Struggling to Find an
Open Source Business Model

The Puzzle

At the heart of this talk is a puzzle:

A seemingly successful open source application

Plenty of users in a range of business and research institutions

A business model based mainly on modest payments for support

But the business model hasn't been working

And as a result, I'm now planning to make a
proprietary Pro version

Topics for discussion - is there a realistic alternative in this case? And when might pure-play OSS be good business?

SOFA Statistics

SOFA Overview

A Python software application

Open source

Produces reports, charts, statistical analyses

Works with Excel, CSV, MySQL, PostgreSQL, SQLite, Google Doc Spreadsheets, ODF spreadsheets, MS SQL Server, MS Access

Runs on Windows, Mac, and Linux

Output is HTML

SOFA Architecture

SQLiteMySQLMS Access

Linking

PostgreSQLSQL ServerExcelCSVGoogleODFImporting

Python scripts ready to glue together

HTML with Javascript and dynamic images. Printable and web-ready.

Display within SOFA GUI

Dojo Javascript/SVG Toolkit for Charts

Matplotlib (and Boomslang) for Auxiliary Charts

wxPython for Cross-platform GUI Toolkit

The Popularity/Revenue Puzzle

Always Together?

Popular enough for Revenue?

Global Downloads A Positive Picture

65,000+

Reviews A Positive Picture

My hope is that this program becomes an adopted industry standard of sorts, mentioned in everyday conversation by organization workers the world over. And, given its free and multi-platform nature, ... this hope of mine may not be an unrealistic one.

John Knight. Linux Journal

Some Very Encouraging Responses

Videos being viewed and embedded

Wide range of users

Professor of Childrens Health
in US

Geotechnical researcher
in Israel

Lead Researcher in an Asian genetics lab

Nutrition teacher in French part of East India

Agricultural statistician
in New Zealand

Small fruit company
researcher

Brazilian University student (estimated 1/3 of all users are students)

Freelance researcher
in Sweden

Aid worker
Malawi

Verdict project seems popular enough

The Struggle for Revenue

Monetisation

Surely must be possible to sell affordable support
to at least 0.5-2% (apparently a common rate for single-vendor commercial open source firms)

Warning Notes

When you play the role of market spoiler
its much easier to be famous than rich. Dave Kellog
(Technology commentator, former CEO of MarkLogic)

Theres heaps of people out there that have said Wow, the app stores a goldmine. Im going to get on this. Reality is a bit harder. Knowing what will work and what wont is just as hard as it is for any other business. Perhaps more so, because theres so much competition.Just look at how much duplication there is out there in the app market. Ive got a friend who sends me ideas for apps every now and then. In almost every circumstance, somebody already has something that does it, and I just send him the link back.http://buildmobile.com/featured-app-nodedroid/

Success and Developer Business Success

The goal - profitability

Current reality

Total Income (over 2 years)

$100

(less Paypal, taxes etc)

Finding an Open Source Business Model

Why an Open Source Business Model?

A positive contribution (satisfying
to share something that helps lots
of people across the world)

The challenge could I do it?

Ability to gain a global profile on
top of which a business can be
built

Can operate with very low
expenditure low risk of losing money

Preference for openness

Successful OSS Business Models

Android Google advertising

Red Hat Enterprise Guarantees

Mozilla Sugar Daddy

Moodle - Partnerships

Eclipse - Competitors

Acquia unique expertise

MySQL Dual licensing

Other options

Merchandise

Books

Customisation

Integration

Charity-ware

Being bought out
(even 0.01% of the MySQL buyout would net US$120K)

NB potential effectiveness of business model depends on product and context

More Business Models

The Bee-Keeper Model

The Bears and the Honey

The Bee-Keeper modelBees are meant to make honey

The Bee-keeper's job is to keep bees
happy, healthy and safe

Bee-keeper sells honey to customers

SOFA ProblemI make nearly all the honey

There are few bees

There are no customers

The bears scoff everything!
(no criticism of bears of course I have only contributed money to a tiny percentage of the open source projects I rely on)

Whatever the reason, no income = no business model

Just keep twiddling the dial?

Joel Spolsky and the Importance of
Persistence and Morale

In my mind, an entrepreneur is like a kid playing with his first shortwave radio. He takes it home and turns it on, and what
does he hear?Nothing. Static.This might be demoralizing. So he tries a
different frequency.Nothing. Static.And this might be demoralizing again. Until his mom wanders by and plugs in the antenna on the radio, and suddenly, he picks up the ghost of a station! It sounds like it's far away, and they seem to be speaking -- what is that language they're speaking? Never mind, it's a station! ...

Twiddling the business dial ...

You can be one small change away from success
(if you don't give up too soon)http://www.inc.com/magazine/20090301/
how-hard-could-it-be-start-up-static.html

As the business progresses, you start trying to turn all the various knobs on your fancy radio set in order to get better reception or to find a station you like. And fortunately, in business, we founders have a lot of knobs to play with. There's price. Location. Employees. Marketing. Advertising. Return policies. Trade shows. Products. Search-engine optimization. ...At this moment, a founder who is incapable of careful morale management will think to himself, Maybe a career in HR management isn't so bad after all. Meanwhile, the determined founder will start playing with the dials -- rethinking the menu, trying new promotions, and adjusting prices. And what he'll find is that, just like the tuner on a radio, certain aspects of a business can be off by only a little bit and then, one tiny adjustment, and BING! The thing starts working.
[Emphasis added]

Experiments

Version 1.0 Release

After 2 years
the verdict is in

Reluctant Conclusion - Pure play doesn't always work

Add closed extensions to the core, still 100 percent open source project. Customers get full access to the source code to view and modify it. The user community loses nothing, but the company adds a compelling reason to pay it money for those ... that otherwise won't or can't. [Emphasis added]

Matt Assay

A time to reap, a time to sow: A phased approach for open-source businesseshttp://news.cnet.com/8301-13505_3-9945870-16.html

Matt Assay reluctantly concluded that pure-play strategies don't work for everything. Started promoting Open Core as a viable alternative.

Pro Version / Open Core Model

Keep the Community Edition 100% open sourceKeep supporting and improving Community EditionAdd extra features to a proprietary extended versionKeep price low (student discounts etc)No loss to community users

Controversial

This is not a good idea, you have to
choose another business model .SOFA is an excellent tool. But pro version
will kill the project, because free users fall on a
second-class citizens category. Sell statistics
books based on SOFA, or t-shirts, but don't
sell the software.
Anonymous feedback

[V]ery few people who complain about the
open-core model have actually tried building a business using any of these models. I suggest
you go and try it for yourself.
James Dixon, CTO, Pentaho

Money for Work is Fair Enough

Need feeding, clothing,
educating etc

Unable to find a successful pure-play OSS business model after 2 years

Substantial projectThousands of hours coding, documenting,
making video, packaging etc

30,000 lines of code

Not just a small utility

Taken on big challenges (i18n, cross-platform)

Not cripple-ware

Providing free support and documentation to community

Can't continue to prioritise SOFA work if no income (4 children to support). No tenured position to fall back on

So Open Core it is

Questions/Reactions

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Your thoughts:Is there a realistic alternative in this case?

And when is pure-play OSS good business?

SOFAPaton-Simpson & Associates LtdAuckland, New Zealand

SOFAPaton-Simpson & Associates LtdAuckland, New Zealand