In recent years, we have seen a rise in open-source alternatives for popular closed source software. Companies such as AirByte, PostHog, n8n, Supabase, Sentry is adopted by thousands of companies and have raised millions in VC funding. These companies build and maintain products that are open-source alternatives to products like Fivetran, MixPanel, Firebase, Datadog etc. These companies have a combined valuation of billions. This rise has driven the adoption of open-source software by enterprises.
Full disclosure: ToolJet is building an open-source alternative for low-code applications development platforms such as Mendix, Outsystems, Microsoft power apps, Retool, etc. You can check us out on GitHub: https://github.com/ToolJet/ToolJet
In this article, we will discuss the reasons for this shift and how does the future look like.
Who are these open-source challengers?
I’ve been collecting a landscape, so many great cos, publishing a blog post about this in next couple days…— Rajko Radovanović (@rajko_rad) January 14, 2022
Hadn’t heard of Jitsu and Baserow, let me know if anything else comes to mind, thanks :) pic.twitter.com/u6BJthAtIT
Here is a list of open-source challengers compiled by Rajko Radovanović. If we take a look at when these companies were started, we will find that most of them were either started or their codebase became public in the last 2 years.
What might be the reason for this sudden rise?
a) Data privacy concerns
One of the attractions of open-source software is that it can be self-hosted. Data privacy laws are being more and more strict every year. The best way to make sure of data privacy and security is to make sure the data never leaves the private networks of a company. Adopting open-source software also helps enterprises to include codebases in their security audits. The users are also free to go through the codebase to make sure the software is not doing anything that can harm their business.
The advantage of a SaaS provider is that they can sell the same software to thousands of customers. The downside here is that majority of the organisations will need to modify their process to get along with the conventions of the software. If an organisation is using open-source software, they are free to modify the software according to the needs of the organisation.
Let's say your organisation needs SaaS software that you use to be connected to a database system or a service that is less popular. You will have to talk to the SaaS provider to explain your feature request and wait for the provider to build that feature. In most cases, they will not build it if it doesn't make sense to a large number of users. If using open-source software, you can find a developer easily on freelancer platforms and build the connector that you want at a reasonable cost.
The best part about this is that if you contribute this connector to the codebase, many other users will also benefit from it.
c) Don't wait for the provider to fix bugs
This wouldn't have happened if it was open-source software :D. Jokes apart, we had even seen our customers reporting bugs and happily fixing those themselves. While it may not be a major benefit as many SaaS companies have amazing support teams who take the bug reports seriously and get them fixed by the engineering teams quickly.
Most open-source software has a paid version with additional features or a paid support program. I am not going to say that these paid versions are cheaper. The free community editions of open-source software are enough for the use cases of a lot of companies. If a cash crunch happens and the company is cutting down their spending on SaaS, they might be able to do so with the free versions of open-source software.
"More than two-thirds [of survey respondents] say saving time and money is the top reason to use more open source for application development during the downturn (68%)," - Managed open-source survey released by Tidelift
[PDF - Open Source Software as Intangible Capital: Measuring the Cost and Impact of Free Digital Tools] https://www.imf.org/-/media/Files/Conferences/2018/6th-stats-forum/session-3carol-robbinsopen-source-software-as-intangible-capitalmeasuring-the-cost-and-impact-of-fre.ashx
Open-source software in most cases is a community effort. Community in many cases has become the "product manager" of open-source projects. The open-source community is known for being helpful, many of our users have contributed to the codebase. The contributions need not be code, it can be a feature request, bug reports, improving the documentation, writing how-to guides, etc.
We've also seen that sometimes community members respond faster than the team members whenever there someone needs help.
f) Access to data
You own your data and it never leaves your premises. You will be able to control who has access to the data and how it is shared. The company or team that built the software will never know how you use the software.
g) Not just an alternative
Many of these alternatives have shown that they can do better than their closed-source counterparts. A lot of them have seen significant growth in userbase and revenue within short periods.
The opportunity & future
While it may not work for every closed source product, open-source can be a great business model for some product categories. If the software requires access to data, it is better if the software runs within a private network to which only the company has access. In many regulated industries like healthcare, sharing data with third parties can cause many privacy issues.
We've recently seen open-source projects being funded by the top VC firms. We have ourselves raised a seed round for ToolJet ( more on it here ). The trend is undeniable, not just in funding, but also in the adoption of open-source software. The involvement of VC firms has also helped in reducing the fear of customers about open-source software being abandoned by the maintainers.
The go-to-market of open-source software is also better. The total addressable audience is millions of developers. Instead of spending millions on sales and marketing, open-source software grows organically with the help of the community. There will be more new open-source alternatives launching in the coming months and years which will be well-adopted by the community.
Building something in public? I'd love to see your project. I'm available at firstname.lastname@example.org and on Twitter.