Commercial Open Source – Part 2

Dear Readers,

Well, I get some strange feedbacks about my last post, so I write a new update on this subject to clarify some ideas.

It is an evidence that commercial companies have an interest in making money, so an interest in beeing profitable. In the open source area, beeing profitable means either selling commercial licences and support, or beeing in position to perfom many training sessions and consulting.

The emergence of new Open Source companies was (and still is) a good news in order to shake the commercial software companies. Anyway, some Open Source companies have raise funds very quicly, which force them to change their structure. We can ask ourself why those companies raised money : answer may be “it was part of their strategy” or “in order to grow faster” … or anykind of valuable answer. But who cares of the consequences ? Venture capitalists want to make profit, so they want those companies to sell & sell, more & more. To achieve this objective, they just hired commercial tasks and build partner network. This is where I think strategy is not good.

If we entered the open Source landscape, this is definitly to behave differently. So, we have to find out new way of making money, to keep the company profitable. A pure commercial task force is expensive to deploy and to maintain. And ROI is never guaranty. It brings the companies to a place where it has to raise new funds, again & again. Or wait to be bought by another company. Both situation are always part of the company, even in the Open Source area. Who remembered the study of Goldman & Sachs that explained Cognos, BO and Hyperion were spending all their licence revenue in commercial & marketing activities (may 2006).Now, everyone knows how those companies end their activities, and how they left some customers & projects “in place”.

Partner network is something nice and pleasant to organise. But please, don’t expect your partners to make the deal for you. Open Source partners are there to use and promote the software, not to close deals. they want to use your product to make projects, and their main objective is their profitability, not yours ! Partner network is important, but an Open source editor will never make money with it. In order to help your local partner, I think editor should hire local technical task force, who can take in charge training projects.

One wrote me CIO want open Source companies to behave like commercial companies … well, I’d like to enter in contact with this kind of CIO, to get further explanations …I can understand that a CIO want to have a valuable company as partner, but I still don’t understand how & why a CIO want to spend his budget in commercial licences, when Open Source alternative are available and valuable.

It is true also that Open Source is not paradise ! But again, we are trying to make a different business, using internet facilities to reduce charges and timezone decalage. Most of profitable Open Source companies have built a business model without any commercial task force (Intalio & OpenERP are simple examples). Again, this doesn’t mean that those companies won’t raise funds (Intalio raised funds over the last past months), but this is the responsability of the company’s chairman or CEO to explain that this money has not to be invested in a commercial task force, but rather on making new version of the platform, building a technical network and providing some specific marketing activities to help local partners.

Have Fun !

Patrick

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