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How Day Software stumbled upon an open source business strategyMatthew Aslett, November 9, 2009 @ 10:15 am ET
I’ve written a few times recently about the fact that I think the open source engagement model practiced by companies such as Day Software will become more popular as we see an increasing number of proprietary companies engaging with open source and the pendulum appears to have swung back in favour of community-developed open source software.
Essentially, while Day contributes to a number of Apache open source projects such as Jackrabbit, Sling, Felix, Chemistry, Solr, Lucene and Tika, its CQ5 web content management platform is based on a proprietary license, while it also offers CRX, a commercially-packaged version of Jackrabbit and Sling.
Today I had the chance to catch up with Day’s CMO Kevin Cochrane who revealed that Day might have arrived at its current business strategy more by luck than judgment, but is now putting a business model in place to build on the company’s technical investment in open source projects.
Here’s the key points:
- Day’s technology strategy is based on a ten-year plan hatched in 2000 by CTO, David Nuescheler and Chief Scientist Roy Fielding to create a ubiquitous Java content repository project.
- The four steps in the plan were to create a standard for content repositories; build a community around a reference implementation; create a framework to build applications based on that repository; create a framework for infrastructure around this repository.
- This plan has been executed via the creation of the JSR 170 Content Repository for Java Technology API via the Java Community Process; the incorporation of the Apache Jackrabbit project; the incorporation of the Apache Felix OSGi framework and standard services project; and the incorporation of the Apache Sling REST-based web framework project.
- Somewhat missing from the plan was a business strategy to commercialize this investment. Indeed until relatively recently the R&D and commercial arms of Day were fragmented and the company was failing to exploit interest in the open source projects its employees had created.
- The business side of the company did not know what to do with this investment in open source and an early business plan – support subscription offerings for Jackrabbit – went largely ignored.
- Erik Hansen joined the company as CEO in June 2008 and has brought in new senior financial and marketing staff, as well as rebuilding the company’s sales team and approach.
- Released in late 2008, CQ5 is the latest version of Day’s Communique content management software and rolls up Jackrabbit, Felix and Sling, as well as the numerous other Apache projects Day contributes to, into a commercially licensed platform targeting web content management (WCM), Digitial Asset Management (DAM) and Social Collaboration.
- CQ5 is targeted at senior-level marketeers via a direct sales force and interactive content partners using a traditional proprietary license. The sales effort is therefore not focused on converting developers but targeting business users.
- However, developer downloads are part of a user’s decision making process. Kevin notes that if two or more developers within a prospect have independently downloaded the open source version there is a good chance the commercial deal will be signed.
- Day also offers CRX, a commercially packaged version of the Apache Jackrabbit and Sling projects. This has a 100% online distribution model with Day reacting to in-bound requests for subscriptions rather than attempting to up-sell users of the open source projects.
- 95% of Day’s CRX code base is open source, with the company offering integration and interfaces that are not available in the individual projects. There would be nothing to stop a user or rival from replicating this integration, other than investment in R&D
- Despite offering CRX, Day’s entire commercial business is based on CQ5. While the company will follow-up opportunities that arrive via CRX with its direct sales staff, it does not try to force the issue by either attempting to up-sell Jackrabbit users to CRX or CRX users to CQ5. Any revenue delivered via CRX is seen as a bonus.
- Where the company previously lacked marketing strategy to build upon the success of projects like Jackrabbit, it has now invested in growing its sales teams in the UK, Italy, France and Asia-Pac and restructured its sales globally with much more of a focus on lead generation.
- The early results are encouraging. In July the company reported total revenue for the first half of 2009 of CHF 17.0m ($16.8m today), up 33% on the first half of 2008. More recently the company boasted 70% license growth in Q3 and a 37% increase in license revenue in the first three quarters of 2009, compared to last year.
There is plenty more to the Day story, as covered in our formal analysis, but it was fascinating to hear how the company’s strategy materialised. While many other vendors have chosen to retain control over their open source projects for commercial reasons, Day opted to relinquish control with the aim of ubiquity.
This might initially have been a technical strategy rather than a business strategy (in fact it could be argued that the current model is the direct result of the lack of initial business strategy) but it created an opportunity that is now being commercially exploited.
It would be fascinating to see if such a strategy could be successfully deliberately replicated. I have a feeling that, for both technical and business strategy reasons, we’re likely to see a few companies try.
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