Challenges and Successes of GitLab's Buyer-Based Open Core Model

Introduction

In this blog, we’ll explore GitLab’s journey and success with the buyer-based open core model, along with the challenges commercial open source companies face. We’ll also dive into key principles and insights from a Q&A session.

Commercial Open Source Software Business Models

• Commercial open source software business models have been a challenge for developers for many years, with various models like offering professional services, providing a SaaS version, and others being tried.

• GitLab’s journey began in 2011 when its creator, Dimitri, needed a tool to collaborate with developers at work, leading to the development of GitLab as an open-source alternative to GitHub.

• Sid discovered GitLab in 2012 and saw the potential of offering a SaaS version, leading to the birth of GitLab.com as an open-core model.

• GitLab’s transition from a physical office to a fully remote model was driven by the realization that remote collaboration tools were adding more value than physical office space, leading to the company’s expansion to over 1250 team members in 65 different countries and regions.

• The growth of GitLab as a product and a company has remained true to its open-source roots, attracting a vast community of contributors and strengthening its business value while upholding core values like efficiency, iteration, and transparency.

Challenges of Commercial Open Source Companies

• Commercial open source companies face challenges in balancing their go-to-market strategy with their open source and community roots.

• Hyper clouds have successfully employed a technique of service wrapping, offering the same interfaces and open source software with ease of deployment and SLAs as a hosted service, competing with commercial open source companies.

• Many commercial open source companies have responded to this by changing their licenses in an attempt to prevent competition with their own SaaS offerings, resulting in backlash from commercial and open source advocates.

• The hyper clouds also have the ability to fork open source projects at the last fully open source release and maintain a separate line, creating a bifurcated ecosystem, as seen in the case of AWS partnering with Netflix and Expedia when Elastic changed the license on Elasticsearch.

• The decision on whether a project is likely to be commoditized comes from years of navigating the complexities of commercializing open source software, with open source companies often needing to find their own way after many iterations and failures with different models.

Challenges and Adaptations in Business Model

• SaaS businesses face challenges when the software becomes easier to use and maintain, as it reduces the need for consultant services and support.

• Implementing a pure SaaS play was not suitable for GitLab as their business was not data intense, and customers hosting GitLab were less likely to send their data back home.

• Hardware or appliance play was also not considered viable due to customer concerns about putting their code into a ‘black box.‘

• The open core business model, with high margins on software sales, was eventually chosen as the scalable model for GitLab and their customers.

• GitLab’s ‘buyer-based open core’ model places certain features into paid tiers based on the likely buyer’s needs, resulting in a 5x escalation in price between tiers.

• Having a hybrid sales strategy, with enterprise sales motions for the highest tiers and self-service interactions for the lowest tiers, has been successful for GitLab.

Key Points on Buyer-Based Open Core Principles

• Buyer-based open core principles align perfectly with the complex needs of executives, leading to a large number of proprietary features to explore.

• Executives are more inclined towards user interface and visualization, rather than just interacting with the project through an API.

• Delivering value to executives reduces their price sensitivity, setting up success for the model.

• Applications with a graphical user interface component drive much less compute usage than infrastructure software in the age of SaaS.

• The application software model allows for a multi-tenant design, whereas infrastructure software sees a desire for single-tenant style managed services.

• Commercial open source companies can create a resistant model to service wrapping motions and take full advantage of co-creation of features with their customers and community.

Key Points from Q&A Session

• The speaker emphasized the critical role of the company, indicating that it naturally leads to an increase in buyer engagement and reduced price sensitivity. While acknowledging the challenges, they expressed confidence in the decision made for their company.

• In response to a question about sales models, the speaker mentioned that GitLab offers self-service for all tiers. They also highlighted the flexibility of buying GitLab on gitlab.com as a SaaS or self-managing it, with the pricing being the same for both options. However, at the highest tiers, a more traditional purchasing process is expected.

• The speaker confirmed that the slides from the talk will be made available, both in the chat and through their Twitter account. They also shared a humorous anecdote about their company’s internal culture and the video available online.

Conclusion

GitLab’s journey with the buyer-based open core model showcases a successful approach to commercial open source, highlighting the importance of balancing open source roots with go-to-market strategies. The insights shared provide valuable lessons for open source companies navigating the complexities of the industry.

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