The Upside of Open Source (Business): Community
Matt Asay recently opined on his blog about the downside of open source business models being "freeloaders" and "leakage". I would like to respectfully disagree and offer a different opinion.
Matt makes several points I see differently. From his post:
- You wouldn't be happy if too many customers were using your software for free.
- "You have to be prepared to watch would-be customers, big and small, derive immense value from your software without paying you. Value that they'd gladly pay for in a proprietary world. Value that they would have to pay for."
- We need to make open source software more "sales efficient".
- "You must have a hook that convinces would-be customers to buy, and not merely use. Free downloads invite use, but only some proprietary (pardon the word) hook effectively closes sales."
- "For MySQL (which, I believe, derives a massive percentage of its revenues from OEM/embedded sales), this means that it offers a clean way out of the GPL."
- "Systems integrators and others who make their money on professional services - in the proprietary and open worlds - always have an incentive to drive the cost of software to zero to make their services more appealing/less expensive. This is normal and natural. It's not, however, good for the creators of the software."
I like to use MySQL as a good example here. As Marten Mickos (MySQL CEO) pointed out a year ago at LinuxWorld: The early community is willing to trade time to save money. The later community is willing to trade money to save time. MySQL customers are in the latter group.
Corwin's Razor: If they're not willing to put their money where their mouth is, they're not a customer.
Walli's Open Source Corollary: They could still be GREAT users.
MySQL celebrates the difference between their customers and their community. Despite 4 million plus users in the community, the ratio of support and maintenance paying customers is apparently about 1:1000 users. (Let's for a moment put aside the different OEM revenue stream, and focus on the original business.) MySQL understands that fundamentally those users will NEVER be customers, but provide business value differently. (They may even encourage another set out of the community to become customers of a different vehicle called the "MySQL Network" -- and that's different too.)
Let's look at what those "freeloaders" provide:
- Huge beta test community: Are all of them beta testers? Obviously not. But with a user base that large, they probably have a pretty reasonable test bed of real world experience to match any closed source company, AND some percentage of them will likely even offer fixes, some of which might be good, so the value of that beta tester is higher than a binary beta user (e.g. a Microsoft beta tester). Even with the order of magnitude drop between users, bug reporters, bug fixers, and good bug fixes, a base of 4M means the collection of freeloaders provides a lot of collective value.
- A word-of-mouth marketing organization: Seth Godin regularly talks about "making something remarkable" and let your customers tell your story. In this case, it's let your users tell your story. Larry Augustin presented at OSBC a couple of years ago and talked about reducing the cost of sales on the balance sheet in an open source company, and how that still preserves the interesting ratios to Wall Street. It's about not wasting time qualifying a sale down the "funnel" until you close the sale, but allowing a prospect to qualify themselves down the funnel such that sales's job is the minimal amount of time needed to close. I think we would find that MySQL didn't need a pin-stripe suited direct sales force for some time keeping the cost of sales low. This is incredibly efficient when it comes to the margins.
- A platform innovation engine: Here's where Alfresco may be blind to the opportunity in their community. I imagine the MySQL partner community, i.e. the channel rather than the end customer may be more efficient at offering new innovations on the relational database engine. The average end user may not have a lot to offer in query optimizer skills, but then who should *I* be to judge that fact? A Microsoft story: within 24 hours of releasing the first (beta) version of Rotor we received an optimizer fix for the JIT on the Intel chip set. About twenty lines of code that created a 10% increase in JIT performance. Rotor is a complete C#/CLR/Base Class Library implementation in source form at about 1M lines of code including the test suite. Think about all those numbers for a moment. (Of course we couldn't accept the gift from our community, but that's a different story.) Darned freeloaders.
Disclaimer: Optaros is a systems integration partner of Alfresco. We are not a reseller. We aren't interested in SPIFs. We are technology agnostic and we will listen to our customers -- that's our incentive. But if we use Alfresco as a base for a document management solution for our customer, REGARDLESS of whether or not Alfresco is able to sell the customer on the enterprise edition, we're going to make best efforts to provide any changes, enhancements, and bug fixes back to Alfresco.
This is exactly what Optaros did in the ActiveMQ community. We added a fundamental bit of functionality about a year ago, on behalf of a customer. The customer agreed to assign the ownership of the change back to us to take back to the community, and we appropriately assigned the ownership to LogicBlaze Inc., the maintainer of that community. (It turns out that this piece of missing functionality is what caused a large open source savvy financial institution to pass on ActiveMQ, and therefore LogicBlaze, in the previous year.)
The change we made was certainly "mission critical" to our customer in the context of the solution, BUT it wasn't business differentiating to them, and they were happy to get the change back to the core community for the engineering efficiency of support in the future. They weren't being altruistic. They received value from the software. They wanted to continue to see the value in the software. They didn't want to live on a fork and eat the entire cost of maintenance. Customer wins. We win. ActiveMQ project wins. LogicBlaze wins.
But this presumes there is a fundamental message that is set from the very top. You have to be rabidly fanatical about your community and the contribution they make. If you scare them off, denigrate their work, or down play their importance, then you break the relationship and will get what you deserve. Telling your community they're the unsupported experimental fringe in the same breath that you're telling your customers they should value "your" software isn't a good marketing message. Separate the messages. Two audiences require two discussions.
Lastly, let's take a look at the whole "price" and proprietary "hook" issue. First: price. Price is the "equal sign" in the equation between consumers and producers. It is set by the marketplace, not the producer or the consumer alone. The "hook" is the value proposition to the customer. Here's what the hook looks like: 30 seconds into the discussion with a prospect, the customer says, "Wait a minute: This is a replacement for the over-bloated over-priced document management solution I get from Documentum, and it's an order of magnitude cheaper and easier to use?!?!?! I got to get me some of that!"
It has NOTHING to do with Alfresco's perception of the value of their hard work. It has EVERYTHING to do with the customer's perception of the value of the solution. Microsoft makes this mistake constantly. They can see the hard work that goes into the innovation side of the equation and therefore believes the customer should see it that way too.
Red Hat didn't succeed because they were selling "support and maintenance" on "free software" instead of a "license fee". They succeeded because the customer perceived the value proposition of a well-packaged well-supported Linux-on-Intel replacement for their expensive SPARC/Solaris UNIX environment.
Customers care about business models about as much as they care about patents and other legal tools a producer uses in their operational environment. Communities, however, care a lot about open source collaborative environments. Celebrate the differences between these two groups. Love them each for the value brought to the company.