A blog for the enterprise open source community
Does open source have a glass ceiling?Matthew Aslett, June 6, 2008 @ 6:58 am ET
Savio Rodrigues has published an interesting post about the adoption of commercial open source software that brings together his thoughts about open source business models and suggests that commercial open source vendors may be heading for a glass ceiling.
As Savio puts it: “OSS lowers marketing, distribution, and sales costs. And yes, OSS is a great way to drive revenue from $0 to $X… s the vendor reaches $X, they have saturated Category “C” users (those with cash and willing to spend it to save time). Now, the OSS vendor must try to win with Category “B” users (those with cash, but who have been trained by the OSS community to expect value for free).”
The categorization is a twist on Marten Mickos’s statement that open source customers are split between organizations that have more time than money (community version users and contributors) and organizations that have more money than time (commercial version subscribers) and adds a third group.
Savio defines this group as “An organization that has more money than time but is used to getting what they need for free and is comfortable enough with OSS to rely on their own skills”.
Roberto Galopinni has also identified this user group, noting: “I believe that is not uncommon to see users – read potential customers – spent a lot of time (therefore money) instead of buying commercial open source products and services. Someone, somewhere in the IT department, knows how much time spends to make things work.”
Added to the problem is the dilemma that is posed by the open source support model: the better the software is, and the more expertise a customer’s IT department has with it, the less likely a customer is to pay for a support subscription.
As previously noted, Jon Williams, former CTO of Kaplan Test, detailed this dilemma at the Open Source Business Conference in March. There are essentially two ways that open source vendors can respond to that dilemma: further innovation (or keeping the product buggy, depending on how skeptical you’re feeling) and the introduction of proprietary products.
Savio is convinced that there is only one option: “The only way that you can convince these users to pay is through the same route that proprietary vendors have been using for decades; sell proprietary products.”
Matt Asay, for one, has (partially) agreed with him: “I do agree with Rodrigues that there needs to be some ‘proprietary’ hook to give would-be buyers a reason to become actual buyers. Where I think we differ is in what we’d keep proprietary.”
The subject of support has also been up for discussion as part of CIO.com’s Executives Online blogathon this week, and I think it is worth noting Bob Sutor’s comment that a support subscription is essentially an insurance policy:
“Just as some people frequently re-evaluate their car insurance policies, open source support contracts should be reviewed on a regular basis. Here are some criteria:
* Was the contract ever used?
* If so, was it worth the money?
* Did users try to use communities or web search to fix their problems or answer their questions? How successful was that?
It may turn out for some open source software (indeed, for some software of any type) in your organization, purchased support is just not used or necessary. Other software may need it and it may be cost effective.”
People take out insurance policies for a number of reasons, mainly because they are obliged to or because they value the item being insured. The point at which people will no longer consider insurance is when the price of the policy is more than the perceived value of the item in question.
It is understandable that technologists assume that the differentiator that encourages users to pay for support has to be a matter of functionality (innovative or proprietary features) but it does not have to be the case.
The insurance policy angle points to another aspect to the open source support dilemma – that the more mission critical the application/service, the more likely a user is to take out a support subscription, regardless of their in-house expertise.
What do people think? Is there an open source glass ceiling? And if so, can the vendors break through it?
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