The Issues with "Go It Alone" Commercial Open Source

Posted by Dominic Sartorio

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Just came back from a highly productive week in Boston, including The 451 Group's second annual client event. Several hundred ISV's, integrators and enterprise customers participated to network, exchange ideas and hear 451 Group analysts' research and predictions in commercial open source and other segments of the software market. I had the good fortune to meet many ISVs, plus extensive time with Raven Zachary and other 451 Group analysts - In my opinion one of the most well-connected and "with-it" analysts in the industry.

My takeaway was a sobering view of the commercial open source market, with a few high-profile winners overshadowing a broad spectrum of underachievement. Fortunately, the differences between success and failure aren't insurmountable for most companies... Or, more frequently, the difference between success and an ongoing "zombie" state where companies keep hanging in there, barely earning enough to pay expenses and keep the investor community marginally interested, while opportunities continue to pass them by. If this sounds familiar, then please read on!

Raven said it best: "Go-it-alone commercial open source will lose. The best collaborators will win."

There are common threads among the underachievers. They build an interesting product, open-source it, and then assume that they'll be golden...

They assume the free open-source version will magically attract customers willing to pay for support (or services or advanced features or whatever the for-fee differentiator).

They assume it will magically attract a channel that will add sales leverage and smoothe the product's rough edges.

And they assume that a great point solution is enough, and will result in interoperability and deployment issues magically going away.

But reality is not magical. In my "day jobs" (PM for SpikeSource and president of the OSA), I interact with many ISV's, and it's scary how many go down this path. Their incomplete picture of what it means to collaborate ends up limiting their success. Let's look at each of these issues in turn:

The Fallacy of "Build it (and give it away) and They Will Come"

The conventional wisdom is that a free, open source version will encourage customers to evaluate on their own before purchasing, i.e. "try then buy", without the overhead of a conventional sales force. True, but with caveats:

First, what is the compelling differentiator that encourages them to pick up the phone and say "I've evaluated and like your free product, now I'm ready to pay"? Many open source ISVs don't put enough thought into this and frequently fall into one of two traps: (1) the free version is too good, so feature-rich and easy-to-support that customers never feel compelled to "upgrade" or (2) the free version is so crippled that nobody can use it, so they evaluate something else instead.

Second, don't wait for the phone to ring. Successful ISVs are never guessing "who is downloading my product"? They know. Whether it's advanced web analytics, active participation through the community site, or an inside sales presence (or all three), they always know where the demand is, what they need, and who are most likely to be interested in the for-fee products and services.

So, don't just stop with open sourcing a product and attracting developers. The sales process itself should be a collaborative exercise. The best collaborators earn the respect and the trust (and the budget!) of their users.

The Channel - The Invisible Multiplier Effect

Many ISVs see the channel as extra feet-on-the-street, and expect a multiplier effect of each channel partner leading to multiple end customer deals. But the channel is hard to grow. It takes a lot of effort to recruit, train and support any given channel partner, and then it's really hit-or-miss if they deliver or not. This is especially true with smaller resellers - Only the best focus on a given product or even stay in business long enough to make it worth it for the ISV. As a result, many ISVs are giving up on channel and choosing to go direct, only to find that they then own the "blocking and tackling" of closing every deal, serving every customer, helping them integrate, and so forth. Everything, ironically, that they were hoping the channel could solve in the first place.

As a result, we're seeing this question asked a lot: "How can I circumvent the channel pain, and serve my customers as quickly and efficiently as possible?" This is driving a lot of interest in form factors like appliances (to reduce time/effort to install and configure) and SaaS (to avoid worrying about installing and configuring at all), and also virtualization (to make these form factors easier to deliver and support).

There's much innovation going on in these areas, and ISVs would be remiss to ignore them. But ISVs shouldn't give up on channel. Customers, especially SMB's, continue to look to the channel for their IT purchases. The right channel partners can complement ISVs capabilities and reach customers they otherwise couldn't reach, and they can bring real leverage to their sales efforts. Again, the advice here is to collaborate: Just ask Hyperic, for whom the JBoss and MySQL channels got its business started. Or SpikeSource, for whom Intel helped drive significant revenue opportunity for its Web 2.0 products. Or XenSource, whose investment in the Citrix channel certainly paid off! Pick the channels where true win-win collaborative relationships can be struck, and focus on those. Don't try to boil the channel ocean.

Interoperability as an Afterthought

If only I had a nickel for every time I heard this: "I know I should make my product more interoperable, but I have to focus on my core features instead." Sounds good, but this misses the point that, increasingly, interoperability is a core feature.

Most commercial open source ISVs, especially application vendors, are small companies focusing on a point solution. But most customers don't want a point solution. They need something that fits well into an end-to-end solution and the rest of their environment. ISVs ignore this at their peril!

Successful ISVs go out of their way to plan for interoperability, starting in version 1, with modular and standards-based architectures. Moreover, they go out of their way to form an ecosystem of complementary ISV partners, and then collaboratively build out and test the integrations. This benefits them in two ways: First, it helps overcome interoperability as a sales objection, and second, they can pass leads and generate business for each other, all while making the customer happy.

But there are different ways of doing this. One way is through traditional business-development-led point-to-point partnerships, but these result in point-to-point integrations that work for only those two products. What happens if the customer isn't interested in the partner's product because they have a competitive, legacy or homegrown alternative in place? The other way is through more open collaboration with an ecosystem of like-minded vendors, and this results in more open and pluggable interoperability that gives the customer maximum flexibility and further removes interoperability as a sales objection. This, by the way, is how the OSA operates - We believe in open collaboration and interoperability. Smart ISV's believe this too. Smart ISV's join the OSA.

Smart ISV's Collaborate!

So, there you have it - Collaboration is the common theme behind every smart commercial open source ISV. It's not enough to open up one's code and attract developers. This type of collaboration is necessary, but not sufficient. Smart ISVs take collaboration up to the next level, and infuse it throughout how they do business. They collaborate with their customers, they collaborate with their channel, and they collaborate with other ISVs. Those that "go it alone" will find it increasingly harder to compete, satisfy their customers and stay in business.

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