Dev

Six factors that can make or break an open source business

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More and more companies are turning to open-source companies’ business models in the hopes of becoming the next Red Hat or Automattic.

The nature of the business model, however, means that companies need to pay special attention to both their customers and the two different versions (open source and proprietary) of their product if they wish to be successful. Failure to do so could drive customers to competitive offerings and keep your open source users from becoming your next customers.

With that in mind, here are six factors every open-source business needs to consider in order to be successful:

Open source will not make bad technology great

Many entrepreneurs and developers are attracted to open-source software because it offers anyone the ability to change, improve, and customize their software. It is often lower cost, too.

But the technology has to be more compelling than just open source; otherwise your users may be tempted by other solutions.

Consider what compelling features your open-source solution will offer. Will the software be easier to use than your competitors (both OSS and proprietary)? Will it have cutting edge functionality? Will there be significant enhancements to the user experience?

If your open source product fails to address important issues like these, it’s likely your customers will move on to another solution that meets more of their needs. Your future customers care about themselves and it is important to meet all their needs. Open source may just be one of the needs on their list.

You can’t just expect a community to emerge

The rich ecosystem of users, partners, and customers is one of the greatest advantages of an open-source business. But if you don’t spend enough time developing and cultivating this ecosystem, you’ll find that you will lose out on these advantages.

Leverage your community of users to the best of your ability; provide them with a forum to discuss and collaborate with other users. This is the one area I feel open source companies need to spend a lot more time and money then their proprietary competitors to be be successful. There are myriad ways to engage your users: in-person and virtual meetups provide an opportunity to exchange feedback on their experience with your product, while an active online user forum could provide a way for your community to troubleshoot or for new users to learn tricks of the technology from more experienced ones.

By developing this ecosystem, you’ll turn your users into walking evangelists who can essentially act as an outsourced version of product marketing, quality assurance, support, and most importantly, friends for life.

Give people a good reason to pay

In the open-source business model, your biggest competitor is yourself (as your paid solution is effectively competing with your open source solution). To that end, make sure there is clear benefit and value from choosing to purchase the commercial version.

Ensure that your proprietary solution offers something customers would be willing to pay for (and that they can’t get with the open source offering), but be careful not to alienate the your open source users by watering it down to much. It too, needs to be “real” software, or no one will adopt it. Remember that adoption is what leads what builds the pipeline of future customers.

Have a commercial-friendly open-source license

Your open-source technology will really get wings of its own if you use a more liberal license. With a “copyleft” license, any project that uses your code also has to be open-source, itself. Other kinds of licenses will let your code be incorporated into proprietary software, as well — potentially opening up a whole new pipeline for paying customers who need commercial-grade support for your technology.

You can get a full run-down on free software licenses from the Free Software Foundation as well as recommendations on how and when to use each kind.

Don’t penalize open-source customers who go proprietary

Some businesses have open source and proprietary offerings that are actually too different; customers sometimes need to restart the project if they choose to shift to a paid version.

Save your customers this headache by simplifying the path from open source user to paying customer. Making it easy for your open source customers to transition to paying customers will help retain them in the long run, and boost your bottom line as well.

Inbound lead volume is key

Open-source solutions are less expensive than their proprietary counterparts, so you should make sure to offset that lower price point with a higher volume of deals.

Be sure to invest in technology that can make your marketing and sales functions more efficient than your proprietary competitors. Use marketing automation and CRM tools heavily to score and monitor your leads and leverage your web analytics to understand where your traffic is coming from.

Additionally, use your marketing tools to educate and teach your open-source users. Just because someone has adopted the open-source version does not mean the marketing and sales effort is complete. Consider developing onboarding education programs to make sure open source users have a great experience.

Michael “Mac” McConnell i vice president of marketing at BonitaSoft, which makes an open-source BPM and workflow engine that allows users to define, execute and monitor business processes. McConnel is responsible for all aspects of global marketing. Previously, he was global marketing lead for Sun Microsystems’ mid-market group. He has also held prominent sales roles at JPMorganChase and Deutsche Banc.

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