"Selling" Open Source 101Basics on starting your own Open Source business

Izhar Firdaus (KageSenshi)PRESENTED BY:

Fedora Ambassador, Malaysia

Licensed under CC-BY-SA 3.0

About:Me

· Fedora Ambassador for Malaysia since 2007

· Current $dayjob:

· Solution Architect @ ABYRES Sdn Bhd· Business partner of Red Hat and Hortonworks in Malaysia

· Current focus on Big Data implementation with RH & Hortonworks products

· Previous $dayjob:

· Co-founder, system-engineer, developer @ Inigo Consulting· Self-proclaimed Plone expert in South East Asia :P

· Built knowledge and information sharing platform for NGOs such as United Nations International Labor Organization, World Council of Churches, Center of Internet and Society India

Disclaimer

· Contents is based on experience on

· Running – and failing – my own company

· External observation as an Open Source contributor over the years

· External observation of several enterprise Open Source companies from a business partner perspective

· I might miss a lot of details

· feel free to suggest improvements

Selling free software

Free as in FreedomThe software is free,

but our expertise and time is not

Why "Sell" Open Source?

Why "Sell" Open Source?

(Relatively) low start-up cost

The software might be mostly ready, add your unique value

"Stand on the shoulder of giants"

Why "Sell" Open Source?

Sustainability

Very few people can have the privilege of getting paid to work on FOSS projects

Keep your project going through generating some form of revenue

Why "Sell" Open Source?

Grow Open Source adoption through business

The more customers you have, the more users of FOSS, and the more people you can hire to work on

FOSS

Why "Sell" Open Source?

Executed well, it can be lucrative business

Take a look at Red Hat

IBM, VMWare, even Microsoft, are starting to understand Open Source business models and

monetizing on it

CommonBusiness Models

"Pure" Business Models

· Selling FOSS without compromising Software Freedom

· Professional Services

· Consulting

· Implementation service

· Customization service

· Training & Resource Development

· Trainer & training programs

· Support Services

· Developer support

· Technical support

"Tainted" Business Models

· Free Software people might dislike you

· Open Core

· The core is FOSS, the add-ons are not

· Many Open Core products keep the really useful, high demand feature as proprietary add-ons

· Dual License

· Option to buy copyleft software under a different license that permit closing the source to use in proprietary software

· Requires you to own 100% of the code copyright

Cloud Business Models

· Gray area in term of Software Freedom

· Goes back to how your licensing and commitment to Open Source

· Host your software on/as a cloud service

· Charge for usage and/or feature subscriptions

· Cloud models

· Infrastructure-as-a-Service

· Platform-as-a-Service

· Software-as-a-Service

Selecting Your Business Model

Key Considerations

· What is your strength?

· Innovation, feature development, and bug fixing? (Builders)

· Implementation and tuning know-how? (Implementers)

· Talking, convincing, promoting, people-person, negotiations (Sellers)

· License of software

· Copyleft/GPL/AGPL? Permissive/MIT/BSD?

· Type of software

· Infrastructure? Application? Library?

· Copyright ownership?

· Do you own all of the copyright? Or only parts of it?

· How religious are you on the Four Freedoms?

Builders

· Builders are people who are experts in:

· Creating new software

· Improving and innovating the software

· Fixing bugs

· Recommended business models:

· Support subscriptions

· Training

· Dual licensing & Open Core

· Cloud business models

· Less recommended business models:

· Professional services

Implementers

· Implementers are quite common

· Install and configure software

· Customize software according to customer needs

· Integrate software with existing ecosystem

· Most businesses I've seen are implementers

· Recommended business models:

· Professional services (Implementation & Consulting)

· Support subscription

· Training

· Cloud business models

· Caution for professional services

· Be very careful on customization work – it might kill you

Sellers

· Market and sell products from Builders and Implementers

· Key Skills

· Customer acquisition and management

· Sales engineering & Marketing skills

· Negotiation and persuasion

· Reseller margin and commissions driven

· Bob Young

· The person who put Red Hat on the path to profit and power in the marketplace today

· Marc Ewing created Red Hat, Bob Young brought it to larger market

Starting UpYour Business

Check The Market

· Anybody have a problem that some Open Source softwares can help solve? What is the market demand?

· Or do you think with enough marketing, demand will increase? (especially true if the technology is something very new in market)

· Are they willing to pay for it?

· Or can you make them pay for it? (tips: show your value, and what they are getting through paying)

· Who are your competitors?

Define Your Product

· Identify the Open Source project that can cater the market needs

· What are you selling? What is your product?

· Remember that the software is free, what value are you adding?

· Refer back to business models · Subscriptions (Support, Hosting, Cloud features, etc)

· Time (Man-days, Man-hours, Man-month, etc)

· Material/Deliverables (Training, Appliance, Documents, etc)

Set A Price

· Price = Input Cost + Production Cost + Operational Cost + Sales Cost + Profit

· Input Cost = Money you pay your vendors & suppliers

· Production Cost = Money you pay to produce the product (Salary, etc)

· Operational Cost = Money you pay for managing the operations of the product (administrative, office, electricity, etc)

· Sales Cost = Money you spend to secure sales (marketing, commissions, customer entertainment, etc)

· Profit = The profit margin you wish to make out of each sales

Business Is About Sales

· Builders and Implementers are usually poor Seller, so find a Seller partner

· "Partner" can be a fellow founder / shareholder

· Or can be another company who have customer base, and interested to sell your product to their existing customers

· Of course, don't forget to give them their commissions and/or reseller margin· Reseller margin = generally the sales cost plus some

profit margin

Start the hunt

· Go out and market your product

· Get people convinced to buy your products

· ??????????

· Secure the sale, deliver the product

· ??????????

· Profit, improve product, add value into society

· Scale!

· Iterate

Case Studies(Good & Bad)

Red Hat· Business Model

· Support Subscription

· Training program and certifications

· Professional Services

· Subscription is key revenue source

· Recurring revenue

· More manageable and scalable

· Premium price for professional consultancies

· Leverages on partner ecosystem

· System integrator partners do the heavy lifting of securing sales, and deliver the implementation & professional services – Red Hat takes support subscription

· Training partners do the heavy lifting of getting students and train the students– Red Hat takes the money from training materials and certifications

Hortonworks

· The "Red Hat of Apache Hadoop"

· Business model very similar to Red Hat

· Management consist of many ex-Red Hat and ex-JBOSS personnel

· At the moment most revenue comes from professional services and consultancy

· Growing very fast

· However, reports says they are still operating at a loss due to high cost of market acquisition for professional services

Inigo Consulting

· My previous team. Focused completely on professional services for a CMS called Plone

· Collapsed after 5 years

· Scaling issues – hour-based charging is a hamster wheel

· Maintenance issues – lack of sustainable support model cause problems with warranties and bug fixes – more than 5 projects over 5 years, maintained by only 1 guy

· Poor business model execution – charging too low, no salespeople, no marketing

· Final blow?

· Brain circuitry broke anxiety disorder very poor productivity → →for more than 3 months meltdown →

· Bus factor of 1, single point of failure – other members doesn't have the capabilities to proceed

Before I End

If you plan to start a business, remember this

Business can be difficult, complex, stressful

You might face many struggles, ups, and downs throughout your journey.

But NEVER stop learning, stand back up after falls, innovate, keep improving, and have fun!

GOODLUCK!!

Thank You