About Protocol | Enterprise

‘It’s not OK’: Elastic takes aim at AWS, at the risk of major collateral damage

Elastic's long-running dispute with AWS entered a new chapter last week with big changes to two of its open-source projects. AWS now plans to take those projects under its wing.

‘It’s not OK’: Elastic takes aim at AWS, at the risk of major collateral damage

"I don't know why this is surprising to people," Elastic CEO Shay Banon said in an interview with Protocol.

Photo: Michael Nagle/Getty Images

Fed up with what he sees as unfair competition from AWS, Elastic CEO Shay Banon felt he had no choice but to restrict the way third parties can use two important open-source projects developed by his company. Yet much of enterprise tech thinks he just threw the baby out with the bathwater.

Last Thursday, Elastic published a blog post — curiously titled "Doubling down on open, Part II" — announcing that Elasticsearch and Kibana, two widely used open-source projects in enterprise tech, would no longer be available under the permissive Apache 2.0 license. Instead, all subsequent releases to those projects will only be available under either a controversial new license known as the SSPL, or the Elastic License, both of which were designed to make it difficult for cloud companies to sell managed versions of the open-source projects they're applied to.

Elastic has never tried to hide its disdain for AWS, a feud that dates back to the 2015 launch of Amazon Elasticsearch Service. The introduction of that AWS service, a managed version of the Elasticsearch open-source project, was arguably the low point in the strained history between enterprise tech companies based around open-source projects and AWS.

It is, of course, completely legal for AWS — or any company — to build its own service around any permissively licensed open-source project. In fact, AWS reacted to Elastic's decision Thursday afternoon by announcing plans to fork the two projects, or to take them in a new AWS-led direction, under the same permissive Apache 2.0 license.

But a generation of open-source enterprise companies (and their venture capitalist backers) see AWS as an anticompetitive gorilla stomping on their opportunity to monetize innovative software, and Elastic took particular offense to AWS' use of the Elasticsearch trademark.

"I don't know why this is surprising to people," Banon said in an interview with Protocol. "I'm making a stand here. I'm drawing a line and saying this is not OK."

However, critics argued Banon's decision paved the way for Amazon to turn its open-source distribution of the Elasticsearch project, the Open Distro for Elasticsearch, into a proper fork. The move had enormous potential to disappoint contributors to the Elasticsearch and Kibana projects who expected their work would be freely available to the community, only for that promise to be discarded once it was no longer economically comfortable for its corporate backer.

"Choosing to fork a project is not a decision to be taken lightly, but it can be the right path forward when the needs of a community diverge — as they have here. An important benefit of open-source software is that when something like this happens, developers already have all the rights they need to pick up the work themselves, if they are sufficiently motivated," AWS said in the post announcing its decision.

After AWS published its decision, Banon issued an additional statement: "When we announced the change, we sadly expected this. This what made it so hard. But I am also relieved. Relieved we are free to focus on products vs. battle abuse. Relieved that I can trust our community will see through this misinformation & confusion."

While legal experts believe Banon has a solid trademark case against AWS, the licensing changes clearly did not deter AWS, and they have no effect on companies like Microsoft and Google Cloud, which have signed deals with Elastic.

"They are aiming to hit Amazon, but what they are doing is throwing a boulder at Amazon floating peacefully in a pond of an ecosystem," said VM (Vicky) Brasseur, a corporate strategist and former vice president of the Open Source Initiative. "I don't think it's worth it. They are going to destroy their ecosystem."

Quite a stretch

Elasticsearch is an open-source search engine first released in 2010 by Banon, who would go on to co-found Elastic in 2012. It is often used alongside two other Elastic open-source projects, Logstash and Kibana, to form the "ELK stack," which is well known in enterprise tech circles among companies that want to build search capabilities for their websites while also using those search capabilities to pursue their system logs for events such as errors.

Customers can buy a managed version of this stack called Elastic Cloud, which runs on all three major U.S. cloud providers, or manage it themselves on either their own hardware or clouds. But there are also some companies and individual users that are happy to take on the burden of managing the open-source version.

The new licensing changes, however, mean that companies using this open-source version must now agree that they won't use Elasticsearch and Kibana as part of their own cloud service, and that has raised questions. The changes are directed at big cloud providers, but there are many small and medium businesses that could be using the open-source projects as part of their own software stack in a way that may or may not be infringing on the new licenses, depending on the quality of the lawyers involved in any dispute.

"If you're using them, please look at how they fit into your software supply chain, look at how this is going to impact your product and your projects. Don't just overlook it and assume it's nothing," Brasseur said.

