Why open core software is bad for the FOSS movement.
Nothing is inherently anti-business about Free and Open Source Software (FOSS). In fact, a number of different business models are built on top of FOSS. The best models are those that continue to further FOSS by internal code contributions and that advance the principles of Free Software in general. For instance, there's the support model, where a company develops free software but sells expert support for it.
Here, I'd like to talk a bit about one of the more problematic models out there, the open core model, because it's much more prevalent, and it creates some perverse incentives that run counter to Free Software principles.
If you haven't heard about it, the open core business model is one where a company develops free software (often a network service intended to be run on a server) and builds a base set of users and contributors of that free code base. Once there is a critical mass of features, the company then starts developing an "enterprise" version of the product that contains additional features aimed at corporate use. These enterprise features might include things like extra scalability, login features like LDAP/Active Directory support or Single Sign-On (SSO) or third-party integrations, or it might just be an overall improved version of the product with more code optimizations and speed.
Because such a company wants to charge customers to use the enterprise version, it creates a closed fork of the free software code base, or it might provide the additional proprietary features as modules so it has fewer problems with violating its free software license.
The first problem with the open core model is that on its face it doesn't further principles behind Free Software, because core developer time gets focused instead of writing and promoting proprietary software. Instead of promoting the importance of the freedoms that Free Software gives both users and developers, these companies often just use FOSS as a kind of freeware to get an initial base of users and as free crowdsourcing for software developers that develop the base product when the company is small and cash-strapped. As the company get more funding, it's then able to hire the most active community developers, so they then can stop working on the community edition and instead work full-time on the company's proprietary software.
This brings me to the second problem. The very nature of open core creates a perverse situation where a company is incentivized to put developer effort into improving the proprietary product (that brings in money) and is de-incentivized to move any of those improvements into the Free Software community edition. After all, if the community edition gets more features, why would someone pay for the enterprise edition? As a result, the community edition is often many steps behind the enterprise edition, if it gets many updates at all.
All of those productive core developers are instead working on improving the closed code. The remaining community ends up making improvements, often as (strangely enough) third-party modules, because it can be hard to get the company behind an open core project to accept modules that compete with its enterprise features.
What's worse is that a lot of the so-called "enterprise" features end up being focused on speed optimizations or basic security features like TLS support—simple improvements you'd want in the free software version. These speed or security improvements never make their way into the community edition, because the company intends that only individuals will use that version.
The message from the company is clear: although the company may support free software on its face (at the beginning), it believes that free software is for hobbyists and proprietary software is for professionals.
The final problem with the open core model is that after these startups move to the enterprise phase and start making money, there is zero incentive to start any new free software projects within the company. After all, if a core developer comes up with a great idea for an improvement or a new side project, that could be something the company could sell, so it winds up under the proprietary software "enterprise" umbrella.
Ultimately, the open core model is a version of Embrace, Extend and Extinguish made famous by Microsoft, only designed for VC-backed startups. The model allows startups to embrace FOSS when they are cash- and developer-strapped to get some free development and users for their software. The moment they have a base product that can justify the next round of VC funding, they move from embracing to extending the free "core" to add proprietary enterprise software. Finally, the free software core gets slowly extinguished. Improvements and new features in the core product slow to a trickle, as the proprietary enterprise product gets the majority of developer time and the differences between the two versions become too difficult to reconcile. The free software version becomes a kind of freeware demo for enterprise users to try out before they get the "real" version. Finally, the community edition lags too far behind and is abandoned by the company as it tries to hit the profitability phase of its business and no longer can justify developer effort on free software. Proprietary software wins, Free Software loses.