In the last 15 years of my career I have worked at several open source software companies, each with its own unique approach to software delivery, packaging, branding, and sales. Two things have become clear to me:
- There is no single best way to build a successful business around an open source software solution
- Success depends on an organization’s commitment to building real-world solutions and its readiness to deliver genuinely valuable services that help customers to be successful with the solutions.
Without genuinely valuable services for your customer, you have no revenue. I am aware that "value" is an overused word. Having spent many years of my career in marketing, I have been guilty of saying "what's the value proposition?" more than a few times. But now, having been in the driver's seat selling services for open source software applications, I can provide a more specific definition of value, particularly as it applies to application software (in contrast with infrastructure software).
The following are four specific insights that are tied to selling and marketing open source software. These are insights that I would like to share and hear other viewpoints on, if you'd like to participate.
1) Selling open source software is actually about selling a meaningful solution bundle
Ultimately, selling an open source software solution is not about selling the software.
In my years in open source, I've seen many different business models emerge. I've worked at companies that have struggled to find revenue models that could ensure long-term viability of their businesses, and in that quest I have experienced the challenge of remaining committed to a purely open approach.
Recently, I have sold and marketed services in a company dedicated to a fully open source software distribution, Open Technology Real Services (OTRS). The services we sold helped organizations deploy the software more efficiently and more expertly, and the company provided ongoing support and maintenance services in an annual subscription.
With a pure open source model, anyone can have access to all of the current packages in a release at no cost, so price is never a factor when it comes to the software decision. I had to count on the engineering team to listen to the community and to our paying customers for guidance and direction, trusting they would engineer the best new features into the product. But if we only engineered good software and sold nothing, we would not have a sustainable business.
Thus, my task was to sell services. This was not about technology, but about people and organizations—listening to and understanding their internal projects, being considerate of their timelines and budgets. I didn't have a hook that could force anyone to buy anything, so I would simply listen and explain and provide a fair offer for services that genuinely met a customer's need. Budgets are much too constrained these days for anyone to buy services they don't really need, so in the end I always felt good about my sales, knowing that my service offer was going to make a real difference for a customer that was trying to solve a business problem.
Is this scalable? Good question. It's not as scalable as a licensed product model, to be sure. Nonetheless, I found this model to be a good foundation for a company, and it led to a sustainable revenue stream that helped to further fund the development of the product. From my point of view, this needs to be a central operating principle of any open source software company: to create revenue that can sustain and grow the business, to make the product better in the long run, and to enable customers to better deploy the software. This only happens if the software and the services provide real value to an organization.
2) Open source software sales are about customer engagement
Fully open source companies want renewable revenue. They don't have license revenue, so they need to find other ways to keep companies interested in an ongoing service relationship. Years ago at Red Hat, I watched how the Red Hat Network came alive, offering a valuable service for those who purchased a software subscription.
OTRS offers a subscription as well. And if you passively wait for the renewal, you can expect that some customers will ask themselves, "Do we use this subscription service or not? Do we really need to continue to pay for it?" My experience was if we never received a single service request from a given customer in one year, I would not be surprised when that customer called to tell me they didn't really need the service. My approach to this scenario was to demonstrate ongoing value. This was accomplished by regular customer engagement, getting them to pay attention to new features they could access via their subscription, reviewing their current use of the product, and offering add-on services to help them be better trained or better able to use more of the product for more of their organization.
The fundamental principle here is value. No customer will renew a subscription service or buy more consulting services if they don't see genuine value in these services as it relates to fulfilling their business objectives, whether that be better customer service, better IT responsiveness, or better IT management.
3) Two steps to market and sell open source applications
Marketing and selling open source applications is very different from selling open source infrastructure.
There is a great deal of truth in the observation that open source software is written by engineers for engineers, and much of what is created in open source is infrastructure software for security, data management, networking, and so on. When I left behind infrastructure and began to work for an application software company, I was surprised to discover this difference when marketing and selling.
Selling application software is selling to users and managers who are taking care of business issues. They are consumers of software. IT organizations, for example, deployed our software as a way to manage their business responsibilities and delegate tasks to other parts of their organizations; not as a part of their operational infrastructure. Application users, service managers, and IT managers are trying to solve human problems, not machine problems.
Furthermore, with a fully open source solution, there are two sales processes. The first is to convince the customer that my free software can solve their problem more elegantly than the alternatives. The second is to ensure that they can successfully deploy the solution optimally for their users with one of my service packages. If my software didn't really solve their problem, the user votes with their feet and finds another one. And if my service packages didn't really create more value than they cost, we would never sell a thing.
4) Selling open source software is an opportunity to deliver freedom
Open source applications, unlike most open source infrastructure solutions, can usually be offered in the cloud through fully managed service delivery. Building a cloud-based service delivery model gives the vendor the ability to have a renewable revenue stream while the end customer gets all of the advantages of cloud-based delivery.
But cloud-based delivery is perceived by many to be the ultimate form of lock-in. This issue is central–an open source company has an important decision to make and has to be clear about its purpose when doing so. The open source company can choose to offer its solution only in the cloud with no way to get data out of the cloud-based instance, or make it extremely painful to get data out (as would be the case to migrate off proprietary solutions). Or, the company can facilitate an exit and make this as streamlined as possible.
While I was at OTRS, we chose to keep this door open, giving users the complete freedom to exit the cloud-based service and run the software on their own internal deployment without any penalty or lock-in. We called this "Pack & Go." And although the freedom was there, no one had yet canceled their service agreement to exercise that right. It will happen someday, for certain, but it's not what most organizations want to do. Nonetheless, they feel better about having the choice—and that is the real freedom. It also means the open source software company has a great deal of confidence in its service delivery model and trusts that customers will agree.
Coda
Building a business around an open source software solution with a fully open approach takes a formula that seems simple and clear on the surface (just give away the software and sell some services!), but is not so simple to implement. It takes commitment and courage within the organization to stay on the open path. It takes a readiness to shape and provide services (people-based or delivery- and maintenance-based) that are of genuine value. It takes a commitment to freedom, something that may not be as obviously profitable and scalable as most investors like to see, but in the end, this is what customers want and are willing to pay for.
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