Banon said "the vast majority" of Elasticsearch and Kibana users will not be affected by these licensing changes, but he acknowledged there will be valid concerns felt inside the Elasticsearch community.

"I'm very worried about [alienating community members]; this is why we didn't make this change lightly," Banon said. "Regardless of how much we try to relax our user base, some people will end up being alienated, and others, which I'm more worried about, might be fed by FUD," the tried-and-true "fear, uncertainty and doubt" campaigns that have been part of enterprise tech marketing for decades.

Brasseur agreed that the licensing move comes with significant risks to Elastic's goodwill inside its community of contributors.

"They're now taking these contributions, which were given by external contributors freely and openly with the assumption that their contributions would be freely and openly available, and now they're locking them up behind a non-open license," she said. "It's perfectly fine to do that. But you better be talking to your community up front and telling them how and why, and then I think it's probably wise for you to be then compensating people for the value that they have provided to your company. Otherwise, you're just using them."

Off the mark

The root cause of the dispute between Elastic and AWS mostly centers on the trademark issue, which prompted a lawsuit from Elastic in 2019 that continues to work its way through the court system.

The use of that trademark caused a great deal of confusion among Elastic's customers, according to Banon, who believed that the AWS service was the result of collaboration between the two companies when it was really just a repackaging of the open-source Elasticsearch project. A tweet from Amazon CTO Werner Vogels calling the new service a "partnership" certainly did not help.

"To modify Elastic's product and call it Amazon Elasticsearch is, in my view, a pretty clear trademark infringement," said Pamela Chestek, a trademark attorney and former intellectual property attorney at IBM's Red Hat.

But when AWS launched the Open Distro for Elasticsearch in 2019, the trademark dispute also turned into a dispute over code.

AWS charged that Elastic was co-mingling open-source code with proprietary code, making it hard for users to know if they required a paid subscription or not to use certain features. The Open Distro was pitched as a way to get the benefits of open-source Elasticsearch with the features needed to make it work properly, and it was released under the Apache 2.0 license.

Elastic denied that it was trying to confuse its users, and alleged that AWS was using third-party code in that distribution that was a copy of its own work.

"Recently, we found more examples of what we consider to be ethically challenged behavior. We have differentiated with proprietary features, and now we see these feature designs serving as 'inspiration' for Amazon, telling us their behavior continues and is more brazen," Banon said in a blog post Tuesday.

License to print money

As with all disputes in enterprise software, this one really comes down to money. Elastic doesn't make money when people use the open-source versions of its software, and all things considered, would prefer they pay for the licensed versions.

From the outside it's hard to pinpoint exactly how much money AWS has made from its Elasticsearch services, but it's a non-zero amount: AWS likely recorded more than $12 billion in overall cloud revenue during the fourth quarter of 2020. At the same time, Elastic's own cloud services are growing quite strongly as the world shifts to cloud-based software.

Elastic revenue rose 43% in its most recent quarter, with SaaS subscription revenue for Elastic Cloud driving much of that growth. Over the course of 2020, Banon wasn't worried enough about the competitive threat from AWS to mention it during the quarterly conversations with the financial community.

In fact, in answering a question about competition with the cloud providers from a financial analyst during Elastic's December earnings conference, Banon said: "We feel like we're ahead of the pack on all three when it comes to the maturity and the future readiness of our products, and that's reflected, I think, by the usage of it." Elastic's stock has more than doubled in the last 12 months.

"We're doing well as a business, and I'm not going to sit here and apologize for it," Banon said. "It's not about doing well or not doing well as a business, it's about doing what's right."

In the aftermath of the licensing changes, however, what's "right" for Elasticsearch users, open-source contributors, and Elastic shareholders takes on different meanings, depending on where you sit.

"I would have been a lot more sympathetic to Elastic if they said, 'look, these choices we made when we were very young, they aren't working out for us anymore. They aren't working out with our business plan,'" Chestek said. "A lot of people would be unhappy with that, but it would be honest."

Update: This article was updated at 3:45 p.m. PT to include a statement from Elastic following the release of AWS' blog post.

Protocol | Fintech

Here’s everything going wrong at Binance

Binance trades far more crypto than rivals like Coinbase and FTX. Its regulatory challenges and legal issues in the U.S., EU and China loom just as large.

Binance CEO Changpeng Zhao is overseeing a global crypto empire with global problems.

Photo: Akio Kon/Bloomberg via Getty Images

Binance, the largest global crypto exchange, has been hit by a raft of regulatory challenges worldwide that only seem to increase.

It's the biggest example of what worries regulators in crypto: unfettered investor access to a range of digital tokens finance officials have never heard of, without the traditional investor protections of regulated markets.

