Non-profits, foundations, and umbrella organizations

O'Reilly celebrated 15 years of its OSCON open source convention this year. The success of OSCON mirrors the success of the wider open-source community. This success has caused many open source projects to investigate ways of formalizing their governance and corporate structures. Several sessions at OSCON covered aspects of open source non-profits, such as reasons for establishing a non-profit for a project as well as reasons for looking at alternative solutions. In addition, several of those alternatives — existing non-profit "umbrella" organizations — described the services they provide to open source projects.

Should you start a new non-profit?

Dave Neary, a board member of the Yorba Foundation and a long-time member of the GNOME Foundation, gave a talk that tackled whether a project should start a new non-profit (slides [SlideShare]). Neary shared some of the reasons for starting a non-profit, separating them into three categories. The first is to provide a financial infrastructure for a project. This includes opening a bank account, being able to make contracts with venues as a legal entity rather than as an individual, and reimbursing volunteers for travel. These activities are difficult for individuals. While some projects put money into the personal account of a volunteer, Neary stressed that this is "not a good idea".

Second, a corporate structure helps insulate members from liability. If you're working in IT, you're exposing yourself to risk, he said. Similarly, you're exposing yourself to risk when you sign contracts for a conference venue. If something goes wrong, you're liable. Neary said that "you want an entity that protects you from that".

Finally, there are reasons related to governance and pooling of resources. A non-profit organization can help to formalize the governance rules of the project, although Neary believes that this should be done within the community rather than the organization. A non-profit entity can also provide a level playing field for projects with major corporate involvement, and it can be used to pool resources from corporations participating in a project. It can also be an entity to assign trademarks or copyrights to.

Costs

While there are good reasons for starting a non-profit, there are also significant costs. Neary believes that the costs outweigh the benefits in most cases. First, you need money to start a non-profit. You need a lawyer to draft the by-laws of the organization and to do various other paperwork. A bookkeeper has to be paid to do annual returns and possibly run payroll (if you're planning to hire staff).

Neary remarked that interesting projects can usually find the funds required to start a non-profit, but there is a much bigger cost: time, which is "something you cannot get back". According to Neary, the amount of time you'll spend is significant — one volunteer will spend all of their volunteer time on non-profit-related activities and bureaucracy every year. Furthermore, it's quite likely that the volunteer will burn out after a year or two. Many people underestimate the amount of ongoing work that running an organization requires, such as making sure elections happen and that paperwork is filed on time. Another problem is that the approval time for open source related 501(c)(3) organizations (US-based charities) has to be measured in years at the moment, partly because open source has found its way onto a watch list.

Finally, another significant cost is the risks and responsibilities for the people involved. The president and board are accountable for the organization, both fiscally and legally. This is a great responsibility and you have to think carefully about it.

Alternatives

Given the significant costs of starting and running a non-profit organization, projects will want to consider alternatives; Neary outlined three possibilities. The obvious alternative is to join an existing umbrella organization. This is a good way to "get most of the goodies and avoid most of the bad stuff". Neary cited some established organizations, such as the Software Freedom Conservancy, Software in the Public Interest, and the Outercurve Foundation. He also noted that several projects have grown to a point where they provide services to other projects, such as the Apache Foundation, the GNOME Foundation, and KDE e.V..

The second option is to find a "sugar daddy" — a benevolent corporate sponsor. In an ideal scenario, the corporate sponsor would provide financial resources (directly and by employing developers) and other services, such as organizing events and helping with legal matters. At the same time, the company would provide a level playing field by leaving it up to the community to manage the project.

Unfortunately, there are considerable risks with this approach. Neary remarked that winds of change often blow through companies, for example when a new CEO comes in, and this may lead to a desire to monetize the project. He cited OpenOffice, MySQL, and Symbian to illustrate the dangers. It's also possible that the project might get neglected if it's no longer part of the core of what the company does.

Neary remarked that this model has worked well for several projects in the short term, but that the long-term viability is questionable. If you want a vibrant community with individuals and companies contributing, this is probably not the model to follow, he said.

The third option is to use management services. You can offload financial and administrative work to another organization, but such services will obviously cost money. The Outercurve Foundation, which has outsourced the majority of its administrative work, was given as a successful example of this approach. One problem, according to Neary, is that you're not getting the benefit of the organization being aligned with your community.

Given the work involved in running a non-profit and the problematic aspects of the alternatives, Neary suggested that joining an umbrella organization is probably the way to go for most projects. In the discussion following Neary's talk, the question of whether there are circumstances under which it makes sense to start a non-profit was raised. Simon Phipps commented that a separate organization may be the right solution if the administrative needs of a project would overwhelm the fiscal sponsor. He named OpenStack as a project that required its own foundation given the level of activity around it and its desire to hire several staff members. While forming an organization may make sense for large projects, Phipps cautioned that "everyone thinks they are one of those and honestly you're not".

Non-profit organizations for FLOSS projects

Bradley M. Kuhn, the Executive Director of the Software Freedom Conservancy, organized a session at OSCON in which several non-profit organizations introduced themselves. This allowed projects wishing to join an existing organization to get an overview of the range of options to choose from.

