Open Sources | Rodrigues & Urlocker » Making Sales while Making Friends: Matt Asay's OSCON2006 Presentation (Online)

July 28, 2006 | Comments: (0)

Making Sales while Making Friends: Matt Asay's OSCON2006 Presentation (Online)

TAGS: Open Source

Earlier this week I delivered a presentation at OSCON 2006 entitled "Making Sales While Making Friends: Lessons Learned from Open Source Businesses." I've been involved with commercial open source since 1998, and have learned a lot over the years (including how to fail spectacularly and slightly more gracefully). I'm in the middle of a string of successes, though, and figured now was the time to pretend to know-it-all. You can view my OSCON 2006 presentation here. It was an extension of some JBoss analysis I did recently, as well as an attempt to pass on some of the lessons I've learned so that the next round of open source commercialization will avoid my mistakes.

My basic premise is that an open source business is hard work, and requires that entrepreneurs spend as much time thinking about the "second sale" as they do about the first sale. In the proprietary world, you sell a big upfront license and then promptly forget about the customer. In open source, however, every business model variant I've seen requires ongoing customer service to help ensure a "second sale" (i.e., renewal of an "Enterprise" license or support contract).

There is a range of ways to help secure a second sale, but the most popular of which (but still nascent) is the "network" offering. Hyperic offers the infrastructure to build such a network - others (including Red Hat, MySQL, and SugarCRM) have built their own. A network offers real value to the customer, above and beyond support, and should be on the shopping list of every open source company.

I argued that the type of sales model an open source company has should directly correlate with its market penetration...

...which is perhaps best measured by its downloads:

Regardless of the sales infrastructure (starting with inside sales, usually, and moving to direct sales over time), marketing is critical to success, because marketing improves conversion rates and builds deal size as brand value intersects with download rates:

I also suggested that startups be realistic about outside development assistance. The Sourceforge (and other) data doesn't lie: you're going to do the bulk of your core development work. You need to worry about building a user community. The development assistance will come, and it is significant, but don't wait for someone else to build your product for you. (As I've written before, some projects - like SugarCRM - see a lot of partner-assisted development. In Alfresco's case, nearly all of our outside development comes from our customers. Not sure as to the reason for the difference....)

Despite my incessant harping on Silicon Valley, I argue that you need to be where your market is, and today the paying open source market is overwhelmingly in the US (with Europe starting to catch up):

And, among other things, I revisited the idea of what it takes to make a successful open source project, commercial or otherwise:

There's more to the presentation which you can see in the download above, but this was the baseline "gist" of it. I really enjoyed giving the presentation, and expect to give a revised version at OSBC 2007. See you then/there.

Posted by Matt Asay on July 28, 2006 10:16 AM

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