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11 May 2006

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Last week I attended the Microsoft VC Summit at our Silicon Valley campus. Before Microsoft and IBM, I helped to build four start-ups, three in the Bay area, so spending a day with a couple hundred VC folks talking about industry trends and business m... [Read More]

» VC Summit 2006 from Port 25
Last week I attended the Microsoft VC Summit at our Silicon Valley campus. Before Microsoft and IBM, I helped to build four start-ups, three in the Bay area, so spending a day with a couple hundred VC folks talking about industry trends and business m... [Read More]

» VC Summit 2006 from Port25
by admin on May 17, 2006 02:05pm VC Summit 2006 Last week I attended the Microsoft VC Summit at our Silicon [Read More]

Comments

Matt Asay

The problem I have with this sanguine view of the world, Stephe, is that it deprecates the very thing that gives you a job: someone else's code. Someone had to write that code. Blessed are those who get to use without having to write, but if everyone's a user, and no one is a buyer, there is no more software to consult around.

Also, keep in mind that the views you promote above apply reasonably well to the OS, middleware, and database layer: infrastructure. They apply much less well to the applciations world, on several levels.

  1. Customers more easily perceive "value" (in your view) in the infrastructure world because they're afraid to run it in a serious environment without support, or without investing a heck of a lot of internal resources to support it. Not so in the apps world.
  2. It's easier to get away with an app that crashes than a database underlying a mission critical system. If Word crashes (which it does), I may lose a document. If my banking system goes down, I'm out serious cash. And yet I still think I should have to pay for Office. It offers me huge value. But if I could get it for free, I undoubtedly would.
  3. It's harder to build communities around applications, because you don't have the same breadth of population to draw from. So, unlike MySQL, not everyone can afford to spread 70M databases throughout the world in the hopes of monetizing 1000 of those. Because there aren't 70M people using a CRM system, etc. It's just harder.
I'm not arguing that open source is bad - you know me better than that. I'm just arguing that it's not an easy road (though I do think it's better), and that I shouldn't be ecstatic to see users instead of buyers. Do I derive value from users? Absolutely. Can I stay in business on the basis of users alone. Absolutely not.

Stephen Walli

I'm going to push back in one place and (almost) agree on another. First the push back: there is nothing sanguine about consulting services businesses in the post bubble era, any more than there is around the value of packaged software. Our customers challenge us on rates constantly, asking why they should pay our rates for the solutions we build versus the rate for work done in India, or the rate from a local body shop full of the employees put out of work by the job migration to India. And then of course there's the challenge of margins. Please don't assume that the consulting business has it "easy" compared to product companies. We are every bit as creative in shaping our business model to the way customers buy consulting services today, as you need to be in the document management software product space.

Let's bring it back to the customer perspective (and draw on Christensen heavily). In Christensen's "Innovator's Solution", he sets a new business versus the incumbents with a few sets of "simple" questions. The answers drive the business model.

Is there a large group of people that historically have not had the money, equipment, or skill to do this thing for themselves, and as a result have gone without it altogether or have needed to pay someone with more expertise to do it for them? To use the product or service, do customers need to go to an incovenient, centralized location? One or both need to be TRUE.

Are there customers at the low end of the market who would be happy to purchase a product with less (but good enough) performance if they could get it at a lower price? Can we create a business model that enables us to earn attractive profits at the discount prices required to win the business of these over-served customers at the low end? BOTH answers need to be TRUE.

Finally: Is the business model innovation disruptive to ALL of the significant incumbent firms in the industry? (If it appears to be sustaining to one or more significant players in the industry, then the odds are stacked in that firm's favour, and the entrant is unlikely to win.)

I believe we will start to see the large systems integration firms hurt from the likes of our business models in the same way the large software companies are hurting in selective over-served spaces from companies developing open source solutions today. Those firms will fight it equally poorly to the FUD slinging of the threatened large software firms. Value moves to the adjoining network nodes.

I appreciate your challenge as an application is different than infrastructure software. But let's look at a different perspective on your "blessed are those who get to use without having to write." If Optaros developed a solution for a customer using Alfresco, REGARDLESS of your ability to sell the enterprise support and maintenance, we would be working with our customer to contribute the solution back. Let's assume it's a solution around document management in a particular vertical you haven't yet penetrated. Alfresco gets software BACK. The customer gets a customer solution quickly based on high quality solution. Optaros gets to pursue solutions with other customers in the vertical with similar needs, and an edge over our competition (and on rates) based on experience.

I am of course assuming here that Alfresco's use of Lucene and Spring means you're contributing all fixes and extensions back to those respective communities.

Eric Albert

"Of course we couldn't accept the gift from our community, but that's a different story." Ah, yes. Sigh. I wonder what things would've been like if that'd been possible....

Ken Mulcahy

Steven –

I saw Matt’s original post on this last week and have just now found time to get back and read the thread. What a lively conversation you’ve had. You both raise interesting points.

This conversation will evolve over time to be sure and to Matt’s original point, open source application vendors need to really get their model working or become irrelevant. Open source adoption and consolidation will happen quickly in the space.

Remember the old expression, “Netscape created the demand for the internet and Cisco filled it”. Will we be saying similar things like, “Alfresco created the demand for Open Source Document Management and _____________ filled it”?

Open Source application vendors have to be really concerned about where this train is headed. It’s obvious that Matt is.

Anyway, the main reason I’m posting is that I want to comment to your post about having your financial services client give you the IP rights to their code so that you could turn the code over to the community by giving the IP rights to the LogicBlaze and the ActiveMQ project.

Being a person who’s managed professional services engagements for over 10 years, I’ve spent a great deal of time on contractual issues like IP, liability, and indemnification. Most old school contracts cling to concepts like “work for hire”, “master slave”, and “total ownership of all IP”. While some companies like to try these approaches initially, I have found that they quickly back off once they understand the ramifications for this approach for your business and theirs.

I have concerns about you allowing your client to retain your IP rights, particularly when they’re associated with an open source project. Not only does this limit your company’s ability to do future professional services for other clients but it exposes future clients to the possibility of infringement and litigation.

I’m probably misinterpreting what you said, but if not, I will be happy to supply you with language that I have used with the Fortune 50 [including FS firms]in contracts for many years that will eliminate this problem. You can contact me directly if you’d like that language.

Great dialog . . . .

Russ Danner

As an open source company at the application layer you have to look for a completely different community. On the infrastructure layer you are looking for geeks to be your maker/innovators on the application layer you need to open it up to non technical people who can use configuration and plug ins to make new functionality. Yes you want them to download and use the software because you want them to innovate.

If they dont pay you they were never going to pay you anyway -- they just wouldnt use your software.

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