What's the biggest difference between offering some functionality as an open source library, and in offering it as an HTTP API? To me the single biggest difference is that running a web service lets you instrument whats users are using, and collect telemetry, while shipping an open source library doesn't.
For a combination of social and technical reasons, the open source community has basically never added instrumentation to libraries which reports back to its authors on how it's being used. The result is that open source maintainers have considerably less information about what their users do with their product than their peers writing web services.
I want to highlight just a few places where having the ability to collect usage metrics would go a long way to improving the quality of open source:
For a variety of reasons, from time to time, libraries deprecate functionality. Unfortunately, right now open source maintainers have no data to inform how disruptive a deprecation cycle is. Maintainers have only their own instinct, or extreme non-representative surveys, to inform how many users are affected by a deprecation.
In a world where open source libraries were highly instrumented, maintainers could start by adding metrics on how often a feature they wanted to deprecate was used. This would give a baseline on current usage. Maintainers could then introduce deprecation warnings in the program and try to publicize the deprecation. Finally, only when usage dropped below a threshold would the deprecated functionality be removed.
This would provide a considerably better experience both for maintainers, who could use actual data to make decisions, as well as for users who would be less likely to inadvertently find themselves in the middle of a highly disruptive breakage.
Other library version
An extremely common question that faces open source maintainers is "What versions of other software are my users using?" This is everything from what version of Python, what version of another Python library, or what version of a system library? For pyca/cryptography we are constantly faced with the issue of supporting a wide variety of OpenSSL versions.
Unfortunately we have no data on what versions most of our users are on. As a result we hear exclusively from users who experience compatibility problems, most of whom are using outrageously out of date versions of OpenSSL.
If we had actual data on what real users used, we could craft a much better compatibility policy that ensured large swaths of our users were supported, without burdening the project by supporting tiny minorities.
Lots of open source projects claim to be targeting "80/20" use cases. Write 20% of the code, serve 80% of the users. However, once again, there's basically never any data to support their ideas about which features users actually need.
Armed with better data about which features are used, and which features aren't, projects would have the opportunity to craft better APIs, which address the actual problems users have.
How we got here
I mentioned that there are technical and social reasons we got here.
The social reasons are complex. While some open source projects do report telemetry, they are universally end-user facing and supported by large companies (e.g. Firefox). Community developed open source projects come out of an ethos that, by and large, does not approve of software phoning home for any reason.
The technical reasons are simplistic. There's a lack of tooling, meaning that for any one project to instrument itself, they need to invest considerable up front effort. Further, a lot of the value that could be derived here would be in dynamic languages. They do not have a compile time phase where many of these statistics could be reported. Instead, statistics need to be collected and reported at runtime which increases the chances that the metrics collection would disrupt normal functionality.
Both of these can be addressed largely by building common tooling that is used by many projects. This would give many advantages such as being able to aggregate reporting across many libraries to minimize network traffic, and sufficient scale that would justify investment in privacy preserving algorithms.
Right now, open source maintainers have almost no data about how their libraries are used with which to make decisions. The result is a lot of guess-work, and deferring to a loud minority at the expense of the overwhelming majority.
If a culture emerged of users being okay with open source projects phoning home with using statistics, and with open source projects using these to inform decisions projects would be able to deliver better results.