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Can LoopFuse crack the open source conversion conundrum?Matthew Aslett, January 25, 2008 @ 5:46 am ET
The merits of the open source distribution model in generating sales leads have been well documented but it’s always good to see statistics that back up the theory. I recently talked with a new open source software vendor (who will remain nameless, although in the interests of avoiding confusion I should state it was not LoopFuse) that shared with me some statistics about its first year distributing open source code and the comparative cost of lead generation using the proprietary model.
In its first year using an open source distribution model the company saw:
- A 12X increase in ‘awareness’ (web hits, community engagement, media mentions, conference visits etc).
- A 13X increase in web site visits.
- A 17X increase in software trials.
- A 40X increase in qualified leads.
- An 8X increase in engagements.
Of course, during a year in business you would expect to see an increase in awareness, trials and leads whatever the business model, but the following statistic puts the merits of the open source model into perspective:
- The company’s executives estimate that it would have cost in the region of $2m in marketing to get those leads if the company was not open source.
Instead of spending that money on marketing (and more besides on sales reps and field engineers) the company has been able to invest it into engineering and documentation, which both help to drive adoption levels. This is is not necessarily to say that the open source model is better, but it does nicely illustrate how it is very different from the proprietary model in terms of investing resources to drive growth.
Of course, the statistic that will have jumped out for many people is the drop from a 40X increase in qualified leads to an 8X increase in engagements. The theory that leads are not enough in open source software has also been well documented.
The ability to turn those qualified leads into paying customers remains a missing piece of the commercial open source puzzle. As Stephen Walli noted today, people might look to Red Hat, JBoss and MySQL as examples of successful open source business models, but it is still not clear conclusions can be drawn from their experience. “It’s definitely an area we need to go think about some more, figuring which software business ratios are significant and which practices to encourage,” he adds.
As Alex Fletcher previously noted: “Yes, proprietary companies are inclined to ramp up sales teams to hawk their products and yes, it is a competitive advantage that open source companies aren’t shackled to doing the same, but the $500k+ deals that don’t happen by way of traditional engagement [driven by vendor outreach] through a sales team are the minority.”
Of course, when it comes to lead generation, open source has a new answer to that in the form of LoopFuse, which made a splash in the press this week with its take on marketing and sales automation. It is no surprise to see the company targeting fellow open source software vendors as potential customers.
If LoopFuse does have the secret sauce, we should expect it to be the first to close the gap between lead generation and customer conversion. We will be watching with interest.
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