Thoughtful open source strategies and nailing the OSS/product relationship with Joe Duffy

The Business of Open Source

This week on The Business of Open Source, I spoke with Joe Duffy, co-founder and CEO of Pulumi.

We kicked off the conversation by talking about why Pulumi is open source in the first place — a mix of Joe’s long-standing interest in open source and a feeling like a developer tool like Pulumi just has to be open source in order to be taken seriously. But there was another reason, too: Pulumi’s founders weren’t just in it to build a company, they wanted to transform their industry and build a lasting community, and felt like open source was the best way to do that.

Lots of good take aways in this episode, like:

• Learning from open source legends... uh, actually, learning from Microsoft. Microsoft is an open source giant, right? It’s interesting to hear Joe talk about learning about open source business strategy from Microsoft, precisely because Microsoft does not make money directly from VSCode, and also does not invest millions of dollars into R&D just to be nice. “If you’re going to try to build a business with open source, you need to be very thoughtful and very strategic about it.”

• The founding team at Pulumi sort of iterated on figuring out the business model, but to a large extent they just thought about it until they had an Aha! moment. On the other hand, they didn’t go public until they thought they had a winning strategy for building an open source business.

• In the case of Pulumi, there’s a client side and a server side, so it made sense to build in a natural division between the two. This also made it so users were less likely to feel like Pulumi was holding back essential features in order to drive sales.

• “The way I always view it is the thing you’re selling has to stand on its own”

• Pulumi started a company, an open source project and a commercial product at the same time. Joe’s not sure he would recommend that approach, but it worked for them. “Figuring out the relationship was importnat, but actually the most important thing was to have a successful open source technology.”

• One thing I wanted to pull out: Even though Pulumi launched the open source project and commercial product at the same time, they focused all their efforts in the first two to three years on getting the open source project off the ground. Many founders I talk to think that once the commercial product is out there, you are forced to build a GTM team… but you don’t have to. In fact, I think the strategy of having the possibility to buy the commercial product while focusing the company’s energy on the open source software in the beginning is brilliant. Result: “We were able to create this immense funnel of inbound commercial interest, even when that wasn’t really the top level focus.”

• Even if you’re primarily a SaaS company, you can still offer an enterprise on-prem version for customers with hard requirements to host themselves, like air-gapped environments. Just because that option exists doesn’t mean you must build GTM motion for it, though.

• The business value Pulumi gets from the open source project is: generating leads, building the company’s brand, and also recruiting top-level talent.

• The fact that developers building the tool are so close to developers in the community is also a huge advantage.

Listen to the full episode, it has a huge amount of great insights!