Influence in open-source development communities is earned through years of writing and sharing great code. Perhaps not surprisingly, then, influence in the business side of open source is also gained through sharing expertise, and not necessarily from making mountains of cash.
At least, that's the lesson I take away from MindTouch's inaugural survey of 50 open-source business executives. MindTouch, an open-source collaboration company, has spent the last few months surveying executives within the commercial open-source community, asking them to name the most influential people within the commercial open-source ecosystem.
The result is effectively an all-star list of open-source business executives. The top five are as follows:
- Larry Augustin, CEO, SugarCRM
- Matt Asay, vice president of business development, Alfresco (and fellow CNET blogger)
- Mårten Mickos, entrepreneur-in-residence, Benchmark Capital, and former CEO, MySQL
- Jim Whitehurst, CEO, Red Hat
- Dries Buytaert, co-founder and CTO, Acquia
The full list is available here.
The common theme running through these top-five vote getters is how open they've been with their peers. Larry Augustin sits on several boards of open-source companies, but he also frequently speaks at industry events and has been involved in open source from its inception.
Matt Asay, my friend and fellow CNET blogger, sits on more than 10 open-source advisory boards, chairs the Open Source Business Conference, hosts an informal get-together every year (called Open Source Goat Rodeo--don't ask why), blogs at an unhealthy rate for CNET on open source, and has actively helped a range of aspiring open-source entrepreneurs understand the mechanics of running an open-source business.
Mårten Mickos made the world safe for the $1 billion open-source acquisition, but he has also traveled the globe speaking at open-source events and is very generous with his time, sharing know-how and best practices with other open-source executives.
Jim Whitehurst, breaking the typical Red Hat mold, has been active in industry events, has hosted a range of dinners and other small-scale, intimate events with open-source executives. He is amazingly accessible, given that he has a fast-growing open-source company to run. It's unfortunate that Whitehurst is the only Red Hat executive to make the list; Red Hat should follow his lead and be more permeable to its peers. Its influence would grow accordingly, just as Whitehurst's has.
Finally, there's Dries Buytaert, who blogs frequently on his project, Drupal, but also regularly attends and speaks at industry events. He has also been active behind the scenes, working with other open-source companies to share information on how to optimize community development.
Open-source code becomes valuable when you give it away. The same holds true for open-source business expertise. There are individuals who have made more money than these with open-source software, but in terms of influence, the more you share, the more influential you become.
What do you think? Who else should be on the list? Who influences you?
In preparation for my upcoming OSBC session, "Open-Core Licensing: The New Business Model Standard for Commercial Software," I dug through some old presentations to try to figure out how monetization efforts have changed in commercial open-source companies.
Ultimately, revenue from open source boils down to understanding buyer types, as described by former MySQL CEO and current Sun Senior Vice President Marten Mickos starting all the way back in 2005.
Marten described the buyer market for open-source solutions as:
- Those who spend time to save money
- Those who spend money to save time
Marten has also asserted that "in the past, differentiation was a compelling reason to buy but, if incorrectly implemented, it could also drive the compelling reason to abandon."
That statement leads into the topic of discussion around open-core licensing and the associated risk-versus-reward scenario as open-source vendors manage projects to balance revenue and community.
The big challenge for vendors trying to monetize open-source products is how to encourage payment for something (anything?) while not bastardizing the user base that is hooked on the free software. I've outlined below my latest attempt at explaining the commercial open-source evolution--or at least, an explanation of how several companies have matured their models to ensure both community and financial success.
- Support + free code
- Support + commercial license
- Support + commercial license + indemnity + warranty
- Support + commercial license + indemnity + warranty + exclusive features
I'm currently working on pricing models for several new open-source companies, and I keep running into a similar set of challenges. The primary issue is that when you shrink a market, as open source does, you must to find a pricing model that solves the equation, meaning that your costs must substantially lower in order for you to make money.
Customers assume that open source is free and that commercial open source is cheaper, but most companies aren't prepared to deal with the implications of having a lower-cost product. Even when you can clearly demonstrate value, you run into a scale issue sooner or later. (Sarah Lacy harangued me about this in an interview for Yahoo Tech Ticker.)
So, the answer appears to be that you have to provide more value for the dollar, but how do you do it in a way that makes a highly scalable, highly monetizable business? I like this quote from Alfresco's John Newton in the Times Online UK"
Newton sees the development of Japanese car brands in America as a good analogy for open source. "People admitted Japanese cars were cheap, but argued they would cost you more because they would break down more.
Japan, by focusing on quality and cost, was able to demonstrate that a Toyota does actually perform, gets you from A to B, and costs you less. That is how the Japanese became the biggest car makers in the world."
Japanese cars in the U.S. market is a good analogy. Former MySQL CEO Marten Mickos often said he wanted to be the Toyota of the software world--which didn't mean low cost as much as it meant that he wanted MySQL to be highly refined, to have mass-market appeal, and to have room for upgrades.
And while cars are not a great business to be in right now, the Toyota model still makes a great deal of sense. Open-source companies have to become models of efficiency in every area in order to keep costs down and revenues up. Customers expect open-source alternatives to be 10 percent to 20 percent of the cost of the proprietary product, which means that open-source companies need to be 80 percent to 90 percent more capital-efficient.
I am trying to get my hands on this new report from the Standish Group that says that open source is decimating the traditional software market.
Open Source software is raising havoc throughout the software market. It is the ultimate in disruptive technology, and while to it is only 6% of estimated trillion dollars IT budgeted annually, it represents a real loss of $60 billion in annual revenues to software companies," said Jim Johnson, Chairman, The Standish Group International, Boston, MA
If the $60 billion is true (and I would assume based on Standish's five years of research it is) then we have been dramatically underestimating the impact open source is having on the traditional vendors. We've known there is a effect, and now we finally have some numbers (and $60 billion is a whopper.)
MySQL Marten Mickos has often spoken of "taking a $10 billion market and making it a $3 billion market." If you consider that open source has taken out $60 billion of traditional software revenues there will be a bloodletting in the proprietary world soon enough.
It's a great time to be an open source company.
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