Selling open source the smart way

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Opensource.com

Open source software is experiencing huge growth, with a staggering 64% of companies currently participating in open source projects. But you probably know that already. What's more interesting to look at is how to sell it, and with a little luck, make some money to help support the people who develop your software and sustain your project.

Why we love open source software

Having a deep understanding of why so many organizations use and trust open source is key when it comes to selling it. As one of our own GitLab colleagues explains, it "allows for a level of transparency which closed sourced products do not have; it provides a greater level of innovation when there is a larger community of contributors; and it allows those who use open source to have a say in the product's direction." What's more, it dramatically adds value, thanks to the passion and expertise of a huge team of developers: in our case, more than a thousand.

On a more prosaic—but nevertheless extremely important—level, it also allows open source software (OSS) organizations to ship faster. While this might not be as exciting as sharing methodologies to crack a problem that's been stumping you for weeks, it's vital when it comes to understanding and emulating its success.

Why should I pay for something that I can get for free?

It's not unusual to hear someone ask why a company would pay for software when they can get it for free. And it's a good question. The companies that do make money from selling open source have acknowledged and utilized this reality. The OSS companies that have experienced huge success have built not just a fantastic OSS project for sales, marketing, and engineering, but also have a business strategy that takes into account proprietary enhancements.

Successful open source organizations have made their money based on the premise that a certain type of user will be happy to pay. They can and will pay for an enterprise-grade version of the complete product. This often includes security, a range of proprietary enhancements, and support. They have also understood another type of user won't be able to pay, but it is important not to alienate these individuals (or organizations)—community support is essential for open source.

At GitLab, our competitive advantage arises partly from finding the balance between service and profit. As one of our developers sets out: "Our approach to selling open source relies on us being stewards to the community and always thinking of features and improvements that will benefit the greater good, and finding that balance between taking care of the overall community, while also making a profit.

"I would say overall we try to sell companies on purchasing an all-in-one solution that will change the way your team works together, and how fast you ship code, while we can always be adding improvements and features at rapid speed because of our open source model."

Support the community, and the community will support you

The importance of the community cannot be over-emphasized when it comes to selling open source. By leveraging the expertise of over 1,000 contributors, we can move faster, quickly and regularly provide the features developers really want, and maintain complete transparency.

This approach enables an environment to be created where everyone—customers, companies, individuals—benefits by contributing and taking ownership. It enables GitLab to be more nimble and generate the features users genuinely want.

It isn't always easy selling open source

Selling a product that's based on an open source project is challenging. In October 2014, we adopted an "open core" licensing model to help us generate income in a sustainable way. Striking the right balance between the open source project and the proprietary version takes skill and experience. We want to take care of the community, but let's be honest—we want to make some money, too! This is where it's useful to have the support of colleagues from a sales and marketing background. By conveying the value proposition of the enterprise edition (EE) over the community edition, these team members make a real impact.

When discussing open source sales, there are two main areas that give cause for concern. "It's hard to make money" is a phrase that crops up. Choosing which features should be EE only is another decision which can be difficult.  If this sounds familiar, then take a look at the tips our GitLab colleagues have come up with for sales teams selling OSS:

"Take care of the community, have them in mind, mention the size of your community to prospective clients. Have a clear value proposition of what your enterprise edition offers over free versions."

"Understand the benefits of open source in general; leverage your community; have a clear value proposition and ROI for your enterprise product."

"Highlight the value proposition of why open source works well. Crowd-sourcing ideas to add/improve features, allow people to contribute on any level, lastly, this will speed up the release timeline. Also have a clear pitch on why the company needs a paid enterprise solution."

The results from Elastic, Red Hat, and others show that it is possible to make money from selling open source. Scott Farquhar, co-founder and CEO of Atlassian, spoke at the Business of Software conference, sharing his thoughts on the Freemium business model, the importance of measuring data, and effective marketing tips (who wants to make themselves popular by sponsoring the beer at the next tech conference?), are essential reading for anyone looking for ideas on achieving financial success with open source software.

