Open Charter gives open source users predictability amidst the licensing change trend

Less than a year after HashiCorp announced it was switching from an open source to a non-compete license (in which users can copy, modify, and redistribute code for non-competitive use), Redis announced they were switching from the open source BSD-3 to the non-compete server-side public license (SSPL). The decision follows a long-standing pattern of large, successful OSS companies (such as MongoDB, Confluent, Elastic, HashiCorp) shifting away from a “pure” open-source license to one restricting competitive use. 

Different licenses serve different business models, but the growing trend of switching licenses years after the project has gained momentum is creating a problem for every commercial open-source company. When users choose open-source software, they expect the project to remain open source forever. If the code suddenly is no longer open source, users may find themselves in a situation where they can’t use software they have heavily invested in and rely on. Open-source software isn’t useful if people can’t rely on the project remaining open source.

For users to trust commercial open-source software (COSS), companies can no longer simply say their code will be open source forever; they need to have a way to hold themselves accountable. One way to do this is to adopt OCV’s Open Charter, a legal statement of a company’s commitment to open source that protects open-source code as a public benefit. Open-source companies that adopt the Open Charter will be more predictable than those that don’t—users can feel assured that the company is committed to maintaining the open source for the long haul and won’t pull a bait and switch. 

Adopting an open charter won’t make sense for every company but it will distinguish those that are 100% committed to remaining open source from those who want to reserve the right to change their business model. Some companies that switched licenses did so for valid reasons, like protecting themselves from being taken advantage of by large cloud providers. However, they have also faced an onslaught of backlash and new competition in the form of forks. As more companies have chosen the route of a licensing change, the community reaction is becoming more swift and severe. The predictability of open-source software has been compromised, which is making commercial open-source software a riskier investment for users. Adoption of the Open Charter is one way COSS companies can reverse the perception of unpredictability plaguing the industry. 

“Freeloaders” are predictable; licensing changes are not  

According to Redis and others, the open source to non-compete trend is driven by large cloud providers shipping open-source code as part of their cloud service offering and competing directly with the company without contributing back to the project. Wanting to cut off “freeloading” competitors is an understandable position, especially as these companies prepare to, or have gone, public. As I’ve written before, open-source companies have low rake (creating more value than they capture) but high growth. As growth slows, the company needs a higher rake. One way to capture more of the value they create is to cut off competition. Because these companies were started as open source in earnest, they seek licenses that are open source adjacent, like the SSPL. The SSPL and similarly popular Business Source License (BuSL) maintain most of the user’s freedoms so long as the user doesn’t intend to use the code to compete with the company that owns the code base. The competitive use restriction makes both licenses non-open source. 

From a business perspective, it’s a defensible and understandable change. These companies have grown into large corporations—they answer to shareholders, thousands of employees, and the many customers that rely on their continued operation. If they can’t sustain their business, hundreds of thousands of people could be impacted. Adopting a source-available, non-compete license is within their legal right and the closest to a win/win you can get in this scenario for the business and developers who contribute to and use the software in a non-competitive way (which tends to be the majority of users). 

However, the fact is that when code is licensed and distributed as open source, it gives anyone the right to use it in any way they choose—including to compete. Even though it’s understandable why companies have switched their licenses, it’s an unpredictable move. It takes the community by surprise and is thus often met with outrage. Business as usual is disrupted for users when the expectation was that it would be free to use, unrestricted, forever.  On the other hand, profiting off of open source without contributing back seems to go against the spirit of open source, but it is legal and permissible under the license. It’s predictable—it doesn’t change or threaten the open source model. This could explain why there seems to be more tolerance toward cloud providers taking advantage of open source than there is tolerance for open source companies switching licenses. 

The consequences for companies making the switch can be severe. The typical reaction is a fork (or many forks) by the community. Elastic was forked into OpenSearch, [Terraform was forked into OpenTOFU](https://opentofu.org/blog/opentofu-announces-fork-of-terraform/( and Redis was forked into Valkey, both of which are backed by the Linux Foundation. Most recently, IBM announced it’s acquiring HashiCorp a year after HashiCorp changed the license for Terraform. The reasons companies have for switching licenses may be valid, but it is yet to be determined if it is good for business. 

Switching licenses undermines trust in open source

Users of open source are so tired of watching OSS companies switch licenses that some are suggesting that it’s not possible for a for-profit company to be a good steward of open source and that open source should not be commercialized at all. 

The more companies switch licenses, the more unpredictable open source becomes, the community loses trust, and fewer people will contribute to or adopt commercial open source. The most likely unintended consequence of this is that more software is closed instead of open. Defaulting to closed source code for for-profit companies would be a huge setback for software development. Commercial investment into open source has given software developers access to cutting-edge technologies that improve rapidly because users can contribute. 

Foundations may be a viable option for some software development, but foundations still need funding and they require the author to give up ownership of the project, which may not be the best option for everyone. Commercializing around an open-source project gives authors and, in some cases, maintainers, a way to get paid to work on the thing they are most passionate about. The best scenario, and the one the industry has been trended toward until recently, is open source by default. An open-core model where the open-source core is protected by an open charter is an emerging option that can solve the licensing switch issue. 

Protect the open-source core with Open Charter 

Regardless of whether or not recent licensing changes have been justified or necessary, trust in commercial open source within the open source community has been damaged. For those that intend to commercialize open source in the future, it will require more effort to gain the trust of users and contributors. For companies that are 100% committed to maintaining an open-source core, incorporating as a public benefit company and adopting the OCV Open Charter is a way to prove that commitment. 

The Open Charter makes it challenging for company management to change the open-source license in the future. Clauses include a commitment not to move previously open-source code to the proprietary code base, making the majority of code open source, and not delaying security fixes to the open-source code base. One of the clauses specifically states that “any software that is released by the Company under an open-source license, will remain available under the original license provided by the Company” and was added specifically to prevent relicensing of existing open-source code. 

This option won’t work in every case. For it to work, the business needs to be resilient against hyperclouds (meaning, the commercial business should be more than SaaS hosting) and embrace an open-core model that plans to develop source-available proprietary code from the start. This model tends to work best for application software versus infrastructure software, as we have seen with the trend of licensing changes—companies who have done this tend to be infrastructure software companies that are more susceptible to hyper-scalers. 

At OCV, we have incorporated four companies with Open Charter: Authentik, Ramatak, Ondsel, and Lucenia. Authentik provides identity management software, Ondsel is a CAD software suite, Ramatak is a mobile game development platform, and Lucenia is a search and analytics tool. The founders of these companies have decided to take a firm stance on staying true to their open-source roots and the open-core model.