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- 1 month ago

$14 billion Elastic made a big stand against Amazon s cloud and reignited a fierce open source software debate (ESTC, AMZN)

Summary List PlacementEarlier this month, $15 billion Elastic made a change to the licensing terms of its free search engine software for businesses, in a move intended to make a stand against what it saw as exploitation by Amazon Web Services. In doing so, it reignited a debate that s been simmering in software developer circles for well over a year — even as critics accuse Elastic of muddying the waters of the open source software movement itself. Starting in 2015, AWS began offering Elasticsearch, Elastic s flagship software, to its own customers as a commercial product, taking the core code and putting its own spin on it with proprietary new features. This is perfectly legal: Elasticsearch began as open source software, meaning anybody — even Amazon — can do whatever they want with it, up to and including selling it. Earlier this month, however, Elastic decided that it would no longer offer its Elasticsearch or Kibana software under the Apache 2.0 license, a standard set of terms and conditions for how open source software may be used. Instead, Elastic will offer those products under a so-called dual license structure: Users can choose either the company s home-grown Elastic License, or the Server Side Public License (SSPL), which was created by the database company MongoDB. In either case, the license places limits on how larger users, like AWS, can use the software. Elastic CEO and cofounder Shay Banon told Insider that in his view, AWS is unfairly benefitting from the hard work that the company has done in building Elasticsearch, both as a piece of software and as a brand. He suggests that customers don t understand that the Elasticsearch offered on AWS isn t actually made by Elastic. I m very happy with the growth of our business both on product level and business level, but I can t quantify how many people end up being confused by their services, Banon said. This is something Amazon took away. Thanks to this confusion, some of them would be our customers on our cloud service. In December, Elastic reported revenue of about $145 million, up 43% from the same period the year before. It s currently valued at some $14 billion on the stock market at the time of publication. Elastic follows the lead of companies like MongoDB, Redis Labs, and Cockroach Labs, which built their business off open source software, but made similar moves to change their licenses in a defensive move against large clouds like AWS. While these companies say the license changes are a move to protect their business, they ve also sparked fierce debate in the open source community. Opponents have argued that allowing the free and unfettered use of software is key to the foundation of open source itself, even if it means letting major companies sell the code. AWS itself has criticized Elastic over the decision, saying that it will take the already-released Elasticsearch and Kibana open source projects and maintain their own, separate versions. Elastic knows what they re doing is fishy, AWS wrote in a blog post. The community has told them this. It s also why they felt the need to write an additional blustery blog (on top of their initial license change blog) to try to explain their actions as AWS made us do it. Most folks aren t fooled. The blog post went on to say: Elastic has a right to change their license, but they should also step up and own their own decision. Banon, for his part, said in a statement that Amazon s announcement is what we expected, and that it doesn t affect the company s plans for developing the software. We created Elastic we care about it more than anyone else. It is my life s work and I will wake up every day and do more to move the technology forward and innovate on behalf of all users, he said in the statement, in part. Why Elastic changed its licensing This isn t the first time that Elastic has taken issue with AWS. Banon told Insider that Elastic is actively litigating trademark claims that Amazon s Elasticsearch offering, built on the company s code, has caused confusion in the market by unfairly implying that the two companies worked together on the service. The CEO claims that he took a personal loan to register the Elasticsearch trademark in 2011. That s a problem with our perspective, Banon said. This is misinformation and confusion that Amazon is betting on. And in 2019, AWS launched Open Distro for Elasticsearch, a version of the software that took the original project created by Elastic and took it in its own direction. AWS said that the move was at least partially because it disagreed with the direction of the core project. This set off a fresh round of debate, with some in the open source community taking Amazon s side in defending its right to use open source code however it wants. At the time, Banon accused the cloud giant of misusing Elastic s brand and masking its actions with fake altruism or benevolence. Banon also claims that Amazon took some of Elastic s proprietary code for its Open Distro version of the Elasticsearch software. It creates so much distraction, Banon said. It hurts our engineers. Engineers come to us and say we found someone copying our code. Engineers say this is very frustrating when we see code that we write and contribute business to the company we love and it s just being copied. All of that has added up to Elastic taking this most recent action to prevent AWS from using its code. It wasn t a single event. It was a continuous stream of events that we see over time, Banon said. Regardless of how much we want to stay working on products and focusing on that, it ends up distracting from that. Users can choose from two licenses Elasticsearch and Kibana customers will be able to choose between the Elastic License and SSPL. Those licenses both have a lot in common