Tuesday, January 13, 2009

Is it open source? Does it matter?

Picture 4.png
Uploaded with plasq's Skitch!

As potential customers start to evaluate open source software in the hopes of reducing costs, some are surprised to find the savings is not what they expected. This is not a "free puppy" scenario where the software is so "needy" that it costs you more to maintain it. Rather, this is a case of the products that commercial buyers are most likely to recognize and consider, operate and behave like commercial software companies. These high profile open source vendors are typically established with a substantial venture capital investment and have obligations to grow revenue quickly. They are building infrastructure (sales and marketing organizations, documentation, customer support) to compete with commercial products. They are careful about protecting their intellectual property. They pay salaries to people who don't code.

The screen shot above shows part of the Alfresco registration screen that you need to fill out to get access to a trial download and various information about the product. Because they collect this information, they probably have the sales and marketing staff to contact the people who register. Not all commercial open source companies operate in this way. Many just put their stuff out there with the hopes that potential customers qualify themselves and come forward if they have a need that a business relationship (support, custom development, training, implementation resources, etc.) that the vendor can satisfy. Open source software companies are spread across a spectrum ranging from the classic commercial software model to something that more closely resembles community open source.

It is not surprising that commercial open source companies that behave like traditional software companies need to monetize their customers like traditional commercial software companies do. In many cases, these companies depend on selling commercially licensed versions of their software products. These products can be cheaper than their commercial competitors but they don't have to be. In theory, the open source development model saves money by reusing free, externally developed components rather than building everything yourself. But this strategy is not exclusive to open source software vendors. Just look at the number of closed source web content management companies that use the TinyMCE WYSIWYG editor or the Velocity template engine.

I have written blog posts (here and here) and reports describing the different twists on open source business models. These concepts are important to understand because they frame your role as a prospect and customer. The most common strategy is to sell a commercially licensed "Enterprise Edition" that you need to pay an annual subscription fee to use. The absence of an up front license cost is nice but, like with SaaS, the annual fees can add up. It is up to the vendor to decide what happens if you stop paying for the subscription.

Offering a free, open source licensed version of the software is what qualifies the vendor as an "open source software company." But, depending on the company, this product (often called Community Edition), may either range from window dressing to a core part of their strategy. Some open source companies generate revenue by using their community edition to penetrate the market and create opportunities for other services such as training, support, or up-sell. Other companies actively discourage the use of their community edition products. How viable the community edition is for your business depends on both your requirements and how the software vendor treats the product.

If a software product has a commercial license or is otherwise identical to traditional commercial software, it doesn't really matter that it is marketed as open source; it is commercial software. By extension, if a software vendor only really supports the commercial version of its product, it is a commercial software vendor regardless of how it markets itself. The industry is confusing this way because it classifies software not by the license of the software itself but by the claimed business model of the vendor. I have to admit that I am as guilty of this as the next guy.

If you have been looking for a traditionally licensed (closed-source) software product (with all of the benefits and costs that normally go along with a software purchase), why not consider the commercially licensed products from open source vendors? There is no reason why the services supporting the product would not be comparable to a similarly priced traditional commercial software product. From a sales support perspective, you can expect an experience that is comparable with a low-to-medium price ($30,000-$70,000) commercial application. You won't get any Super Bowl tickets but you will get the attention of a sales engineer to help show you the benefits of the platform - at least over WebEx, in person if they are local or the deal is big enough.

If you are looking for an open source product that you can save money by self-supporting (with the help of a community), there may be some commercial open source products worth considering. Be aware of the positioning of the open source community edition. In some cases the community edition is intentionally unstable and unsupported but, in many cases, the community edition is production quality software that benefits from the investment in its commercial brother. Just don't expect a commercial software sales experience.

Magnolia has a nice program for helping prospective customers evaluate their software. They have a commercially (visible source) licensed Enterprise Edition (EE) and a GPL licensed Community Edition (CE). Because CE is on the same code line and is tested the same as the more feature-rich EE, it is a legitimate option for real websites. Under Magnolia's evaluation agreement, Magnolia staff will perform the role of a software sales organization by doing demonstrations and answering questions. In return the prospective customer agrees that, if they choose Magnolia, they purchase EE. This saves Magnolia the potential risk of investing a sale and having the customer turn around and go with the free version. Potential customers that are looking for a commercial software sales experience get one and are sold a commercial product. Customers who want to invest their time and explore the different options get supported through open source avenues (mailing lists, issue tracker, etc.).

Being branded and marketed as "open source" doesn't make software inexpensive or good or bad. Open source business models simply create opportunities to unbundle the various aspects of a solution and package them in different ways. Open source vendors are experimenting with ways to package and charge for their solutions. Some companies are generating revenue from their free products, others are basing their businesses solely on their commercial products. These nuances may seem confusing to someone who is accustomed to simple comparisons of features and price in an otherwise homogenous marketplace. However, an understanding of these options is becoming increasing important to today's software buyer.