The clearest indication that Rackspace understands open source is perhaps this comment from Rackspace’s cloud co-founder Jonathan Bryce (in an interview with Redmonk’s Michael Cote):
Some companies who — you know, you mentioned software companies that Open Source some of their products, sometimes that happens when those products are maybe on the decline or if they need a marketing boost to generate interest and there’s always a little bit of a conflict of interest there and as a software company how do I give away my software and then I also make money off of it? Lots of people have done it and made a lot of money.
For us, though, it’s actually a much simpler decision, because, for us, the software is a piece of the overall service that we deliver. But really what Rackspace is about is operating software at scale, doing it really well, really efficiently, really reliably and then offering great support and great — just an overall awesome experience on top of it.
So, the software, to us, is not a real advantage competitively. We built our company using Linux, using MySQL, and Postgres, and JBoss, and Apache and all of these freely available systems. What we did that set us apart from the competition is we delivered it in a way that it was just a superior experience. When we look at the cloud, what we see is a lot of competing proprietary systems and there isn’t really a true competitive market. [Emphasis mine]
Did you get that? The reason OpenStack may be a big winner is that Rackspace doesn’t need OpenStack to make money. At least, not directly.
This is also the reason that OpenStack may draw outside involvement (i.e., community). Rackspace and its community can use OpenStack to drive revenues in other areas of their businesses. For Rackspace, that “other area” is the management of software at scale, as Bryce notes. Other companies will have their own revenue-generating complements.
This is the key to making money in open source. You can’t be focused on selling the open-source software directly. The paid value must be elsewhere.
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Of course I agree that you can only charge for value added, and with open source this usually means you charge for a service that compliments the software.
By making the distinction clear, Rackspace do not NECESSARILY ensure the long-term viability of OpenStack but they do ensure that they don’t stand in the way of its potential success.
The new challenge for Rackspace is ensuring that they are effective at developing latent demand for their value added services within the community of users, and feeding that demand into their already effective sales machine.
OpenStack is to Rackspace what Android is to Google: Both don’t need to ‘own’ it directly as they monetize off the technology indirectly.