From Open Source Software to Open Source Strategy
From Open Source Software to Open Source Strategy
by Anonymous · May 21, 2026
Nearly 27 years ago, on July 12, 1999, an Above the Crowd post titled “The Rising Impact of Open Source“ opened with this statement: “Perhaps the most powerful movement in the software industry today is the continuing rise of ‘open-source’ development.” With more than a quarter century of hindsight, the success of the open source movement has exceeded even my own optimistic 1999 expectations. Founders have launched thousands of open source initiatives, producing hundreds of VC-backed companies and hundreds of billions of dollars in new market capitalization. The vast majority of new software development now happens on open source platforms.
But while “open source software” is a well-understood concept, a powerful new use of open source has emerged. Over the past fifteen years, a handful of leading business innovators have used open source concepts in an ultra-sophisticated way to solve critical strategic goals. I call this Open Source Strategy. These efforts are reshaping the power dynamics of entire industries and, once fully understood, are nothing short of sheer genius. If you operate in any industry that involves intellectual property and technology, and you do not fully understand this new landscape, you are exposed.
A Brief History#
The modern open source movement traces back to three pioneers. Richard Stallman announced the GNU project on September 27, 1983, kicking off the “free software movement” out of the conviction that restricting source code was unethical. Linus Torvalds released the first Linux kernel in September 1991, frustrated by the limitations of MINIX and inspired in part by GNU’s tools (gcc, bash). He later attended a Stallman speech and was persuaded to release Linux under the GNU General Public License. Linux has since become the most widely distributed operating system in the world.
The third pioneer was Eric Raymond, who in 1997 presented an essay called The Cathedral and the Bazaar at the Linux Kongress in Würzburg, Germany. Raymond was the first to chronicle that software developed in a widely distributed, transparent way (the Bazaar model) was not just an effective way of building software — it was the very best way to build high-quality software. His central thesis: “given enough eyeballs, all bugs are shallow,” which he respectfully christened Linus’s Law. The Cathedral and the Bazaar is as critical to the history of software as Adam Smith’s Wealth of Nations is to economics. It unlocked the core reason broad open source approaches will always outperform proprietary closed “Cathedral” efforts: complex software gets better when problems are widely distributed across many minds. A remarkably prescient observation in 1997, and one that has only proven more true since.
Shortly after the essay, the movement adopted “open source” as the new name — a deliberate move away from the more zealous “free software” framing to make it more palatable to commercial endeavors. Just one year later, Red Hat, the leading commercial Linux distributor, IPO’d on NASDAQ. Open source was not only the very best way to build complex software — it was also a means to economic gain.
Benchmark, the firm where I worked as a General Partner for over 25 years, was an early investor in Red Hat and over that time invested in numerous other open source companies, including MySQL (acquired by Sun for $1B), SpringSource (acquired by VMware for $420mm), Hortonworks (now Cloudera), Elastic, and Confluent. The economic case for open source is now beyond debate. The list of major outcomes has only grown:
IBM acquired Red Hat for $34 billion in 2019 — at the time, the largest software acquisition in history.<br>Salesforce paid $6.5 billion for MuleSoft in 2018.<br>IBM closed its $6.4 billion acquisition of HashiCorp in February 2025.<br>IBM completed its $11 billion acquisition of Confluent in March 2026 — its third major open source bet in seven years.<br>GitLab IPO’d in October 2021, joining MongoDB, Elastic, and Cloudera on the public markets.
IBM alone has now spent more than $50 billion acquiring open source companies. Open source is bigger than ever. The question is no longer whether the model works, but how widely it can be applied.
With three decades of hindsight, the five core reasons the open source software model is so powerful: leveraged development (more hands on deck, more corner cases explored), better testing and bug discovery (Linus’s Law again — open source is more vetted and more secure), more innovation (more parties trying more things), viral grass-roots distribution (which lowers the cost of distribution for any company built around an open project), and cost-savings for customers (no proprietary lock-in). As a result, founders have replicated the Red Hat model in entirely new categories. Let’s call this “classic” open source execution: find a need, kick-start a...