Josh Berkus, the Assistant Treasurer of Software in the Public Interest (SPI), introduced SPI as a "minimalist financial sponsor". SPI was initially created to act as the fiscal sponsor for the Debian project, but it has over 30 projects at this point. It provides basic services, such as the ability to receive charitable donations, collective ownership of project assets, and light legal assistance.

SPI does not provide project infrastructure, start-up funds, liability protection, or advice with project governance. An advantage of SPI is that it does not dictate any specific governance or infrastructure, and that it does not require exclusive representation. Some projects use SPI to hold funds in the US while making use of other organizations to do the same in Europe. Berkus said that SPI would be a good choice for projects that just need a bank account or want to run a fundraising campaign.

Kuhn followed Berkus and described SPI as a grantor/grantee fiscal sponsor. Software Freedom Conservancy, on the other hand, is a "direct project", or comprehensive, sponsor. What this means is that projects affiliate with SPI whereas a project joining Conservancy actually becomes part of the organization. (See this recent LWN article for a detailed explanation of these two models.) Kuhn compared it to becoming a wholly owned subsidiary — a project is a "division" within Conservancy and has its own committee, but ultimately Conservancy is the legal entity, which has to ensure that regulations are followed.

The benefits of this approach are that Conservancy can offer liability protection for volunteer developers, and that it can officially act in the name of project, for example when signing a venue contract. The downside is that there is more oversight of the project as Conservancy takes on the project's liability.

Conservancy offers a wide range of services from which projects can choose à la carte. Its services include asset management, legal assistance, help with conferences, fundraising, and more. Kuhn concluded that "you want us if you want full service".

Noirin Plunkett represented the Apache Software Foundation. She said that Apache offers indemnity to developers, infrastructure, and independence. There are several requirements to being an Apache project. Plunkett said that there is "no negotiation" with regard to these three requirements: the use of the Apache license, a collaborative, consensus-driven development process, and a diverse community. Commenting on the latter requirement, Plunkett remarked that "we don't have projects that have one sole source of contributors". Apache projects are also expected to use Apache infrastructure. There is diversity in other areas, though, such as the technology focus of a project, ranging from an office suite to a web server. Joining Apache involves an incubation process to ensure the project meets Apache's legal and community standards.

Ian Skerrett spoke about the Eclipse Foundation. Unlike the first three organizations, Eclipse is a 501(c)(6) organization, which is a US trade association — its goal is to promote the Eclipse community. Eclipse offers various services, including infrastructure, IP management, and community development. It has a lawyer and two paralegals on staff — Eclipse puts a lot of focus on IP management, scanning all code that comes into its repositories to ensure license compatibility and copyright pedigree.

Skerrett clarified some misconceptions people often have about Eclipse. First, Eclipse is technology neutral — while its focus used to be on Java, it has a lot of projects in other languages these days, including Lua and JavaScript. Second, Eclipse is forge neutral, having embraced GitHub in addition to its own infrastructure "just last month". Finally, Eclipse is flexible in terms of licensing. While the Eclipse Public License (EPL) is the default, exceptions can be granted to use other licenses.

Skerrett explained how Eclipse views success, as this influences the projects it is interested in. In addition to large numbers of users and contributions, Eclipse sees commercial adoption of its projects as a key factor of success. Specifically, Eclipse is a great place for building industry platforms.

Paula Hunter explained that the Outercurve Foundation provides business operations, technical services, and a legal structure for its projects. Outercurve is open to many projects — it is not tied to a particular license, technology base, or development process. The only requirements in terms of the development process is that the project needs to have one. Outercurve offers a neutral place for people to collaborate and Hunter believes that neutrality encourages contributions. She mentioned that projects hosted by Outercurve — originally started by Microsoft — have almost 400 developers now and that less than 40% are employed by Microsoft.

Hunter said that the key question for her is how Outercurve can help projects be successful. In order to support projects, Outercurve maps out services throughout the lifecycle of a project. This includes concept stage, launch, building community, and adoption.

Jim Zemlin was the last speaker and he joked that the Linux Foundation provides the "same things" as the other organizations, "only better". Instead of running through the service catalog of the Linux Foundation, Zemlin talked about the importance of FOSS foundations. He discussed the role of standards bodies, like ISO, in supporting collaborative standards development and noted that FOSS foundations play a similar role for open source. They support a collaborative development process, which is a "better, faster way to innovate", according to Zemlin. Noting that people use Linux multiple times every day and don't even know it, he said that it's the "coal and steel of our time" — but "instead of being owned by the Carnegies, it's owned by us".

Discussion

The non-profit sessions at OSCON led to various interesting discussions. One question that came up several times was about non-profit options in Europe. There are various open source organizations in Europe, such as KDE e.V., the Document Foundation, and the OW2 Consortium. Unfortunately, it's difficult to have a European-wide organization, and many countries have different non-profit structures. For example, Phipps mentioned the concept of a Community Interest Company in the UK and suggested that it deserves further investigation.

Another takeaway is that it is important to consider how well aligned the project is with the organization. When the Vert.x project was looking for a home, several organizations offered. One such organization was the Software Freedom Conservancy, but Kuhn (its Executive Director) openly admitted that Eclipse or Apache were a better fit due to their stronger connections to the Java community.

Finally, it is important to remember that projects give up some control by joining an umbrella organization. How much, and what kind, depends on the particular organization they are joining. Projects interested in joining an umbrella organization are therefore advised to carefully evaluate their options.