This sponsored post is produced by Scalr.

Why would a technology startup choose to open-source its software? As a startup developing for the enterprise, we at Scalr made the decision to open-source our software, the Scalr Cloud Management Platform, in 2008. This was the right decision for our business, but there have been additional benefits to our customers that we did not consider when we started. Today’s enterprise buyers care if a startup has open-sourced its code. And if they don’t care, they should.

Though Scalr is currently the only open-source solution in the cloud management sector, several high-profile technology startups have made the same decision in other business segments, including MongoDB (a nonrelational database, formerly 10gen) and Chef (configuration management, formerly Opscode). It’s proven to be a good business model.

Why would a startup selling to the enterprise choose to open-source its software? And why would an enterprise buyer care if its software vendor of choice has open-sourced their code?

Here’s why.

When an enterprise evaluates software, it often views dealing with a technology startup as riskier than dealing with an enterprise software vendor. The old “No one ever got fired for choosing Big Blue” sometimes still influences software purchasing decisions. And there are some valid reasons for this concern — although minimizing risk in this way often precludes choosing the most innovative and advanced solutions.

Because indeed, selecting innovation involves risks. History shows there is a real risk that a startup may go out of business or pivot, changing its focus. Additionally, a startup’s timeline may not correspond to that of an enterprise: If the startup has taken outside investment, it may be under pressure to pursue a rapid exit through merger or acquisition, losing focus on its product — or even discontinuing it!

Open-sourcing software reduces that supplier risk. It enables startups to assure their enterprise customers that their product and its community are enduring. Whatever the fate of the software startup, the code and community will remain. For many enterprise buyers, this offers considerable reassurance.

Our experience bringing Scalr’s Cloud Management Platform to market demonstrates this point well.

Cloud-management platforms are a class of products that sit on top of cloud orchestration platforms such as Amazon Web Services, OpenStack, CloudStack, and others, and enable their users to access cloud-computing resources from all those platforms through a single pane of glass. For an enterprise adopting one, the cloud management platform is the nerve center of its cloud infrastructure.

As such, minimizing supplier risk is critical for an enterprise choosing its cloud-management platform. Selecting a vendor that ceases to innovate or becomes aligned with a hardware or software vendor that is contradictory to the company’s cloud-architecture decisions will likely result in a need to rip and replace the platform through which all of its infrastructure is managed. It’s a weighty decision, indeed.

In fact, several enterprise customers have shared that Scalr’s software being open-source reassures them in the sales process, as they are confident that the code will remain available to them. They also appreciate the option of deploying Scalr with commercial support and on their premises, behind their firewall, instead of accessing it via a software-as-a-service model.

Here at Scalr, we also made the business decision to avoid VC investment, and have turned several offers down. We’ve experienced consistent growth and have been profitable for several years, so this was the right decision for our business. What’s more, several of our enterprise customers have shared that this is a business benefit to them as well. Not being under pressure to make a speedy exit, but remaining focused on customer-centric innovation, offers enterprise customers additional peace of mind.

Ultimately, minimizing technology and supplier risk requires effort on both sides of the table: startup software vendor and enterprise buyer. Whichever side you’re on, the independence of open-source is well worth considering.

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