Open source companies are thriving in the cloud

Open source companies are thriving in the cloud

It turns out open source didn’t need a different licence or business model, but to get smarter about cloud computing

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Quick, can you spot the common link between MongoDB, DataStax, Redis Labs, Percona, Couchbase, and EnterpriseDB?

If you said, “They’re all open source database vendors,” you’d be mostly correct. Not all offer databases governed by an open source licence.

But if you said, “Each offers an increasingly popular database-as-a-service cloud offering,” you’d be spot on. Indeed, while we’ve spent a few years with erstwhile open source vendors changing their licenses to ward off evil cloud vendors, what we’re starting to see is these same vendors embracing the cloud, and to hugely positive effect.

Hence, while Databricks CEO Ali Ghodsi has correctly argued that “it’s extremely hard to manage and run a high quality managed service in the cloud and not all open source companies are good at it,” it’s also true that more companies are figuring this out, making the next decade the era of open source databases in the cloud.

Signs, signs, everywhere the signs

Already we’re seeing clear indicators that open source is leaving behind its on-premises roots and heading to the cloud. A recent Red Hat survey found that 95 per cent of respondents view open source as important, with use of proprietary software declining to 42 per cent (from 55 per cent the year before).

And while it may be too soon to call it a trend, 28 per cent of respondents called out “Designed to work in the cloud” as a key benefit of using modern open source tooling (like Kubernetes), the fourth-most cited benefit (up from eighth place last year).

Meanwhile, as more applications are born in the cloud, cloud databases have been booming. When I first started writing about this in earnest, “cloud database” mostly referred to databases offered by Amazon Web Services (AWS), Microsoft, and Google.

Quite quickly enterprises figured out that rather than having one massive Oracle database to run their diverse workloads, they could instead leverage a broader array of databases, with cloud databases increasingly central to their selections.

So much so, in fact, that in mid-2019 Gartner was ready to declare that “cloud is now the default platform for managing data” and that “only legacy compatibility or special requirements should keep you on-premises.”

This declaration, however, isn’t just about databases offered by public cloud vendors. No, an interesting thing has happened to open source vendors on their way to financial success: They’ve discovered the cloud, and in a big way. Consider MongoDB, for example.

Atlas lifts MongoDB

MongoDB launched Atlas, its fully managed cloud database service, in 2016. A year later, MongoDB reported that Atlas accounted for 10 per cent of its Q4 2017 revenues.

By March 2019, Atlas revenues had surged to 34 per cent of AWS revenues, worth over $100 million in 2018. At that time, MongoDB CEO Dev Ittycheria was asked about the impact cloud database vendors were having on MongoDB.

Ittycheria’s response? “We see no impact on a negative basis whatsoever.” If anything, he said, it was raising awareness for MongoDB.

And how. In MongoDB’s most recent quarter, Atlas revenue boomed by 185 per cent year-over-year, claiming 40 per cent of the company’s revenue. In the earnings call, Ittycheria touted MongoDB as a “cloud-first company,” citing three ways in which focusing on delivering MongoDB as a fully managed cloud service has changed the company:

  1. Increases the pace of innovation with new products, features, and capabilities: “We can deploy new features continuously rather than on an annual release cadence of an on-premises product. Furthermore since new products are initially built for the cloud, our product teams can work quickly and independently to introduce new products and features, increasing the pace of innovation and providing more value to our customers more quickly.”
  2. More granular visibility through adoption and user behaviour: A “continuous and data-driven feedback loop allows us to understand what features customers find most valuable, where in the product they get stuck, or where they’re not taking advantage of all the capabilities available. This enables us to iterate more often, and more intelligently ensure that our product teams are focused on the most important opportunities.”
  3. Broadening MongoDB’s reach into the global database market: “By having relations with all three cloud providers, we benefit from access to the customers and geographic reach. And we’re seeing positive results with all three.”

This calls to mind some advice Couchbase director Andy Oliver recently offered to database competitors who try to innovate open source licensing rather than offer real product innovation: “Only better service, support, and innovation... will save them. Changing the open source definition won’t fix what is, in the long-term, a business model problem.”

Open source as-a-service

But as MongoDB’s results show, creating cloud database services is possible for these current or former open source vendors.

And as difficult as it may be to create competence in operational efficacy, says Ghodsi, it’s the only way forward: “The reality is open source software itself has zero intrinsic monetisation value because anyone can use it, so there will always be a requirement for open source vendors to determine the value beyond the software. We believe this value lies in the vendor’s ability to deliver open source software as a service.”

As results from MongoDB, Redis Labs, DataStax, and others show, database vendors are figuring out how to be as good at operationalising software as they have been at developing software. This should give hope to would-be open source entrepreneurs that worry about how to monetise open source.

Ironically, it turns out that the open source model is the same as it ever was: charge for support. The difference, of course, is that “support” is baked into the product in a cloud offering.

The database future is firmly planted in the cloud, as Gartner has declared. Fortunately, open source database vendors got the message.

Tags open source

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