Looking forward

Increasingly, companies are discussing the security of open source components. Having a process in place that is free of vulnerabilities and license compliant is essential. Although selling open source software will always have particular challenges, the good news is that companies continue to value the range of features, control over product direction, competitive cost, and transparency that it offers.

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Job is Vice President of Product at GitLab. He became deeply passionate for software engineering while working in neuroscience and becoming increasingly frustrated with the lack of version control in science. At the end of 2012 he decided to make the jump and start to work as a software developer fulltime.

3 Comments

> The OSS companies that have experienced huge success have built not just a fantastic OSS project for sales, marketing, and engineering, but also have a business strategy that takes into account **proprietary enhancements**.

> Successful open source organizations have made their money based on the premise that a certain type of user will be happy to pay. They can and will pay for an enterprise-grade version of the complete product. This often includes security, a range of **proprietary enhancements**, and support.

**This is wrong.** It's very important for people like the article author to realize how bad this logic is. Red Hat does not do proprietary enhancements, and for any other company thinking about doing this, it is not a good idea. No respectable open source software company does.

Proprietary enhancements will be plagued with all the same problems that any other closed source software has (user rights, portability and interoperability, inefficient duplication of effort, licensing hassles and costs, not attracting the full potential number of developers, QA people, etc, no outside-company points of view...), and *don't solve the real issue of revenue sustainability for the open source project.*

I forget who, but some Red Hatter said the great thing about their subscription model was that it **aligned their incentives** beneficially, because their revenue was spread out over the period of time where they would have responsibility for supporting the product. And this not only makes the revenue fundamentally *about* the open source work they do, it also keeps them honest as a company - it makes their financial interests practically identical to their clients' interests.

Contrast that with the proprietary enhancement model. The incentives are decisively **not** aligned here, because the company is getting revenue for one thing, and their main product is a whole other thing (the open source project.). That is neither sustainable (because you aren't making money on the actual open source product), nor fair (because you aren't making money on the work put into the open source product.) And as a result the company is not kept honest - they have strong financial incentives to do bad things for their customers.

For example, why not just make the whole thing as proprietary as you legally can? With the enhancement model, open source is reduced to charity, and as soon as the company realizes that they are literally doing charity, just giving away free labor to an open source project, they will lock it down as much as legally possible, simply because that is their financial interest under that model.

Again, contrast that to Red Hat, a real open source company, where they **do not** have any financial interest to lock anything down, in fact they have a direct financial incentive to keep things as open source as possible, because that's exactly how their revenue-generating products get value.

That's why their model is a more sustainable and successful business model for open source. Because they are actually **selling open source**, not **selling proprietary software to fund charity.**

i came to post basically the same comment as the previous commenter. i find it disturbing that someone who can't/doesn't care to figure out a real open source model has the gall to write a post about doing it "the smart way"! A real "open source" (should be free software) model doesn't resort to making the open source code a trap to enslave the user by other means! you develop labor based products around the free software. It's not real complicated! If you think you can write some proprietary code and sell it 400,000 times while making digital slaves out of your users you are a slaveware peddler. Just because you use the core as a trap doesn't give you the moral high ground. Sell support, hosting, installation, pre built packages(hardware and software ready to run), training, etc. It will take more thought and a higher percentage of those auxiliary products/services to pay the devs what they want but it's the right way to do it. You keep dismissing people who have told you similar things and acting like they just don't get it. you're the one who doesn't get it (unless you're just not being honest with either yourself or the public). If you weren't so arrogant or corrupt you probably would have already changed course.

Another one here who is worried about this site advocating open core models. They carry none of three benefits of open source for their users and no matter how carefully management handles the balance between community and enterprise features - it is fundamentally unstable.

http://blogs.gartner.com/brian_prentice/2010/03/31/open-core-the-empero… on my first point. I am happy to write on opensource.com about my second ("it is fundamentally unstable").

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