While the original movement behind open source was one of benevolence that isn't to say that the economic model of open source at scale actually works as a competitive advantage.
There are costs associated with running a business and one of the largest is marketing. What open source allows you to do is defer these costs by charging nothing for adoption. This allows you to acquire users, build up an ecosystem, and create a moat against competitors to your business. Competitors not in the sense of AWS which is adjacent, but competitors in the sense of another replacement for Elastic Search itself.
At the beginning you are losing 100% of your revenue opportunity, but you have to remember that you are either modeling yourself as a consumer company or business company. Simply put, consumers companies make more money from consumers while businesses make more money from businesses.
AWS is a business company so the majority of their revenue is from businesses. With most open source projects you are also a business, which means if you find 10 years of success 90% of your revenue will eventually come from businesses.
Those early adopters are usually smaller entities so they aren't really a large opportunity loss and the big businesses want to see massive adoption before they really consider switching. So effectively you are cutting out 20% of your revenue opportunity to build up an ecosystem moat as well as marketing budget. It isn't money directly out of your pocket, but instead is paid purely in head count, which by the way is much cheaper and more effective than trying to market your software to hundreds of thousands of people across the world.
The "free" component isn't just one of benevolence but actually an attack on any future competitor because why would those early adopters pay $5 for something that they can get for free. Most early businesses rely on these smaller customers and open source actually cuts that out of the equation, reducing competition.
So it's a very interesting dynamic in the sense that something that was started for a "good" purpose can accidentally actually stifle future competition, when you would assume otherwise.
There are costs associated with running a business and one of the largest is marketing. What open source allows you to do is defer these costs by charging nothing for adoption. This allows you to acquire users, build up an ecosystem, and create a moat against competitors to your business. Competitors not in the sense of AWS which is adjacent, but competitors in the sense of another replacement for Elastic Search itself.
At the beginning you are losing 100% of your revenue opportunity, but you have to remember that you are either modeling yourself as a consumer company or business company. Simply put, consumers companies make more money from consumers while businesses make more money from businesses.
AWS is a business company so the majority of their revenue is from businesses. With most open source projects you are also a business, which means if you find 10 years of success 90% of your revenue will eventually come from businesses.
Those early adopters are usually smaller entities so they aren't really a large opportunity loss and the big businesses want to see massive adoption before they really consider switching. So effectively you are cutting out 20% of your revenue opportunity to build up an ecosystem moat as well as marketing budget. It isn't money directly out of your pocket, but instead is paid purely in head count, which by the way is much cheaper and more effective than trying to market your software to hundreds of thousands of people across the world.
The "free" component isn't just one of benevolence but actually an attack on any future competitor because why would those early adopters pay $5 for something that they can get for free. Most early businesses rely on these smaller customers and open source actually cuts that out of the equation, reducing competition.
So it's a very interesting dynamic in the sense that something that was started for a "good" purpose can accidentally actually stifle future competition, when you would assume otherwise.