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Frameworks, core principles and top case studies for SaaS pricing, learnt and refined over 28+ years of SaaS-monetization experience.
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When MongoDB changed its license in 2018 to the Server Side Public License (SSPL), it sent ripples through the open source community. The database company had watched Amazon Web Services launch a MongoDB-compatible service without sharing revenue or code contributions. MongoDB's defensive licensing move sparked an ongoing debate about how open source companies can protect themselves against cloud giants.
For startups and companies building open source software today, the threat of a major cloud provider offering a managed version of your product—potentially undercutting your business model—remains very real. How can you build on open source principles while protecting your commercial interests?
The Cloud Provider Competitive Threat
The pattern has repeated itself numerous times: a company develops valuable open source technology, gains traction, and then finds Amazon, Google, or Microsoft offering a competing managed service based on their open source code. Notable examples include:
- Elastic facing Amazon's Elasticsearch Service
- Redis Labs seeing AWS offer ElastiCache
- Confluent's Kafka being offered as managed services by all major providers
- MongoDB competing with Amazon's DocumentDB
As Elastic's CEO Shay Banon said after AWS launched a competing service, "You cannot take our code, run it as a service, and put your own user interface on it."
Cloud providers have immense advantages in this competition: existing customer relationships, mature billing systems, integrated security, and economies of scale. They can leverage your innovation without the R&D costs while potentially capturing the most profitable part of the market: enterprise customers who prefer managed services.
Defensive Licensing Strategies
The most direct approach to preventing cloud provider competition is changing your licensing terms. Several models have emerged:
Source-Available Licenses
Unlike permissive open source licenses like MIT or Apache 2.0, source-available licenses provide access to source code but restrict certain uses. Examples include:
- Commons Clause: Prohibits selling the software as a service
- Business Source License (BSL): Restricts commercial use for a period, then converts to an open source license
- Elastic License: Specifically prevents offering the software as a managed service
HashiCorp's move to the Business Source License in 2023 exemplifies this approach. Co-founder Mitchell Hashimoto explained: "We've invested hundreds of millions in R&D… we need sustainable business models to continue that investment."
Server Side Public License (SSPL)
MongoDB created the SSPL specifically to address cloud provider competition. It requires anyone offering the software as a service to release the entire stack—including management tools and interfaces—as open source.
While the Open Source Initiative rejected SSPL as not meeting open source definition requirements, it has proven effective as a defensive measure. After MongoDB's license change, AWS created a compatible alternative (DocumentDB) rather than directly offering MongoDB as a service.
Complementary Commercial Strategies
Licensing alone isn't enough. Successful open source companies employ multiple strategies:
Cloud Provider Partnerships
Instead of competing, some companies partner with cloud providers. Confluent (Kafka), Neo4j, and MongoDB all have marketplace offerings on major clouds, giving them access to cloud customers while maintaining control of their product.
According to Confluent CEO Jay Kreps, "Working with cloud providers rather than against them lets us focus on product innovation while leveraging their distribution channels."
Differentiated Enterprise Features
Keep your core open source but develop proprietary enterprise features that add significant value:
- Advanced security and compliance capabilities
- Enterprise-grade support and SLAs
- Sophisticated management tooling
- Integration with enterprise systems
HashiCorp maintained this model for years, with open source Terraform, Vault, and Consul alongside enterprise versions with additional features.
Cloud-First Strategy
Companies like Cockroach Labs and Timescale initially built managed cloud offerings themselves, establishing market position before cloud providers could compete. By delivering superior service quality, specialized for their technology, they created a defensible position.
CockroachDB's CEO Spencer Kimball noted, "We don't just offer Cockroach as a service—we offer the definitive experience built by the creators who understand it best."
The Role of Community Building
A strong, engaged community provides a competitive advantage cloud providers struggle to replicate:
- Community contributions improve the product
- Users become advocates and educators
- The ecosystem builds complementary tools
- A talent pipeline develops for hiring
As Redis Labs founder Salvatore Sanfilippo observed, "AWS can copy our code, but they can't copy our community."
Making the Right Choice for Your Project
There's no one-size-fits-all solution. Your approach should depend on:
- Project maturity: Early-stage projects benefit from permissive licensing to drive adoption
- Business model: How you monetize affects licensing decisions
- Resources: Defending against cloud providers requires substantial resources
- Community values: Some communities resist restrictive licensing
Key Takeaways for Open Source Companies
The competition with cloud providers isn't disappearing, but you can take proactive steps:
- Consider defensive licensing early, before cloud providers target your market
- Build value beyond the core open source project that's difficult to replicate
- Develop direct cloud offerings to establish your position
- Cultivate a strong community as a competitive advantage
- Create partnerships rather than pure competitive relationships
By combining thoughtful licensing with strong product differentiation and community building, open source companies can protect their innovations while maintaining the collaborative spirit that makes open source powerful.
The future likely belongs to companies that balance openness with sustainability, creating models where both the community and commercial entities benefit from ongoing innovation.