with more traditional open source: They both allow the public to view, download, and modify the software s source code however they wish. They also allow for outside developers to contribute new features or bug fixes back to the main project, or to contact Elastic developers directly for help. There are some differences between those licenses and the more conventional approach to open source, however — mainly that both licenses prevent users from turning around and selling the software to their own customers. This raises both philosophical and practical problems for Elastic customers. The Open Source Initiative, the body responsible for defining what constitutes open source, has not certified either the Elastic License or SSPL. The Apache 2.0 license, meanwhile, is an industry-wide standard, giving customers and their legal departments reassurance that they re using the software in compliance with the terms and conditions. Banon acknowledges that replacing a common open source license with two new, more restrictive ones may cause trouble for Elastic customers. It also represents a change of tone for Elastic, which previously pledged that it never will ditch the Apache 2.0 license for Elasticsearch and Kibana. The blog entry where it made that promise has since been updated with a footnote saying that circumstances have changed. To people who change from Apache 2.0, first of all we apologize, Banon said. I understand this is noise we don t want to deal with. Our mindset is that our team is ready and standing by to make it easy on you as much as possible. In the future, Elastic may also look to using Cockroach Labs Business Source License, a source-available license where the code flips to being under an open source license after five years, Banon said. Open source licensing lawyer Heather Meeker, who advised MongoDB on the creation of the SSPL and Elastic on the Elastic License, says that the problems they cause are offset by harsh business realities. That means the companies will stay in business, because they may not be sustainable without doing that, Meeker told Insider. That may not be a benefit to any user either. To that point, Banon said that most of Elastic s customers won t see any change from the shift, but that the company will be better for it. The majority of [customers] are not affected, Banon said. I hope we did a good job just relaxing them and telling them, hey, it s fine, carry on. This exchange will only allow us to build better products for you. MongoDB, Redis Labs, and Cockroach Labs have made similar changes Several companies have made similar changes in recent years. MongoDB adopted SSPL, Redis Labs created the Redis Source Available License, and Cockroach Labs created the Business Source License. These licenses are all intended to balance the benefits of open source with forestalling the threat of providers like AWS. Read more: Despite the looming threat of Amazon s cloud, some software companies are going all in on free software. Others are fighting back. However, Open Source Initiative president Josh Simmons says that while people are free to use the licenses that they see fit, the rhetoric around licensing changes in recent years are destructive and disingenuous at best, as they will use phrases like free and open to describe software that is not available under an OSI-approved license. The reason that open source works is well-defined rules that work in a predictable fashion, Simmons told Insider. Anytime people throw around the rhetoric of open without abiding by the standard, we have a situation where someone is muddying the waters and frankly eroding community consensus. Relicensing can also lead to numerous consequences, Simmons says. For example, people working with Elasticsearch or Kibana may end up reassessing their relationship with those tools and explore forks, as they may have uncertainty about how the license works, he says. Customers may even completely stop using the software. I think it s created enough uncertainty to give people pause before adopting this software, Simmons said. Beyond that, there s the uncertainty where you have the organization that made prior commitments on those license choices and they ve gone back on those commitments. What does that mean from a trust perspective? That to me looks untrustworthy. Aiven, a startup, is already marshaling developers to take the Elasticsearch code that s already available under open source and start a new project around it. Ditching the main project shepherded by Elastic, is important as a hedge against the disruption moving away from traditional open source it creates, says Aiven CEO and cofounder Oskari Saarenmaa. I think we see more and more people just realizing that Elasticsearch is no longer open source, but they want to have an open source alternative to that, Saarenmaa told Insider. Elastic is moving to more proprietary rules. That would be good for their business in the short term but I think it s a long term, they will lose some community support. From Banon s perspective, he says that he just hopes that these changes to Elastic s licensing strategy will mark the end of its feud with AWS, allowing the two to go their separate ways — without Elastic feeling the need to take any more legal action. My biggest fear is loopholes because we ve seen our trademark being abused and our commercial code being copied, so I want to make sure we do it well enough so it won t be abused, Banon said. We re doing this change, so we don t want to litigate. Got a tip? Contact this reporter via email at rmchan@insider.com, Signal at 646.376.6106, Telegram at @rosaliechan, or Twitter DM at @rosaliechan17. (PR pitches by email only, please.) Other types of secure messaging available upon request.SEE ALSO: Google Cloud s business is booming again Join the conversation about this story NOW WATCH: Here s what it s like to travel during the coronavirus outbreak


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