Lately, I have been thinking about the different ways that an open source business model can benefit the companies that base their businesses on an open source product. Although there are many benefits, one of these benefits is that open source can be used as a marketing strategy. I blogged about this idea in some detail on the new Compiere Blog, and here is an excerpt:
Since Compiere is freely available for download, anyone can install the software, try it, and see if they want to use it in their environment. Many of these people will never generate any revenue for Compiere, but maybe they tell a few other people about Compiere, and maybe those people tell a few more people … This viral marketing helps to promote and market open source products with little involvement from companies like Compiere. Having an open source business model can generate a level of awareness that might otherwise cost a substantial amount of money to achieve through trade shows, advertising, etc.
Using open source as a marketing strategy requires a shift in thinking for anyone coming from a proprietary background. As open source companies, we need to encourage people to download our software for free – the more, the better! It does not matter to me that someone gets our software for free without paying Compiere a dime. Yes, they are benefiting from our hard work without giving anything in return, but all I need is for them to tell someone who will eventually want to attend training or purchase some type of support or other services from Compiere.
Open source companies also need to be a bit careful not to be too heavy handed with pushing people into revenue generation. We cannot (and do not want to) force people into purchasing support agreements or other services, because this would severely limit our ability to benefit from open source as a marketing strategy. Instead, we need to provide compelling services (support and others) that benefit our customers. Those customers who need and want our help will pay for it. (Quote from the Compiere Blog)
Today we announced our new Authorized Partner Program at Compiere. As many of you know, designing a partner program within an open source company has a unique set of challenges. The program must be designed to provide Compiere and our partners with enough revenue to sustain our businesses while creating product offerings at appropriate price points for customers. This is not unique to open source companies; however, most open source companies have to find creative ways to achieve this balance without relying on revenue from product license sales. The new partner program is designed to provide the resources partners need to build their businesses by providing consulting services, training, and support, since Compiere partners tend to have business models similar to value-added resellers, system integrators, and service consulting firms.
When I started working at Compiere at the end of November, they had a pretty good idea about what they wanted from a new Partner Program, but they needed someone to pull everything together to define the exact specifications for the program, write brochures and other promotional materials, and draft a completely new legal agreement between Compiere and our partners. My skills are a bit diverse (I’ve done everything from UNIX sys admin to market research on roller bearing usage in steel mills), and at a small company, the “just get it done” attitude means that I can get my hands into all sorts of fun things and do something a little bit different every day. I really love working for a company where I can jump in headfirst and quickly have a real impact on the company. Prior to Compiere, I had always been at very large companies, most recently Intel, where as one of tens of thousands of employees, it can become very difficult to see how your work impacts the profitability of the company. Additionally, the bureaucracy inherent in large corporations can result in much slower reaction time, and it can take many months to launch even the smallest program. I started working on the partner program at Compiere during the last week of November and the program launched just over a month later, which is amazing when you take into consideration the holiday downtime and the effort involved in getting a new employee (me) up to speed!
I love my job!
Second Life has just announced that the Second Life client has been released under an open source license, and they described their move to open source as “inevitable”:
“At Linden, we have always been strong advocates of the use of open standards and the advantages of using open source products. Though Second Life makes abundant use of non-standard technologies, our basic UDP protocol message system for example, we rely on open standards and open source implementations when appropriate and available. Since many of the components that will make up this network are not yet done, we are not publishing long white papers or RFCs at this time — instead, we are giving everyone what we have along with a goal of producing those open standards with the input and assistance of the community that has brought Second Life to where it is now.
Releasing the source now is our next invitation to the world to help build this global space for communication, business, and entertainment. We are eager to work with the community and businesses to further our vision of our space.” (Quote from the Second Life Blog)
I also found it interesting that Linden Lab specified the GNU GPL version 2, rather than releasing it under the GPL and future versions … another company hedging its bets on the still under development GPL v3.
I think this is a great move for Linden Lab, and an astute business decision. By releasing the client software under open source, residents can modify their client experience, while Linden Lab continues to provide the server side code, which is where they make their revenue. Linden Lab is providing a more flexible environment for users, which should translate to additional users, and at the same time, they continue to have the revenue stream required to keep Second Life in business.
Marco Rosella has an interesting idea about how companies can promote their exit strategies at the upcoming Web 2.0 Conference … (Note – this is meant to be humorous):
“The success of a new service, if really demonstrated itself different from all the others, however could decree the end: where there’s a lack of Venture Capitals and/or the ads are to cover the band costs, naturally proportional to the traffic, the only reason of survival remains the sell to a big company.
…
As we know by now, Web 2.0 web application’s interfaces have their peculiar style defined by reflections, fades, drop-shadows, strong colors, rounded corners and star badges, these standing out in the header of every homepage.
Badges are the key element of this kind of design, being the first to flash user eyes, and so extremely important for the right communication of a message with fundamental importance.
Below you’ll find some example badges, arranged in four incremental levels, each one related to a different business model.” (Quote from Central Scrutinizer)
This is a humorous way to portray the current environment; however, it highlights a serious issue facing web 2.0 companies. With so many new web 2.0 companies, it becomes difficult to stand out in the crowd. Not all of them are looking to rise above the crowd in order to exit the business, but even getting mindshare with users can be difficult. Those that succeed in growing a large user base tend to do so virally, YouTube / MySpace / del.icio.us / etc., which is difficult to predict. Web 2.0 companies will need to focus on finding ways to get attention. Maybe the acquire me badges are not such a bad idea 
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