Interview with NATS author and discussion on OSS business models

This is a very interesting interview – well worth the listen.

Toward the end of this interview, the author discusses OSS business models and has some helpful thoughts.

The below quote is a taste:

Derek Collison Says


No, it doesn’t. And to be honest with you, we’re in a weird global situation, as we all know, and my hope and thoughts are with all the listeners, and I hope you’re safe, and healthy, and all that kind of stuff. But when you’re looking at a company and you’re trying to figure out how to drive revenue, we talked a lot about different pieces, but I’ll tell you, at the end of the day you’re either selling a vitamin or an Aspirin. And when times get tough, people stop buying vitamins.

So if you can figure out a pain point and make it easier for folks, that always is easier than everything else. So for NATS, to be honest with you, it’s two-fold. One is OpEx spend is too high; too many moving pieces, or just it’s too expensive to put it on Google Pub/Sub if we’re trying to do two million messages a second type stuff… So it’s like “Great. We can cut your OpEx out. No big deal.” Or it’s that pattern we talked about early in the show, of “I’ve got lots of remote thingies that I all want to communicate, East/West, North/South, those central things, and I don’t wanna have to worry so much about security”, and it’s just one ubiquitous communication stuff.

So those two pain points are what’s mostly driving us as a business. Maybe not NATS as a project and an open source technology, but us as a business; it’s solving those pain points.

Here is another article about Derek and his company.

Another quote:

So part of that “What do we wanna build a company to do?” was equally weighted with “How are we gonna make it a viable business?” So for me - again, a very unpopular opinion, I’m sure - I personally don’t believe in open core. I think it’s freemium enterprise repackaged, and it’s gonna fail, just like freemium enterprise did. I could be wrong, but my bet was that there’s really only three ways to make money off of open source:

  1. run it as a service,

  2. bundle it with hardware, because a consumer bias of a physical thing totally changes their bias, and they have no problem paying for it

  3. And then the last one is augment with a service.

Another quote on OSS business from the interview:

Yeah, and I’m an angel investor and I consult with lots of smaller companies, and a lot of companies struggle with “How do I turn it into a business?” I said “Think about a way where my experience with your software becomes better.” If you have a system that collects data from everyone, keeps the privacy concerns in place - that’s a big, big deal, of course… But it keeps all of that stuff at bay. Essentially, it makes my use of the product better because of that.

[01:04:09.29] I was fortunate enough to work at Google from 2003 to 2010 or so, and I remember some of the – obviously, Google has a lot of extremely bright people that think of very, very elegant, complex solutions to very hard problems. But what I liked to see a lot within Google was extremely simple solutions to complex problems. So spam was a huge deal when Gmail came out. It was just awful. But as Gmail became so popular – and we had lots of usage on it. Even in the early days. And if we just put a little button that said “Hey, I don’t like this message. It’s Spam”, it would see all the signals and say “Wow, in the last five seconds a thousand people clicked on the same message and said it was Spam, then we can automatically mark it and move it off.” So that power of collecting data and using it to optimize individuals’ experiences is a model that I’ve talked to a lot of startups about, and said “Can you encapsulate what you’re trying to do with your software where the service is augmenting - it’s not an open core, you’re augmenting with it - but your experience gets tremendously better because of it, and it’s something they can’t recreate?”

For your case, Mat, I agree with you. They’re just saying, “Wait a minute, I can store a gig in my own data for way cheaper than you’re doing it.” But if you said “Hey, can you collect all of the spam signals from 40 million people for Gmail?”, they can’t do that. They’re just like “I can’t do that.” So then what happens is they go “I know I can’t do that on my own. Does it really help me that much that I’m willing to pay for it?” And that’s always the trade-off.

and another:

Yeah, and it’s interesting… Building a software company - you can get a lot of mileage out of thinking of it as a psychology problem, than a technical, or go-to market strategy. I try to frame everything now as “What is the psychology of the consumer?”

If you’re building a kernel - except if you’re Microsoft, which even there they don’t have to let go of it shortly, is “Oh, those are always free.” Even though there’s probably multiple hundreds of millions of dollars of expertise and investment into these, the consumer bias is it should be free. So always ask yourself, “What does my consumer look like, and what is their bias around what I’m trying to offer them?” If you resentingly say “Oh crap, they’re gonna think it has to be free”, you might wanna rethink what you’re trying to do.