The Rise of Open Source Software in Europe

We are seeing a significant change in the global business landscape, and attention within technology circles has focused on verticals where adoption levels have been surging over the past few months, in areas such as e-commerce, logistics, digital payments, telehealth, or tools enabling remote working.

But this is a story that goes beyond the accelerating consumption of software; we are also seeing significant changes in how software is developed. In particular, the continuing rise of open source software (OSS) is a trend that tells us a lot about the evolving structure of technology companies, and the European market’s global opportunity.  

The landscape has never been stronger

Recent developments have underlined the extent to which OSS is on the rise in Europe. We have just seen our portfolio company Rasa, the Berlin-originated open source platform for conversational AI, reach an important new milestone. Last month the Eclipse Foundation, one of the world’s largest OSS non-profits, announced that it is becoming Europe-based, moving from Canada to Belgium.

That is on top of data showing that Europe has a larger community of open source contributors than the US with more than 3M developers, including two of the three largest markets (UK and Germany), and four of the ten fastest-growing (Ireland, Turkey, Netherlands, and Portugal). There are now almost a dozen unicorn-scale OSS companies to have emerged from Europe, including pioneers such as MySQL, Gitlab, Canonical, SUSE, JetBrains, ForgeRock and Elastic. In their footsteps, a second generation is now following: category leaders in emerging fields from conversational AI (Rasa), to developer-first security (Snyk), headless CMS (Strapi), infrastructure monitoring (Netdata), high-performance databases (Clickhouse or Redis), networking (Containous), systems reliability (ChaosIQ), Kubernetes management (Weaveworks), or decision automation (Camunda).

Drivers of OSS growth are here to stay

The OSS business model has overcome critics who argued that it is more idealistic than commercial and would not be profitable at scale. Increasingly, large companies are taking an OSS-first vendor approach, with developers more influential in making purchasing decisions, and enterprises looking for more control and customization in the products they use.

This has favored companies in Europe, with OSS playing to the strengths of a fragmented market and making its weaknesses less relevant. When a small team can gain global traction at an early stage, leveraging OSS developer communities to grow without the need for a large sales function, the depth of its local talent pool matters less. The playing field starts to level between European tech outposts and Silicon Valley. The community-led adoption of OSS brings down company-building costs by reducing the need for expensive field teams and making it easier to tap into remote markets, including the US.

If the structure of the technology market in Europe helps explain why the OSS model has gained traction so far, the impact of Covid-19 points towards how it might accelerate further. One reason is community: their decentralized nature means that OSS companies are not disadvantaged in an environment where both a vendor and its customers must work remotely. Product development and promotion were already happening on a virtual basis and can continue thriving without interruption.

The cost factor is important too. In what is likely to be a sales environment with more C-level scrutiny, OSS vendors will have the advantage of being able to find their way into organizations in an organic manner through adoption by individual users and teams. They may also be able to offer better value in many cases to enterprises who will often be looking to make savings in their software spend. Those customers also want greater control over what gets deployed into their production environment, as they overhaul systems to support their increasingly fragmented IT footprint. Inherently customizable OSS solutions provide the flexibility and control that many CTOs need in a more challenging environment for security and network management.

OSS was already booming in Europe, and the sector is set to thrive in an environment that has turned many of its inherent features into advantages. The changing needs of enterprise software customers intersect closely with what OSS companies are best placed to provide: cost-effective, flexible solutions that put developers in the driving seat. Once regarded as a marginal way of developing software, OSS is increasingly likely to become a dominant product approach & business model. As it does, it may become a defining catalyst for the global growth of European software

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