How to Sell Open Source Software

Open source software is a popular alternative for commercial software products. This hands-on, practical book gives you the insight and information to sell open source products. It will take you from zero to salesperson in this easy step-by-step guide that begins by discussing why open source is hot, who is using it, and how to connect with your customers. You will master the basics, including how to help customers choose the right software, warnings you should heed when selling open source, how to explain what open source licensing is all about, and how to deal with customers who want warranties.

Building on the success of “How to Become a Linux Guru,” this book follows the same commercially successful format. It will also: Help you sell more open source software; Emphasize professional, business-oriented skills that are needed to sell commercial software; Dispel many myths and misconceptions about open source software; Outline practical ways in which you can gain business-oriented skills; Cover all commonly used open source platforms; Provide a prosperity recipe framework based on four principles.

Create a commercial product

One of the key decisions to make in this process is where the open source project begins and ends, and where the commercial product picks up.

What are the differentiating factors? One of the findings from the Fedora-to-RHEL model is that branding and identity are important to both parts. The Fedora community must feel ownership of its identity, and paying customers must feel some affinity to the RHEL brand.

The bottom line is—the open source community, when it works well, provides the innovative force that sustains product development. Some companies decide that they will develop proprietary pieces of their commercial product not available to the upstream community. Other companies add further restrictions to their upstream community, essentially enforcing that all innovation comes from the downstream product development group. In the case of Glyptodon, they looked at four different models. All of these are valid, but there are tradeoffs to each.Open Source upstream community, proprietary downstream product—This is the model chosen by a number of companies, including Confluent, Databrix, Cloudera, and a host of others. The basic idea is to build a commercial proprietary product on a successful open source platform, usually with a viable community in its own right, separate from any commercial effort. This has become an especially popular model for data analytics solutions companies, who are able to differentiate products based on the management control plane. The core data analytics technologies are freely available and open source, while the management control plane software is only available at a cost. The downside is that it’s difficult to build a user community around the downstream product, although that doesn’t matter as much for certain industry segments.

Limited upstream open source community, proprietary downstream product—This was the most popular model back when the first commercial open source companies received attention from investors. The model was simple: put out a limited version of the commercial product under an open source license and try to upsell on the proprietary features only available in the commercial version. The result is that the parent company is ultimately responsible for sustaining product development, and there’s very little lift from an outside community. The communities in these cases never develop an identity outside of the parent company, limiting their growth and value to the parent company. This is a viable model in cases where the technology is more end-user app-focused. For these businesses, the tradeoff is worth it if what you’re trying to build is mass adoption of a freemium product that you offer premium services for down the road. In cases where you require more input on product development, as is the case for many infrastructure solutions, this hasn’t proved to be a suitable model.

Upstream open source community, downstream licensed product built with open source software—This is the Red Hat model, and it’s been proven to work well for others, too. For vendors who sell infrastructure solutions, there are some advantages. By developing and devoting resources to the upstream community, you help to ensure that your technology is used by a large number of people, many of whom are highly skilled admins who need to employ solutions that will allow them to be more efficient. By making a downstream product that has the same feature set, you allow these admins to do much of your selling for you, without having to explain why features are in one version but not the other. The downside is that the prospective customer can choose not to buy from you at all, but that gets us back to the original point about time vs. money. If you’re able to save them time and the headache of maintenance, they have a compelling reason to buy from you.Upstream open source community, downstream SaaS product—This is a relatively new model that is easier for some vendors (and customers) to grok than the idea of selling open source software. Take an open source community, make it successful, and then offer to run it as a service for customers who don’t want the headache of operating software themselves. There are tremendous benefits to this model: it’s easy to explain, there’s an obvious benefit to the customer, and you don’t have to worry so much about delineating between the user and customer communities. But there are downsides: by taking on the daily operations of customers, you need to have the internal expertise to efficiently and securely run these services for your customers. This can be quite challenging, especially if you’ve never run a SaaS business before. MongoDB, to use one example, has made great progress with this model recently.

Think about a business model from day one

This seems obvious, but you’d be surprised how often open-source entrepreneurs think of their business model only after their free-software downloads are off the charts. In contrast, our experience suggests that some of the best open-source companies had a clear idea of how they were going to make money from their early days.

Companies often do this by selling enterprise versions of open-source projects with extra security and management features. These are designed to appeal to the large enterprises that are big IT spenders. Another option is to offer a premium SaaS service, essentially a pay-as-you-go model. While delivering a reliable service can be difficult — namely, packaging many open-source components together into one compelling, cloud-based offering — SaaS can be another route to revenue.

Red Hat is a good example of a company that thought about monetization from the get-go. Early on, when the company was shifting from shipping Linux CDs in textbooks toward selling to big enterprises, executives drew a clear delineation between the company’s free Fedora user community and the more sophisticated Red Hat Enterprise Linux (RHEL) product. They recognized that their target buyers — CIOs and operations executives — valued stability over features, and these execs wanted an enterprise-grade, paid product supporting their core Linux applications.

Some of the best open-source companies had a clear idea of how they were going to make money from their early days.

So while Red Hat maintained a vibrant open-source community around Fedora, updating it with new features and releases every six months, the company marketed enterprise-grade security and optimization on standard Intel hardware to people using the paid enterprise product. This allowed Red Hat to build a recurring revenue stream of more than $1 billion from enterprise customers; it also, more broadly, helped Linux become the most widely adopted server operating system.

Another forward-thinking open-source company, Cloudera, comes from the big-data world, where several companies are trying to commercialize the open-source project called Hadoop. Like Red Hat, Cloudera has reserved some important enterprise features — security, performance and business analytics — for its higher-end product, called Enterprise Data Hub. Meanwhile, big-data competitor Hortonworks is trying to make money from paid product support, which may be a more difficult model.

Conclusion

Ever wondered how to sell software that you don’t own. In this session we will talk about running a consulting business and how you can use open source software to make money.

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