be too easy for competitors to take our place, we are a really small company with little means and we think the advantage of knowing our base-software better than anyone else might not be enough...
    – Julien
    Commented Jan 8, 2016 at 17:22
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    @Julien: Then I agree with kdopen. I'm all for open source, and open source and making money aren't contradicting each other. But open source changes the way a company makes money from software and if you have a working business model and fear that this business model could be hurt by open source, then proceed with caution. Going open source without a proper concept and an understanding how it impacts business might hurt your company.
    – Mnementh
    Commented Jan 9, 2016 at 11:08
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There are plenty of companies with an open source base. Red Hat, Cloudera, and Talend are a few that come to mind. They offer things like paid support, commercial distributions with regular patches versus compiling on your own, commercial enhancements, consulting services, training... I would suggest looking deeper into their business models for examples on how these companies make money. Would similar approaches work with your software?

Going open source can result in a community of developers, helping enhance your base code at a faster pace. Plus free can be great for marketing, tracking downloads of a free version represent potential leads. That said, the open source version becomes one of your main competitors.

In my opinion, to disrupt a solid business model to go open source would need some strong drivers. Is there an existing open source competitor that is catch up? Are you losing too many sales opportunities due to lack of an open source base?

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Look at Stack Exchange. You don't need to. If there's demand, they'll come.

That said, if you are going to look at changing your entire business model to deliver open source software, then you're obviously going to have to get your income from somewhere else somehow. There are a number of options: see my answer to How can large open source projects be monetized?.

Asking users to pay for open source software is a bad business model, because someone'll just release a free version. Instead, the most often thought-of way is to add some ads to your product, which bring the income in instead.

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  • Our software is not intended to be used by general public, So I don’t think those could be solutions to our situation. Thank you for your answer.
    – Julien
    Commented Jan 11, 2016 at 17:06
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The answer is the simple golden rule: do onto others as you would like other to do onto you.

Is it fair to use FOSS to build your commercial software, but not afford your customers the same benefit you derive from it even if the license permits it? In other words, is it fair to profit from the good will, hearts, minds and labor of programmers whose intent was too encourage FOSS development, but then turn around and close off their code as well as yours? The letter of the license may permit you to close it off, but the spirit of the license is is usually to open it.

There are cases where commercial companies, such as Microsoft and Google, encourage FOSS, but mainly as a way to create mindshare and preemptively deter competition. Google will never open its search code base, nor will Microsoft release its Windows source code. In this case, there is no dilemma here. Close it or open it according to the license.

If you feel it is unfair, then deliver the source code. Your customers most likely will have no use for your source code unless they have inhouse technical capabilities. They may want the source code purely for their own piece of mind.

If you want to close up your IP, then it is only fair that you replace the FOSS components with commercial open or closed equivalents. It may cost you more money, but you are also contributing to developers whose livelyhood depends on their IP just as much as you do. It also gives you the ability to say no without any dilemmas.

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