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Topics Business. About the author. Daniel Rubinstein - I'm a Computer Science undergraduate student at Duke University interested in software engineering and open government. More about me. Recommended reading Open source tools for running a small business in What is open core? Why I use Linux to manage my yoga studio. Reach your open source community with content marketing. Don Watkins on 18 Dec Permalink.
Great article! Open source does pay well and it benefits everyone involved. Blake on 18 Dec Permalink. CoreOS Tectonic is a good example of this model. Daniel S. Katz on 19 Dec Permalink. Mike Schwartz on 13 Mar Permalink. For this, they provide not only an easily available product, they also provide the source code to the product under an open source license.
From a user perspective, this has the following benefits:. Specifically, it reduces hurdles to adoption as potential users perceive no or little lock-in, and it makes it possible that the community becomes self-supporting once it reaches critical mass.
Walker as well as Capobianco provide some insights into how commercial open source firms seed and grow such communities [ 37 ] [ 8 ]. On the most basic level, communities need a place to gather, and they need tools of communication. For this reason, most commercial open source firms host a software forge with integrated or ancillary tools like wikis, forums, and mailing lists. Much of the general advice on community building on the web applies, like aiding the construction of explicit social structures and rewarding members for good behavior [ 22 ].
More specific to single-vendor commercial open source is the application of traditional marketing techniques: Firms need to understand the different sub-communities and their significance and target and support them accordingly.
Specific programs aimed at different segments may become necessary. Each of the following business functions sales, marketing, product management, engineering, support has its own requirements and best practices of engaging with the community, and they are discussed in turn. Augustin provides an account of the commercial open source sales funnel, as depicted in Figure 1 [ 5 ].
An eventual customer goes through a process of downloading, installing, and using the software, before they are recognized as a lead, become a prospect, and finally are converted from user to customer. Because the open source product is available for free, potential customers can download, install, and use the product without ever getting in touch with the commercial firm behind the product. At the same time, the firm can track via typically voluntary download registration and community forum activities who is actually using the product.
Some products also provide usage information back to the firm. A lead analysis can then determine which of these users might be potential customers. More often than not, however, the firm will wait until a non-paying user steps forward and asks for a sales contact to purchase any of the services outlined in the revenue generation section.
Thus, leads emerge from the existing user community, either voluntarily or by analysis. Of course, the commercial firm can still engage in a traditional sales cycle with non-using prospects as well. In the commercial open source setting, the potential customer is sometimes already using the product and hence is familiar with it.
These factors make a sale significantly easier than possible if the software firm had no prior relationship with the buyer. As free open source software, commercial open source can make it into potential customer companies under the radar screen of the CIO. IT organizations may have strict rules in place not to install arbitrary software, however, in practice these rules are frequently circumvented [ 26 ].
Such early footholds in potential customer companies drive customer acquisition cost down significantly [ 39 ]. Whether a significant percentage of potential customers is already using the product typically depends on the type of product. For some it is the case, for others it is not. One role of the community is to support the potential buyer during the lead generation phase.
For economic reasons, the commercial firm cannot provide this support on a broad scale, since only a small and hard-to-identify percentage of users might actually turn into customers. According to Taylor, conversion rates of 0.
Since the user is not paying at this stage, voluntary community support is typically acceptable. As soon as the user is converted into a paying customer, professional support becomes available. Most single-vendor commercial open source software firms engage in traditional marketing: They advertise, they exhibit at trade shows, and they give talks [ 8 ]. What is new is that an engaged user community aids these marketing efforts. More specifically, the community makes marketing more effective and cheaper than possible without this support.
Marketing is more effective because non-paying users are credible sources of good testimonials. Thankful for a good product and the positive engagement in the community, users evangelize and market the product themselves without much support necessary from the commercial firm [ 39 ].
Free marketing can significantly reduce the marketing cost of a software firm, and hence create a competitive advantage over a competing traditional firm. From a startup perspective, such a reduced cash burn rate increases the likelihood of survival for the commercial open source firm over the traditional firm. Von Hippel has shown how user innovation can be a significant source of product innovation for any commercial firm [ 35 ] and Shah has shown how this applies to open source software [ 30 ].
Mickos discusses how user innovation has aided the MySQL database [ 36 ] [ 26 ]: By providing the source code, firms encourage volunteers to innovate and contribute to the product for free. As mentioned, no such contributions will be accepted unless the rights are transferred to the commercial firm.
Nevertheless, such user innovation can significantly improve the product, and if only through ideas rather than code.
An engaged community actively discusses strengths and weaknesses as well as future prospects of the open source product. Almost every commercial open source software firm provides the means to such discussions in the form of mailing lists, forums, and wikis on a company-run software platform.
Thus, product managers can easily observe and engage with the community and discuss current and future features. This in turn brings product managers close to users and customers, aiding the product management process, for example, by helping feature definition and creation of a product roadmap.
