Who acquired whom?

Although billed as a “merger of relative equals,” last fall’s combination of Cloudera Inc. and Hortonworks Inc. was by all accounts a Cloudera acquisition of its smaller big-data rival. But it now appears that Hortonworks’ open-source business model has won the day. Cloudera Wednesday quietly announced changes to its licensing policy that will make its entire product portfolio available under open-source terms, effectively adopting Hortonworks’ business model.

The move has important implications for the industry’s ongoing debate about how business models can be built upon a foundation of free software. Although Cloudera is a major contributor to open-source projects, its decade-old business has always been based on selling licensed software.

The company has been under pressure to harmonize its business model with Hortonworks’ since the acquisition was completed. Hortonworks’ sells support and services for open-source software on a subscription basis, a model that has been successful for Red Hat Inc. but few others. Cloudera’s model is based on the more common “open core” approach, in which open-source software is packaged with proprietary extensions and sold on a licensed basis.

Cloudera executives tipped their hand at the DataWorks Summit in Barcelona in March, when they stated that “their software would become 100% open source,” said Paul Miller, principal analyst at Forrester Research Inc. “This month’s licensing change is simply them delivering on that promise,” he said. However, the executives’ comments got little media attention and Cloudera never issued a formal announcement about the planned changes.

“The new Cloudera wants to be able to tell a strong, clear, clean story about taking open source software and then using experienced people to work with their customers to get the most from that software,” Miller said. “It also doesn’t want to alienate former Hortonworks customers by handing them a large and unexpected bill.”

Two license plans

Beginning early next year, formerly closed-source products including Cloudera Manager, Navigator, Data Science Workbench, Cloudera Data Platform Private Cloud and CDP Data Center will be licensed under either the Apache License, Version 2 or the GNU Affero General Public License, Version 3. Customers and developers will be required to enter into a subscription agreement to gain access to professional support.

Cloudera didn’t specify which products would be covered by which license, a detail that has important implications for cloud providers as well as customers deploying software in the cloud. The AGPL is a variation of the widely used GNU GPL that requires organizations that deliver software as a service to give users the option of downloading the modified source code. It was created to close what some people view as a loophole in the GPL that permits cloud providers to profit from the delivery of open-source functionality without contributing code back to the community. Cloudera said it would provide further details on license terms later in the year.

The shift is notable given that Cloudera has long been one of the most vigorous opponents of the pure open-source business model. After its initial public offering in 2017, co-founder and Chief Strategy Officer Mike Olson declared, “We’re not an open-source company. We’re an enterprise company.” Olson was even more emphatic in a 2013 blog post in which he asserted that “you can’t build a successful stand-alone company purely on open source” and “pure-play open source companies never survive. That’s a law of nature.”

However, Cloudera’s execution has disappointed investors. After a few quarters of promising earnings results, the company hit a wall last month, prompting the resignation of both Chief Executive Tom Reilly and Olson. A blog post co-authored by executives from both companies yesterday said rationalizing the competing licensing models was both necessary and an “opportunity to lead and to renew our commitment to open source software.”

The shift will present still more challenges to Cloudera at a time when its shares are dangerously close to penny-stock levels. “Open source is a disruptive force that had a hand in ending Microsoft’s monopoly, spawned the big data movement and gave rise to containers and many other innovations,” said David Vellante, chief analyst at Wikibon, a sister company of SiliconANGLE. “But it’s generally not sustainably profitable.”

Regardless, Cloudera clearly felt that staying the course was not an option after acquiring Hortonworks. “Customers are entrusting their most valuable asset (their data) to our data management platform,” wrote nine-year Cloudera veteran Charles Zedlewski and Hortonworks’ co-founder Arun Murthy, who is now the chief product officer at Cloudera. “They want to pay their platform vendor for added value, not out of fear of the cost of switching.”

There will be no change to licensing terms for current or older versions of any existing software products. Customers with active subscriptions for the on-premises CDP Private Cloud or CDP Data Center software will be able to access source code from a Cloudera repository.

Image: Nick Youngson/Alpha Stock