What we can learn from ownCloud's collapse

OwnCloud's U.S. office shut down after last week's Nextcloud announcement. There's a very important lesson to be learned here.

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Credit: russellstreet/Flickr

OwnCloud was founded by Frank Karlitschek in 2010, a KDE developer who created many other open source projects. Concerned about the rise of proprietary cloud, Karlitschek's vision for ownCloud was to give users complete control over their cloud storage and sync software.

After the successful launch of the project, Karlitschek started looking to build a business model around it. In 2012, he co-founded ownCloud Inc. with Markus Rex. They raised over $10 million in venture capital and the company was growing tremendously well.

But in April of this year, everything fell apart. Karlitschek announced that he was leaving ownCloud Inc. He was not happy with the balance between the interests of the ownCloud community and that of the company.

Many core engineers followed suit, leaving ownCloud Inc.

Although by the end of May, ownCloud announced the formation of a foundation around the project, it seems it was a case of too little and too late.

End of ownCloud?

On June 2, within 12 hours of the announcement of Karlitschek's new project and company Nextcloud, ownCloud Inc. announced that it was shutting down its U.S. office, placing the blame squarely on Nextcloud. “Unfortunately, the announcement has consequences for ownCloud, Inc. based in Lexington, MA. Our main lenders in the US have cancelled our credit. Following American law, we are forced to close the doors of ownCloud, Inc. with immediate effect and terminate the contracts of 8 employees," ownCloud wrote in a blog post.

OwnCloud also accused Karlitschek of poaching developers. Although Karlitschek himself said that he would welcome anyone from ownCloud who wants to join Nextcloud, it's not clear that he went so far as to poach developers. Arthur Schiwon, one of the core developers who left ownCloud, wrote in a blog post that he "decided to quit because not everything in the ownCloud Inc. company world evolved as I imagined.” It's not hard to imagine that the others left for the same reason.

Unhappy engineers leaving a company is nothing new. We've seen companies like Nokia, where a band of engineers formed Jolla. We have seen similar departures in projects like OpenOffice, where engineers left the project to form LibreOffice.

It’s also quite hard to believe that an entire company would collapse within 12 hours of a fork! As Linus Torvalds once said, forks are the strength of the open source world.

And here's where the important lesson is:

No matter who you talk to from SUSE to Red Hat to CoreOS…every company that built its business around open source values the community the most. The community is what creates their projects. They have to strike a very fine balance between business needs and community needs. And that balance seems to have been tipped at ownCloud.

The announcement of ownCloud Foundation was met with criticism from the open source community, which saw it as proof that the company was still trying to be in control. For example, ownCloud Inc. had a majority control over the foundation, which gave them the power to expel any community member.

Another factor in ownCloud's undoing could be venture capitalists. Jos Poortvliet, the ownCloud community manager who now works at Nextcloud told me that a lot of ownCloud features were held back because developers had to convince investors in 30 seconds. And every such conversation led to a comparison with Dropbox. Investors would refuse features on the basis that Dropbox doesn’t do that.

I don’t blame investors for not understanding the open source development model. I think it’s the job of the project to either find investors who do understand or educate them.

Poortvliet also expressed his frustration on Google+ where he wrote that he “learned that often, with venture capital you have to limit yourself to doing things investors can understand rather than what users and customers ask or what could make money. This doesn't always have to be an issue but it can be crippling. And it's frustrating because management ends up forced to make short term decisions they know are bad.”

Conclusion

While U.S. operations of ownCloud have shut down, the German entity and the ownCloud project still exist. But one has to wonder how long they will continue to exist with the core developers, including the founder, having left the project.

With ownCloud fork Nextcloud, Karlitschek and the team are now building the future of ownCloud. “You can create a very successful business model around open source,” Karlitschek told me in an interview when he announced Nextcloud.

Karlitschek told me that this time they have learned from their past mistakes and will maintain a very good balance between what the open source community needs and what Nextcloud customers need. At the same time they are not accountable to any investors as they are funding the project themselves.

Nextcloud is the cloud that Karlitschek always wanted to build. And the future will tell us which cloud — ownCloud or Nextcloud — will rule our open skies.

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