In commercial open source, this community does not only include current customers but also current non-paying users and possibly even researchers and students. Thus, compared with a traditional community of customers, the breadth of perspectives in such discussions is much higher.
This breadth of perspective in turns helps product managers understand new features and issues that have kept non-users from becoming users as well as existing users from converting to customers. Many single-vendor commercial open source firms distinguish between a free community version of the product and a paid-for enterprise edition.
Product management faces the challenge of motivating enterprises to purchase a commercial license without annoying the non-paying community by withholding important features. Smart product managers address this problem by determining which enterprise features are irrelevant to the open source community and by taking a time-phased approach to making features available that are needed by both communities. Product management benefits greatly from the immediate connection with the community, which provides ideas and feedback and keeps the product focused on its needs.
Thus, the community helps the firm create a superior produc. Obviously, volunteer contributions can speed up development.
Also, an engaged technical community represents a potent pool of possible future employees that proved themselves before being hired, taking risk out of the hiring process. More importantly, however, and similar to product management, are the benefits of direct and immediate feedback from the community. A single-vendor commercial open source company is likely to provide the latest release, sometimes a daily release, to the community, including potential bugs.
An engaged and fearless community picks up the latest release and provides feedback to the company about bugs and issues they found, sometimes together with a bug fix.
While such community behavior may appear as counterintuitive, it is nevertheless what practitioners experience [ 26 ] [ 36 ]. The distinction between an experimental community edition and slower-paced but more stable enterprise edition in turn lets the commercial open source firm sell operational comfort, that is, the stable enterprise edition, more easily.
Still, engineering management may not want these two versions to become too different from each other to avoid re- integration problems with outside contributions as well as unnecessarily redundant development on both versions.
An engaged community supports itself by and large. The commercial firm needs to aid in the support, but does not have to perform the bulk of the work. Thus, a self-supporting community is necessary to grow a large non-paying user base that might be converted into paying customers later.
Paying customers can then receive full support from the commercial firm as part of their maintenance contracts. The self-support activities of the community benefit the support activities of the commercial firm as well, reducing its cost. Specifically, engaged communities frequently develop and manage their own documentation, or at least contribute to and expand company documentation.
User-maintained wikis and knowledge bases have become common. Thanks to the power of Internet search, many users, including paying customers, find it easier and faster to browse for problem solutions before turning to paid support in the form of phone calls or emails.
Industry analysts predict that by more than half of all open source revenue will accrue to single-vendor dominated open source projects, called single-vendor commercial open source. This paper comprehensively presents the core properties of single-vendor commercial open source firms as well as their main business functions.
Through a review of interviews and presentations by practitioners of commercial open source as well as other sources, this paper shows how at the core of the successful commercial open source firm is an engaged and self-supporting user community. From this user community, many benefits accrue, touching almost every business function of the firm: Sales are eased and increased through inside champions and reduced customer risk, marketing becomes more effective through better testimonials and active community support, product management more easily meets customer needs and benefits from user innovation, engineering creates a superior product faster and cheaper, and support costs are reduced.
Thus, first order of business for a commercial open source firm is to create and sustain this community, a business function frequently non-existent or neglected in traditional software firms. Then, I would like to acknowledge and particularly thank Jacob Taylor for helping me refine this paper further.
Hi Dirk, Great article. A question: have you seen any statistics about the estimated market value of the entire commercial open source market? If you have and could point me to a reference, I would greatly appreciate it. Thanks, Brett. Nice Article. Brett: References [20] [21] provide some data. The real question, however, is what percentage of the total packaged software market open source products would take. Who knows?
It is just a thanks for the article. I am starting to work in a project with open-source furniture design development, and your article gave me really nice insights. WOW what an article! I mean, great one! A question arise from this article? You want to see the software? We'll answer your questions. Or we'll try to. Over the phone, on the Web, whatever. Pay us enough and we'll come over.
Red Hat likes this business model. Product Ware -- The software is free, you just buy the box it runs in. Android phones use this. So do some network routers. It's number two, but with a bullet. Cloud Ware -- Our software is in the clouds now. Pay us for what it does. The money goes into the cloud. Later it will rain on us. SugarCRM likes this business model. Project Ware -- Need something done? We'll do it with open source. Pay us for our work, and pay us for the project.
IBM makes a ton on this business model. You can rent it, by the hour, by the month, by the user. This is wildly popular. Zoho uses it. So do many other companies. You don't pay anything, the advertiser pays instead. Heard of The Google? This is their primary business model. ZDNet also uses this business model. Sugar Daddy Ware -- Our software has a sugar daddy. Firefox has Google. Eclipse has IBM. Open Office has Sun, or it did. So just use the stuff. Daddy will provide. We believe in daddy.
Foundation Ware -- Our software has a foundation. It has lots of sugar daddies.
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