Three years ago Hortonworks led a chorus of open source Kumbaya as it sought to differentiate itself in the rapidly growing Hadoop market. Today, Hortonworks has significantly changed its tune, embracing proprietary software as a way to improve its financials.
The only shocker here is that it took so long.
Last month I declared that "there's no money in open source." While open source has become essential for every business, selling open source software is an exercise in self-hurt and business-model gymnastics. Hence, the most successful open source companies aren't open source companies at all: They're companies like Facebook that liberally embrace and contribute open source code, but don't sell it.
Hortonworks tried to beat these odds and follow Red Hat, the one company that has managed to build a profitable, ever-growing open source software business. Though the company has delivered impressive top-line revenue growth, it remains far from profitability in a fiscal environment that increasingly demands sustainability. With Hadoop adoption nearing 100 percent, according to Forrester, Hortonworks needs to find a better model for getting paid for all that adoption it has helped to foster.
Enter proprietary software
As reported by The Wall Street Journal, Hortonworks "will [soon] offer proprietary software, built by other companies or in partnership with Hortonworks, that would run on an open source platform." While the company appears to be trying to keep its hands unsullied from that proprietary software by having others develop the code that it sells, it's definitely a big shift in strategy.
After all, this is the company that fretted about proprietary software fragmenting the Hadoop ecosystem and chided those that adopted an "open core" model. But this is before the company got spanked for having to raise another $100 million to cover its continued losses on a give-it-away-and-pray-they-pay business model.
More than a year ago I insisted this model wasn't sustainable for any but Red Hat. Hortonworks seems to agree and paves the way for the company to further accelerate its path to profitabilty.
... kind of, sort of proprietary
Not surprisingly, Hortonworks isn't waving the proprietary banner too high yet. Shaun Connolly, vice president of Strategy for Hortonworks, stresses that this shift is very much still being defined: "It could evolve to enable us to be a marketplace for partners to sell their value-add, and it could be commercial," meaning Hortonworks could end up bundling the proprietary software with its Hadoop distribution.
Connolly was quick to add that this wasn't a land-grab by Hortonworks: "As we evolve our model, we want to make sure there's something in it for our ecosystem. That's our DNA."
But the same could be said of Cloudera, MapR, and other Hadoop competitors that haven't eschewed proprietary software. Each is trying to grow the overall Hadoop pie, even as it claims as much of the revenue as possible for itself.
No, what's at stake is Hortonworks' ability to profitably grow that pie, and this move positions it much better to do exactly that. This is a good move by Hortonworks for the company and its shareholders, but also for the broader big data ecosystem.
The world's biggest contributors to open source, Facebook and Google, make their money selling proprietary services that run on top of open source software. Their contributions depend upon that proprietary cash. Now Hortonworks will have a proprietary revenue stream, too. That ultimately means more great open source code -- and that's a very good thing.