Keep Reading Show less
Tomio Geron

Tomio Geron ( @tomiogeron) is a San Francisco-based reporter covering fintech. He was previously a reporter and editor at The Wall Street Journal, covering venture capital and startups. Before that, he worked as a staff writer at Forbes, covering social media and venture capital, and also edited the Midas List of top tech investors. He has also worked at newspapers covering crime, courts, health and other topics. He can be reached at tgeron@protocol.com or tgeron@protonmail.com.


Keep Reading Show less
Nasdaq
A technology company reimagining global capital markets and economies.
Protocol | Policy

Facebook’s scandals have obliterated any goodwill left in Congress

Lawmakers were supposed to wade into questions about Big Data's effect on competition. Instead, their vitriol at Facebook was unending.

Image: Alexander Shatov/Unsplash

In the wake of last week's damning series of reports about Facebook, senators at a hearing that was initially supposed to be about competition instead unleashed their ire on the firm, comparing it to Big Tobacco, suggesting it lied to Congress and all but accusing the social network of profiting off teens' anxiety and suicidal thoughts.

The bipartisan parade of fury on a politically salient issue lasted hours on Tuesday. Senators focused particularly on a Wall Street Journal report about the company's careful research into the corrosive effect of Instagram on young users' mental health. But the show, coming during a hearing that was supposed to examine the impact of Big Data on competition, was also the latest evidence that Congress' periodic fits of anger at tech companies and the way Facebook obsessively deflects can create a loop that gets in the way of what Washington actually wants to do.

Keep Reading Show less
Ben Brody

Ben Brody (@ BenBrodyDC) is a senior reporter at Protocol focusing on how Congress, courts and agencies affect the online world we live in. He formerly covered tech policy and lobbying (including antitrust, Section 230 and privacy) at Bloomberg News, where he previously reported on the influence industry, government ethics and the 2016 presidential election. Before that, Ben covered business news at CNNMoney and AdAge, and all manner of stories in and around New York. He still loves appearing on the New York news radio he grew up with.

How tech is inventing better ways to read the internet

The market for read-later apps is heating up again, and the apps are much smarter this time.

The reading experience of the internet sucks. But some startups are trying to fix it.

Illustration: cihanterlan/Getty Images and Protocol

The internet, as a reading experience, is mostly terrible. The heavy pages riddled with ads and trackers, the unexpected pop-ups, the bespoke designs that in too many places end up broken. Over the years, many have tried to fix this problem — Google with AMP, Facebook with Instant Articles — and none have succeeded. It can often feel like things just keep getting worse.

Ben Springwater certainly felt like things were getting worse. In 2016, he was working at Nextdoor, lamenting with one of his colleagues, Rob Mackenzie, that reading on the internet was so complicated. The reading experience was part of the problem, but so was the internet's unlimited supply of stuff. "It completely boggles the mind that so much of this stuff is really excellent, this life-changing stuff we could read," Springwater said. But there's only so much time in the day. "So we have filters: We go to Twitter, we check the headlines or what comes into our inbox. But those decisions for most of us are really suboptimal, relative to the potential of what we could be reading."

Keep Reading Show less
David Pierce

David Pierce ( @pierce) is Protocol's editor at large. Prior to joining Protocol, he was a columnist at The Wall Street Journal, a senior writer with Wired, and deputy editor at The Verge. He owns all the phones.

Protocol | Policy

New report shows kids see COVID-19 misinfo on TikTok in minutes

A new report finds that kids as young as 9 are being fed COVID-19 misinformation on TikTok, whether they engage with the videos or not.

NewsGuard researchers asked nine kids to create new TikTok accounts and record their experiences on the app.

Photo: Andrew Harrer/Bloomberg via Getty Images

TikTok is pushing COVID-19 misinformation to children and teens within minutes of creating a new account, whether they actively engage with videos on the platform or not, a new report has found.

The report, published Wednesday by the media rating firm NewsGuard, raises questions not only about how effectively TikTok is enforcing its medical misinformation policies, but also about how its own recommendation algorithms are actively undermining those policies.

Keep Reading Show less
Issie Lapowsky

Issie Lapowsky ( @issielapowsky) is Protocol's chief correspondent, covering the intersection of technology, politics, and national affairs. She also oversees Protocol's fellowship program. Previously, she was a senior writer at Wired, where she covered the 2016 election and the Facebook beat in its aftermath. Prior to that, Issie worked as a staff writer for Inc. magazine, writing about small business and entrepreneurship. She has also worked as an on-air contributor for CBS News and taught a graduate-level course at New York University's Center for Publishing on how tech giants have affected publishing.

Latest Stories