- Don't look back
- Is support for OSS optional in your business?
- Nokia N810 Tablet + WiMax
- Vendors need to right-size their products
- Dolphins Invade Sun Campus!
- State of Open Source
- MySQL Workbench: open source data modeling
- Comments on The 451 Group's Database Report & Red Hat's 4Q revenue
- Kaplan: Guiding open source in IT
- Can the transportation market teach us anything about the software market?
December 03, 2007 | Comments: (0)
Support Subscription vs. Software Subscription
On my previous post about the scalability of the "support subscription" business model, Joel Jackson said:
"I’m confused Savio...what don’t you understand about a software subscription annuity model? $200-500mill today in base revenue could easily be (along with a modest growth rate of new customers, which Red Hat doesn’t seem to have a problem getting) over $1bill in revenue in the near future"
Joel, thanks for bringing up this point. I'm talking about the Support Subscription business model, not the Software Subscription business model. I may not have been clear on the difference in my previous posts.
JBoss provides us with a good example of the two in practice:
Prior to the acquisition, JBoss employed a Support Subscription business model. Anyone could freely get and use JBoss products without paying JBoss a cent. Customers that wanted to call in with technical support questions and receive defect fixes faster, etc. had to pay for these rights. The customer paid for support around freely available products. The customer was clearly paying for a service (i.e. support, not to be confused with professional services a la IBM Global Services or Accenture).
Several months after the acquisition JBoss adopted the "Fedora-model", or, in layman’s terms, moved to the Software Subscription business model. Customers can only get certain versions of JBoss products by paying for "a JBoss subscription". This subscription includes technical support and monitoring services (which were part of the Support Subscription business model that JBoss previously employed). The additional access to non-freely available products is what sets this business model apart from the Support Subscription model.
Software Subscriptions has been a component of the commercial software business model for longer than I've been alive. FWIW, over 50% of Oracle's revenues are driven by Software Subscriptions. Software Subscriptions in the commercial software business model give customers access to non-freely available products. The customer has the right to receive technical support & maintenance around these products under the Software Subscription business model.
If you just said, "wait a minute, are you saying the Fedora model / JBoss Subscription is just like the Software Subscription business model that commercial software vendors have been using for decades?" Bingo.
The Software Subscription business model scales because customers are buying products. When a customer stops paying, they no longer have access to the product. Contrast this with the Support Subscription business model where customers can elect to use the product without support, or start with support and move to unsupported if they didn't make many support inquiries in the previous year.
There is absolutely nothing wrong with OSS vendors employing the Software Subscription business model. It's the best business model (from a revenue standpoint) that we've seen in the software industry. Just don't tell me that OSS "changes all the rules and has a cherry on top".
PS: I should state: "The postings on this site are my own and don’t necessarily represent IBM’s positions, strategies or opinions."
Posted by Savio Rodrigues on December 3, 2007 06:18 AM
RATE THIS ARTICLE:
-
- COMMENTS
Savio, what are you educating the world on here? You say: "Just don't tell me that OSS changes all the rules and has a cherry on top".
Do you think the genius of OSS is how we sell it? Seriously. How did you get a job blogging on open source my friend.
We already know that to scale in OSS you start off by doing two things: (1) writting great code and (2) getting market share (by selling what you call "Support" subscriptions"). Then, right about the time your OSS company is in Gartner's upper right "magic quadrant" with the other proprietary companies, you establish a revenue model that try's to convert much more of your user base (by selling what you call "Software" subscriptions).
Is this what you were trying to educate us on all along?
Come on and say it with me: The real genius in OSS isnt the way we sell software. Its the way we develop software and crush the development models of proprietary companies in the process. OSS transforms the way software is developed, distributed and supported.
Let me give a quick example: Remember when Scott McNealy got up to the podium and announced Solaris 10 cost them $500mill and 8 years to develop?...then 3 months later Red Hat introduced RHEL 3 which had every feature Solaris 10 had (minus 2, which were added 60 days later) and it only took Red Hat 1 year and $25mill to roll out. And RH comes out with a new version every single year. Since that time Sun has open sourced Java, Solaris, and anything else they can find...and signed an OEM H/W deal with IBM. JBOSS was doing the same thing to BEA's model. But I guess somehow that DOESNT qualify for OSS "changing the rules" according to you? Wow.
But (whether you believe it or not) that is the genius sir. That is the power of OSS...and yeah, Savio, thats a pretty big cherry sitting on top.
I just didnt know this was all new information to you.
Posted by: Joel Jackson at December 3, 2007 09:14 PMSavio,
Main difference between JBoss model of old vs. current is that our certified distributions are only available to subscribers. Since 2005, we have been offering regular patch releases for JBoss AS 4.0.x releases that were only available to subscribers. So, while the initial GA release was out on JBoss.org, patches and updates (as well as support and indemnification) came through the subscription.
Re: Subscription. I blogged about the fact that the subscription encompasses bits, patches/updates to bits, support, and legal assurance. Use of the Subscription SERVICE is limited to the servers you have covered under the subscription. You can continue to use the bits after you let your subscription lapse (this is nature of GPL license for example). You just no longer get the patch/update, support, and legal assurance elements.
Finally, if someone is fine using and deploying the community bits, they can do so. This is a BIG distinction between proprietary subscription model.
Bottom-line: There is lots of choice and all of the code for JBoss community and enterprise releases are open. Unlike models used by certain unnamed large companies. ;-)
And this openness is the heart of Joel's point.
Posted by: Shaun Connolly at December 7, 2007 06:49 AM
- Get Started
- Port 25 Blogs
- OSS News
- Join a Project
{Open Source} Heroes Happen Here
Start today and order your own Hero Hack Pack – which includes Getting Started with Open Source, Windows Server 2008 and Visual Studio 2008 Trial. Each pack is a chance to win a free pass to OSCON 2008.
TOP STORIES
Sun to clarify JavaFX planMS's dev tool service packs
HP in talks to buy EDS
Developers' role shifting
MS: XP SP3 reboots OEMs' fault
Apple: iPhone out of stock
Can Sun rejuvenate Java?
Powerset unveils Google-killer
FBI worried about Cisco gear
AMD updates quad-core Opterons
ADDITIONAL RESOURCES
- Virtualization: A Step by Step Approach to Success
- Dialing up Agility with Business Transformation
- 5 Things You Need to Know About Storage Virtualization
- Is your smaller organization ready for High Availability?
- Is system maintenance doing more harm than good?
- Virtual Test Lab Automation: Manage development infrastructure
