Sustainable software, part IV: Commercial Open Source redemption

Previously, on Sustainable software:


Making money on software alone is going to be increasingly hard as real world economics kick in. Open Source keeps on gaining momentum per se, yet Commercial Open Source doesn’t seem to go beyond mimicking traditional license-based business models with some Open Source frosting, proving it is not sustainable in the long run. Commercial Open Source is an accidental oxymoron.

When I was a student I did my share of summer jobs, mostly by helping a bookshop with a summer booth by the beach. On a very hot summer my employers thought they had the great idea of selling books by the kilogram: I was given a huge kiosk with lots of remainders, a scale and a couple of banners prominently showing we were going nuts.

The first week, we were novelty, I had serious problems keeping up with the frenzy and the owner was walking on sunshine. A week later the business dried up, we barely survived the summer season and my employer was spending revenues on anti-acid: customers realized that it was still just books, and we didn’t consider how motivating people to buy bulk quantities didn’t quite fit with tourists looking for the casual book and not exactly fancying heavy shopping bags on their evening stroll. People found out they were getting a better deal from the booth next to ours who was still going old school, who happened to have a better choice of titles and who consistently kicked our backside night after night: can you say fundamentals?

The important lesson I learnt is that marketing can only get you this far. It is not that hard to come up with a nifty idea to attract customers, but if you forget that at the end of the day it’s all about converting visitors to customers, which in turns requires proving you have something valuable to offer, you’re just building on sand. The sizzle is just not enough.

Commercial Open Source reminds me of my summer on a beach. Sure enough, it still manages to line up a number of interested prospects, enticed by the idea of a new way to distribute software liberating from proprietary clamps: unfortunately interest typically lasts until the salesman comes to visit. Chances are the guy has been building a career in proprietary software, and all he knows about his product is that it has something to do with computers, and what is still missing to nail the quarter. In or about slide number 10 the prospect wakes up and understand that the if you filter out “Open Source” from the pitch, the whole yadda-yaddas and blah-blahs are just the same old proprietary kool-aid he’s been through for ages: he still has to pay per CPU, he still doesn’t get any flexibility and he’s still going to be locked in. Ahyeah, the Open Source pixie dust is there but what gives in the end?

I’m sorry folks, you don’t build an industry with this. Unless you manage to prove your worth, budget owners are not going to pick up the tab, and your worth is seriously challenged if a free alternative is up for grabs somewhere. You can concentrate as much as you want in adding hoops to entice your customer to buy the proprietary version of your code, but you should also be aware that you will be pushing a boulder up the hill the moment your prospect understands that he has really been tricked to think he would have been in a different position, whilst that’s not really the case.

I want to be optimistic, in the end, and this is why I believe that there might be a sustainable model for Commercial Open Source, even though it will require a serious rethinking of what we have seen so far. My 2 eurocents would be:

  • Ditch the traditional proprietary approach for your paid-for alternative. Realize you just can’t take any Open Source advantage away from the customer, unless you’re fine in being on a level field with proprietary predators. A first, yet important, step in this direction would be abandoning pricing strategies bases on something that’s not really tied to a production cost for you, such as servers, CPUs or users: a key advantage of Open Source is the flexibility you get the moment you need an additional server – taking a key differentiator away is not going to help.
  • Be a blockbuster and work on volumes. If you get to be a leader in your space, you are going to be the strongest incumbent ever. If you manage to get that far, and you have a clear, upfront and value-driven commercial proposition, there is no need for hard sells. Just resist the temptation of being greedy, and then you can just sit back, relax and wait for your fax machine to be clogged by purchase orders from those who really don’t feel like being without official support.
  • Don’t be shy of value added services. Training, development support and consultancy are not exactly swear words and it’s something customers really value. All the big product guys are making sizable revenues for services, why should you be different?

Finally, a humble request. Please stop clogging my reader with stupid whines about users not paying your subscription and getting a free ride, making your software unsustainable as you can’t foot the developers bill. The market couldn’t care less about your developers’ kids in need of new sneakers or your VC craving about his next Lambo: the argument that someone has to pay for software development is one of the biggest straw man of Open Source – the market pays for value, and if you build very little, guess what, you won’t get more than peanuts. If your production model can’t leverage the community, if your marketing model can’t make the best out of the enormous free ride Open Source is providing and if your business model can’t stand the market and has to beg for charity, you will be shown the door pretty soon (unless you screw up real bad, in which case you can always resort to the US Treasury of course). We won’t miss you.

Sustainability is a serious issue: do not pollute it with empty rhetoric, let’s talk business instead. Let’s get back to basics and analyze why Open Source is the absolute best way to produce software, and a great money making machine if used appropriately. Food for another post (or two).

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