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Open Source as a Viable Business Model
This document discusses how an open source company can generate revenue. It provides examples from Joget Workflow and Jaspersoft to illustrate how open source projects can experience viral growth through downloads and adoption, leading to paid support contracts, consulting, and other services that produce recurring revenue streams. While open source companies face challenges in areas like funding, marketing, and customer acquisition, the document argues that the open source business model is viable given examples of successful companies like Red Hat and MySQL that have educated the market.
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Open Source as a Viable Business Model
- 1. Open Source Company Can Make Money Meh? @tiensoon VP of Technical Consultancy, Open Dynamics © 2010 Open Dynamics 1
- 2. • Often dubbedas “The Joget Guy” at community events • Time zone transporter • Responsible for consulting, training, enterprise support and community building for Joget Workflow
- 3. • Open sourceworkflow application builder started by Malaysians, and gone global! • Led and managed by Open Dynamics Sdn. Bhd. • Open Dynamics also incorporated in California, US • 21 months • 40,000 downloads • 800 adopter sites
- 4. 19 ✈ 14,000✈ 40,000 12 months 9 months
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- 6. Strong Traction 800 adopter sites 600 community members 19 partners
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- 8. Open Source !=Freeware • “Think free as in free speech, not free beer” • Always remember: Source code is one of the deliverables too!
- 9. Given Enough Eyeballs,All Bugs Are Shallow • 600 registered community members worldwide • Beta release is tested in use cases of multiple localities
- 11. Viral and RapidGrowth • 40,000 downloads • 800 adopter sites • If 5% of adopters are qualified leads, you have 40 leads to be gunning on, in less than 2 years!
- 12. Release Early, ReleaseOften • Oct 2009 – v1.0.0 6 months • Apr 2010 – v2.0.0 Beta 3 months • Jul 2010 – v2.0.0 11 months • Jun 2011 – v3.0.0 Beta 2 months • 23rd Aug 2011 – v3.0.0
- 13. Feedbacks for FutureProduct Roadmap • No matter how technically cool and advanced your product is, it’s useless if it doesn’t meet targeted use cases. • Large community size • More use cases • Product that meets the needs
- 14. Real Case Study:Joget Workflow • v1 – “Workflow Management System” • v2 – “Do More, Code Less” Users are not just automating processes, but building application! • v3 – “Transforms Your Processes into an App”
- 15. More Brains andMore Hands • Open source ecosystem allows users to help and contribute: – Critical bug patches – Translations – Documentation – Forum support – Plugins • Ultimately, it benefits everyone
- 16. Challenges of Runningan Open Source / Open Core Company
- 17. Full-Time Commitment • Runninga company, is not the same as running a part-time project as personal hobby • To stay committed on the fast track, product development is a full-time job (same as any other serious startup ideas)
- 18. Reality: Everyone Needs$ to Survive • How to fund: – product development? – the operational team before revenue touches break- even point?
- 19. Fund Raising • Convincean Angel to fund your MVP (minimal viable product) or pre-release. • Get commercial companies to sponsor your project: – Financially, or – Developers
- 20. OSS Space isVery Competitive Now • Your OSS product is competing very intensely with other OSS options too! Find your niche, understand your market viability! It’s a business after all.
- 21. Global Product Marketingis Tricky • Mediums: – Community-driven evangelism – Media exposure (TeachCrunch, GigaOM, RWW, O’Reilly Media, Mashable, and etc.) – Tech shows as presenter – Interviewed by relevant tech channels
- 22. Global Product Marketingis Tricky • Things get easy if you: – Are a celebrity developer / successful technopreneur with proven track record – Have a celebrity investor in your Board of Advisors – Have connections with relevant tech medias
- 23. Free Software …and … • Free-of-charge POC?? “Can you come to my office and present to my team?” • Asian market = Not scalable sales
- 24. Who is Willingto Pay? • Reality check: There are some adopters who won’t pay whatever you do. • But, there are also some adopters who know value and will still pay!
- 25. Who is Willingto Pay? E.g: xxx,xxx downloads → yyyy adopter sites → n% qualified leads
- 26. Paying at ThePoint of Value • Dedicated support package with SLA • Training services • Consulting services • Product implementation services • Complimentary tools that simplify the jobs • Plugins for enterprise deployment environment
- 27. Open Core? • Acompany produces a product that is mostly available as open source, but then there are some closed source components around the open source “core”. • Community Edition & Enterprise Edition • Examples: Jaspersoft, Alfresco, Magento, Pentaho
- 28. Know Your Adopters •Google Analytics is your best friend.
- 29. Know Your CustomerAcquisition Cost • What is your total costs of customer acquisition? – Marketing events – Google AdWords – Sales presentations Avg. Customer Acquisition Cost = Total Acquisition Cost No. of Customers Profit per Customer?
- 30. There’s Never Beena Better Time for OSS Than Now
- 31. Education is AlreadyDone by Successful OSS Pioneers • Companies like MySQL AB and Red Hat have done enough education to the enterprise sector on viable OSS model.
- 32. The Global EnterpriseIT is Putting Attention on Open Source Adoption • Accenture survey from 300 large organizations in both the private and public sector (5th Aug 2010) finds: – 69% anticipate increased investment in 2010 – 38% expecting to migrate mission-critical software to open source in the next 12 months – 50% are fully committed to open source in their business
- 33. Open Source asa Viable Business Model: Using Jaspersoft as Example
- 34. JasperReports: Yearly Adopters Gain •Total downloads in 2010: 1M (based on Jaspersoft’s CEO – Brian Gentile’s input) • Assuming adopter conversion rate is 2% • New adopters in 2010 = 1M * 2% = 20,000
- 35. JasperReports: Yearly Support SubscribersGain • Assuming support subscriber conversion rate is 2% • New support subscribers in 2010 = 20,000 * 2% = 400
- 36. JasperReports: Yearly Revenue Growth •Assuming each support subscriber pays $5,000 • New stream of revenue gained from support subscription, in 2010 = 400 * $5,000 = $2,000,000
- 37. $2M Recurring Revenue •Support subscription is recurring revenue. • And the conservative figure of $2 million annual recurring revenue, is just coming from 1 service – support subscription.
- 38. Open Source CompanyCan Make $ Meh? Undoubtedly, it’s a proven scalable business model!