$360 million IT automation startup Chef is 'bucking' a 'distinct trend' in open source software with a big bet on making all of its products totally free

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On Tuesday, automation software startup Chef announced it would make all its software free and available as open source — even the products it used to sell commercially.
Instead, it will sell Chef Enterprise Automation Stack — a package of all of its products already optimized to work together — plus customer support services.
Chef is moving in the opposite direction of some other commercial open source software companies: Where the likes of Redis Labs, MongoDB, and Confluent are placing limitations on how their software can be used, Chef is opting to make all of it free to anybody to use for any purpose.

On Tuesday, the $360 million automation software startup Chef announced that it's going to make all its software completely free for anyone to use, however they want, as open source code.

Previously, its core software was available as open source, meaning anyone can view, download or modify the code for free. It also developed and sold additional features aimed at enterprises. Now, though, Chef announced that even these additional features, previously paid upgrades, will be available as free open source downloads, too.

"We spend a lot of time with customers on this," Chef CEO Barry Crist told Business Insider. "We spend an enormous amount of time with customers leading into this and we feel extremely comfortable and confident in these changes."

Chef is popular among software developers for making it automatic to set up new servers and other IT infrastructure, which is especially handy when you're dealing with large-scale software running in clouds like Amazon Web Services or Microsoft Azure.

Crist says that this new open source initiative was the result of 9 months of consideration. Ultimately, Chef says, the move to open source is a move to chase the value that the community brings. Open source software — especially popular software like Chef's — attracts large communities that all pitch in to make it better, faster.

"Our belief is the benefit we get from the community is significantly higher than whatever benefit we get by closing the software," Chef co-founder and board member Adam Jacob told Business Insider. "As a board member I couldn't be prouder."

To actually make money, Chef is introducing the Chef Enterprise Automation Stack, which packages up all its software, plus customer service, support, and software updates — all in the name of making it that much easier for customers to use Chef. It's a similar model as Red Hat, which supports Linux and other major open source software.

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Crist says that this move simplifies matters for customers in another way, too: Under its previous business model, popularly called "open core," customers were often fuzzy about which code was open source and which wasn't, leading to some confusion, Crist says.

However, Crist added that this announcement had nothing to do with financial pressure from Chef's investors or anybody else. Rather, this move was all in the name of streamlining and simplification, he says. According to Pitchbook, Chef has raised $105.3 million, most recently at a valuation of $360 million.

"We wanted to be tightly aligned with our community and we wanted something that would take us to the next chapter over the next 5-10 years," Crist said.

'That is the distinct trend Chef is bucking'

This announcement comes after a series of companies, including Redis Labs, MongoDB, and Confluent, have changed their software licenses to become more restrictive, limiting how people can use certain components of their software. These moves have been controversial among developers, some of whom see it as undermining the core principle of "open" in open source software.

Chef sees that trend, Crist says, and is actively going the other way: All of Chef's software will now be under the Apache 2.0 license, popular in the open source world for its permissiveness.

"They're going the other way," Crist said. "They're close sourcing more of their code...That is the distinct trend Chef is bucking."

Eric Anderson, whose firm Scale Venture Partners invested in Chef, says that many people may see this as a "welcome change" in the wake of the controversy over open source licensing agreements.

Initially, Anderson says there was some concern that Chef might lose customers by making the software free. Another concern is that Amazon Web Services or another major cloud company might swoop in, take the now-open-source code, and resell it to their customers as a premium paid service for their own profit — something that's allowed under the rules of open source, and a thing that's happened to many software companies.

However, Anderson says, he's optimistic about this business model because Chef has a more collaborative partnership with Amazon Web Services. For example, AWS partnered with Chef to launch AWS OpsWorks, a version of Chef's software on Amazon's cloud.

As Anderson talked to Chef's customers, he says that they were supportive of the changes also. And now that Chef's software is completely open, it could attract new customers who come to appreciate the company's commitment to open source.

"The management team at Chef is an incredible team and I think it took them a fair amount of courage and vision to make this decision. I think it's the right one," Anderson said. "This would renew commitment from the community. I think they're good changes."

Adrian Cockcroft, VP Cloud Architecture Strategy at AWS, also supported Chef's announcement via Twitter.

Thank you @adamhjk and everyone @chef - very happy to be partnering with you https://t.co/zKjVNH3dfF and wishing you the best with this new open source strategy! https://t.co/dY1sx9EkJB
— adrian cockcroft (@adrianco) April 2, 2019

That being said, making all of one's software open source might not work for every company, board member Jacob says.

"Everybody's business is complicated," Jacob said. "But for a lot of organizations, they would be better served by being more open. Having faith in that and believing that's where your value comes from is hard."

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