The Business of Open Source is Not Software

I’ve been staying out of the free vs. open source wars running around my little corner of the world of late. There is a lot of talk about whether or not open source has “won”. Open source is free software, so it seems silly to try to differentiate the two. The only way to do that is to focus on the people who care about the difference, and that just results in ad hominem attacks.

For years now I’ve been struggling to educate the market on the fact that the business around open source software is not about software. It’s about solutions. The clients I talk to are ultimately not concerned with what software to buy but instead want solutions to a variety of problems facing their business. Unfortunately, many of them only know the process of purchasing software, and they are unable to adapt to a solutions-based purchase.

Think about it. How does, say, the choice of a management solution usually play out?

First, a list of requirements are drawn up. Then, either through a VAR or just by searching the Internet, a list of possible software solutions is drawn up. The next step is to get demo versions of the software or perhaps talk to the vendor and get them to do a proof-of-concept. Finally, a choice is made and a check is written for software licenses.

In the “demo” step the vendor is usually asked to expend some resources on the sale. Those costs are recovered when the customer purchases a software license. Not only will they pay for the software, due to lock-in they will most likely buy maintenance for years to come. It is a nice revenue stream that makes a gamble on free demos worth it.

This doesn’t work very well for open source. Real open source software doesn’t have a licensing cost, so one can’t make up revenue there. Real open source software can’t prevent access to the latest and greatest code, so there is no requirement to purchase maintenance. Since the client isn’t required to purchase anything, that makes the “demo” phase of a sale a lot more risky.

At OpenNMS we are happy to do demos during the pre-sales process, but we have to draw the line when it comes to a large amount of pre-sales consulting. There is a product we offer called the “Getting to Know You” project in which a consultant will come and spend two days demonstrating what OpenNMS can do on their network, allowing the client to kick the tires and ask questions, and we charge for it. That way, regardless of the choice made by the client, our costs are covered. This is important, since our business model is “spend less than you earn”.

The reason I am writing about this now is that over the last two days I have had to deal with a potential client who is asking for a large amount of work above and beyond what we do with a normal sale. We have been trying to meet their needs for several weeks, but they wouldn’t come to training and when I pressed for a Getting to Know You project I was told no. Since the product has not been “approved” they don’t want to spend any money on it, even if by spending a little money they could save a ton in the future.

This reminds me of one of my favorite YouTube videos, where a woman goes to the hairdresser for a new hair style but doesn’t want to pay for it until after all of the work is done and then only if she likes it.

I run into potential clients like this from time to time, and what I’ve found is that it is better to cut and run instead of spending the time to try and win the business. Someone who isn’t willing to pay for your time most likely won’t understand the value you provide, and in these cases they are better off buying something traditional like Solarwinds than investing in OpenNMS.

I sometimes get asked “how do you make money selling free software?” and I have to answer that I have no clue. I don’t sell software, I sell solutions. The prevalence of Software as a Service (SaaS) businesses are making this easier, since people are being introduced to the mindset of getting a solution without having to purchase software, but the biggest challenge to my business is getting people to understand the value free and open software provides in creating a great solution without the “purchase software” mentality.

Luckily, there are enough people out there who “get it” that our business is doing very well this year. Their companies now have a competitive advantage, which, over time, will be demonstrated. Only when these advantages are demonstrated in the market place can open source be said to have “won”.

5 thoughts on “The Business of Open Source is Not Software

  1. This is indeed one of the major issues in enterprise software. I’ve worked as a Presales engineer for several years for large software company and in my experience it goes well beyond a “demo”.

    Most of the enterprise Tier 1/2 customers require PoC/evaluation prior to purchase, where software needs to be installed in their premises (sometimes test environment sometimes production). This often takes multiple weeks and requires qualified field engineers, hence it is very costly for the vendors. Customers almost never want to pay for this effort directly, hence end up paying for it in license costs, etc. later on.

    But I can also relate to position that most customers are in. There are many products/vendors in the market, all claiming to be the best. It has become very difficult and time consuming for the customers to figure out which one of these products actually works and would add value in their particular environment. They can’t figure out which one is better, they don’t have the resources to evaluate if by themselves, hence they push the risk to the vendor, accepting that they will have to pay for it (and then some) if they end up buying the software.

    I’m not sure there is an obvious solution here. Open source removes the barrier by enabling the potential customers to get the software, evaluate/use it themselves. But this is hardly the biggest issue. Even if the product is freely available (open source or not), evaluation requires customers to invest resources to learn and use the product. Resources they often do not have. Hence they push vendors to prove that they can do the job on their dime, before they invest their time and money.
    This actually works in many cases. Vendors often walk away from PoC/evaluation situations if they don’t think they can do the job.

    So open source or not, for customers, even just looking at a product/solution requires a “leap of faith”. It is much easier to make that leap, if there is a large pool of users for the potential customers to poll from, and this is what differentiates open source project with vibrant communities from products simply have an open source license.

  2. It’s not so much a leap of faith as a change in mindset. I run a services business, and if a potential client can’t see value in those services chances are they will make a bad client. I price our offerings as best I can, and one bad client can end up costing me money.

    This is how other service-oriented business work for doctors, lawyers, and even automobile repair people. Try to ask a lawyer “Hey, write up my will, and after I die if there are no problems with it you might get paid”.

    Unfortunately for years software has been sold differently and so certain organizations are set in their ways. They expect open source organizations to play the same game as commercial ones.

    If this prevents them from using an open source option, that is really too bad. Their competitors may not be so closed-minded, and if there truly is, as I believe, an advantage to using open source software it will make itself known in the marketplace.

  3. Thanks to Tarus, I hear Geoffrey Moore explaining the combination of faith/mindset, and the importance of focusing any new-technology (or new-mindset) marketing push into ONE sector where people talk with each other.

    Much easier said than done, of course. But his point is clear.

    I agree that “…an advantage …will make itself known in the marketplace.” IF it’s accompanied by some combination of effort/persistence, good marketing, and plenty of luck.

  4. I think that when you’ve made it quite clear in advance what you’ll do, and what you charge for, then if they’re asking you to do plenty of work for no charge they may well be expecting the same in the long run.
    Perhaps this is a lesson that companies can choose their customers?

  5. Tarus, I think this mindset prevents companies from using not only open source option but also any company who cannot stomach massive upfront sales costs. This may be one of the reasons that contributes to the massive consolidation in the market.

    One problem with the doctor/lawyer analogy is that the service they provide is fairly well defined. You more or less know what the output will be. Software is very ill-defined, many companies with vastly different products have similar descriptions of their solutions, all competing for the same budget. This makes it very difficult for the users to decide what to do.

    In many ways, this problem is not a lot different than companies not willing pay for the “consulting” that killed the likes of Predictive during last decade. Customers chose by their feet to get advice from the vendors rather than working with consulting companies, since they get advice “for free” from vendors.

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