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Server Side Public License (SSPL) vs. Open Source: A Guide for Investors

Updated: Mar 16

The technology landscape is filled with an array of licenses that dictate how software can be used, modified, and distributed. Two terms that have garnered significant attention are the Server Side Public License (SSPL) and the broader category of "Open Source" licenses. Investors looking to put money into software companies, especially those in the data management and cloud sectors, should be well-informed about these licenses to make judicious decisions. This article aims to elucidate the key differences between SSPL and traditional open-source licenses, and why these differences matter from an investment perspective.

What is Open Source?

Open source refers to a type of software license that allows users to view, modify, and distribute the software's source code. The basic idea behind open source is to promote collaboration, transparency, and community-driven development. Some of the most popular open source licenses include:

  • GNU General Public License (GPL): Requires derivatives or linked works to be open-sourced under the same license.

  • MIT License: Permits reuse within proprietary software provided the license is included.

  • Apache License: Allows for modifications and stipulates the inclusion of the original license and changes made.

The benefits of open source include rapid bug detection and resolution, fostering innovation, and reducing software development costs.

Example: Linux, the widely-used operating system, is open-sourced under the GPL. This has led to a plethora of Linux distributions like Ubuntu, Fedora, and Debian, each tailored to specific use-cases and audiences.

What is the Server Side Public License (SSPL)?

The SSPL is a license introduced by MongoDB, a popular NoSQL database company. While it has many open source characteristics, it includes clauses that have sparked debate in the tech community. The primary differentiation of SSPL from other open-source licenses is its stipulation on providing services using the software. If a company offers the SSPL-licensed software as a service, they must also open-source the entire stack of software used to deliver that service. This provision is seen as a countermeasure against cloud providers who use open-source software to deliver proprietary services without contributing back to the community.

Example: If a cloud provider like Amazon Web Services (AWS) were to use an SSPL-licensed database software to offer it as a managed service to its customers, AWS would have to open-source the entire software stack used to provide that service.

SSPL vs. Open Source: Key Differences

  • Service-Based Stipulations: The most contentious difference, as mentioned, is the SSPL's clause about service-based offerings. Traditional open source licenses don't have such provisions.

  • Community Reception: Many in the open-source community do not consider SSPL to be genuinely open source. The Open Source Initiative (OSI), the body responsible for maintaining the Open Source Definition, has not approved SSPL as an open-source license.

  • Business Models: SSPL is seen as a way for companies to protect their business model from large cloud providers. Traditional open source models, while fostering collaboration, often leave room for monetization by third parties without direct compensation to the original developers.

Implications for Investors:

  • Potential for Litigation: Companies adopting SSPL might face legal challenges, especially from big cloud providers who might perceive the license as restrictive.

  • Monetization and Competitive Advantage: Companies using SSPL can better defend their business model from being undermined by larger players. This could mean steadier revenue streams.

  • Market Perception: Depending on the market and audience, the use of SSPL can be seen as either a pro-community move (protecting small developers) or a restrictive practice (moving away from the open-source ethos).

  • Adoption Rates: Given the controversy around SSPL, some developers might be hesitant to adopt or contribute to SSPL-licensed projects, potentially affecting the software's growth and improvement rate.

The choice between SSPL and traditional open-source licenses is not just a technical or philosophical one. It has real business implications, especially for investors. By understanding the nuances of these licenses, investors can better gauge the potential risks and rewards of investing in software companies navigating the intricate landscape of software licensing.

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