A few people emailed me asking me to elaborate on my claim that employing open source as a promotional tool and community building tool were good ideas. A few also asked if I’d consider it for my upcoming web apps. Well let me answer the second part first: yes we are considering it. Why? Well let me get to that.
You are all probably thinking “WTF why would I give away my IP?” well the concept that you are building a single product in the software as a service market is slightly false. You are building a platform more than anything; a platform that will be the base for your service. The best way to build a community around this is to let others help build the platform or foundation. I am not saying give it away for commercial purposes, i.e. don’t let someone resell your code, but do let them add on to it.
As a developer of a platform your goals should be: make it as good as it can, and get as many people as possible to use it (maybe not that order, but I’ll leave that up to you). When you are strapped for cash, the easiest way to build your startup is using open source, so why not use the open source community to help build your community? If you give the tools away, enough builders will find them useful that you are likely to find at least someone interested.
There is another MAJOR point I failed to cover in the previous post: costs. Free for life accounts as we’ve seen on any number of web services are expensive to run. You generate next to no revenue from them, but they drain computing power. So how do you alleviate that? Let the people who aren’t interested in paying run it on their own hardware and bandwidth. If someone is THAT interested in trying it, but not able or willing to run it themselves, they should be willing to pay a nominal fee for that privilege, it is only fair.
So those reasons hopefully explain a bit more the thought process I’ve been utilizing in analyzing this subject.
- What we have, and what’s coming -
Open source has been a hot topic in the software world over the last ten years or so, due in no small part to the widespread penetration of Linux in corporate environments (mainly as servers). However there has been a long running debate on how one can really commercialize free and open source software. Open source is one of the best friends of a modern web2.whatever startup, it provides cheap (usually) and robust solutions for companies that would have normally been forced to go with super expensive software to power their offices or applications.
The real reason I’m bringing up open source in this venue is that it plays a critical part in the development of many companies and people I deal with on a regular day to day basis, including my own. Over at my web development shop, we use open source software all the time, from ActiveCollab to PHP/MySQL for some of our development, to an open source phone system to handle our calls. Being in Miami we also deal a lot with companies in South America where open source became huge in the late 90s (the world’s largest Java app was made in Brazil).
So back to my original topic, the business models of open source, and how they are changing. Currently the most popular business model based around open source is that of providing support for people at a cost. So you give the car away for free, but the instructions on how to use it cost $200/hour. Some other open source models include ad and revenue sharing with partners (look at firefox, they make $90mil+ a year from google search).
So the question is, where is the business model going, and how will it affect my business? Well the next major trend I think we’ll see is in the SaaS market moving to partial open source. Take a gander over at Biggu’s move to release the source code to a few of their tools. This was a smart move for three reasons: 1. They couldn’t keep up with the hackers trying to break their apps, so they let everyone else deal with it. 2. They weren’t making money from the apps they open sourced, so this lets them reallocate resources to revenue generating projects. 3. It was a major PR tool, it allowed their other revenue generating products (podcall, podserve, etc.) generate some good buzz and ultimately some more exposure.
Now its hard to extract a clearcut business model from Biggu’s move, but its sort of what I’m about to get to. My suggestion for what could be a very successful SaaS move would be to open source the entry level version of your app. Give it away, free! But do that instead of offering a free for life account on your system. Let the community who was less likely to pay for your product or might have had their concerns about offloading their data to another host run it locally. Just give away a stripped down version of your product. This gives developers and end users a taste of what there is. Then turn around and sell/lease/rent your pro versions with more features. The users will see the missing features and flock to this paid model. The SaaS model itself has already been proven, as it gives end users a cheaper way to get into the software versus the high up front costs of a traditional software model, and people are more likely to try the software and keep it if its easy to get into.
So how does the Open Source Barebones model do for you? Simple:
- Builds a community of users and developers who will contribute code back to your enterprise versions.
- The community can help wipe out bugs in the entry level stuff and the core of your app. If people are willing to help you, TAKE THE HELP!
- You are now building an army of marketers for your project, don’t forget that.
