Closing an open-source deal through your systems integrator

In an open-source business, a vendor's biggest competition often derives from a freely available, "community" version of its product. By extension, an open-source vendor's biggest competition comes from the systems integrators that provide implementation services around that vendor's community software.

Crippling this competition--so tempting on the surface--tends to cripple all the benefits that come from it, including facilitated adoption of the software, and lower sales and marketing costs.

The question, then, is how to foster unfettered adoption of one's open-source software while still preventing would-be partners from undermining one's own ability to profit from the software.

Over the past two and a half years, my company, Alfresco, has struggled with this tension and has, I believe, come up with some winning strategies and policies. I share them here, in case they're helpful to you in your own efforts to build an open-source business.

1. Require your systems integration partners to invest in your company's success. This means that they should be contractually bound to distribute a company's commercial versions. You're not giving the their services away; why should they give away your software?
2. Don't let partners start implementation services until the prospective customer has purchased a subscription. In the open-source world, the software is not generally the trigger for a purchasing decision, as the prospective customer already has the software--or some variant of it. Service thus becomes the trigger: the promise of support and, as I suggest here, the promise of implementation services. Held together, they provide prospective customers a compelling reason to purchase, which generally is as much in their interests as it is in the vendor's, as the IT buyer needs a reason to purchase today instead of next month or next year.
3. In return, invest in the partners that invest in you. Alfresco has a lot of partners, but there is a core of partners that we trust absolutely with customers to do great work and to promote our interests in tandem with theirs. These are the companies that get our leads. Any would-be SI partner that approaches you with palms up should be sent away with its tail between its legs. This isn't a charity.
4. Make partnership meaningful. In addition to the leads you provide your SI partners, invest in co-marketing and other differentiators to help would-be customers choose them over the more parasitic members of the community, which opt for the community version of your software because the SI has no value beyond cheap labor and cheaper software.
5. Align interests with your SI partners. Alfresco made a conscious decision not to get into services. This means that our partners know that they will earn maximum dollar doing services for our customers and that we will never compete with them for a customer's services dollars. It also means that our valuation is enhanced by predominately holding subscription-based product revenue on our books.

These are a few strategies that we use. They provide incentives to prospective SI partners to commit to an open-source software company, leading to better value for the partner, the vendor, and the customer.

[botchagalupe]

That sure sounds like a recipe straight from some BIG propitiatory vendors I know. I know you guys have been successful and all and who am I to question. However, that list sounds like a very close-minded services approach to an open source product. In my mind I would think you would want every service provider under the sun to feel free to promote the use of your product (no holds barred). As long as you the vendor create/supplies the best sauce then like your customers the service partners will always need me. Giving unfettered access to service companies is, IMHO, no different from giving access to your base source version for free. Yes you run the risk of any prospective company taking your code and competing with you as a software company. However that typically doesn't happen because you have so much of a head start. IMHO, that would be the same case for service company If you provide the best sauce the service company/partner will want to work with you. However, if you can't keep up either as a software company or as a provider for SP's then you deserve the wrath of the "live by the sword die by the sword" effect ... IMHO you can't (or maybe shouldn't) have you cake and eat it to. ...

[rszrama]

"You're not giving the their services away; why should they give away your software?"

This really seems like a silly question... By providing releasing your software with an open source license, you're already giving it away! Would you contend that it's open source as long as it comes from your community, but no one has the right to pass it on if they're going to make money providing services around it? I guess I've just never seen an open source license that reads like that... but you can bet I'd never use it.

[seanupton]

The end-user loses here. Smart end-user companies might want to be part of your ecosystem/community, but you are sending a signal that they cannot expect T&M and support services from folks without a product agenda. That agenda colors everything. I work in IT and support development in content management systems, and I want to throw dollars that I can at services at TCO less than 40% of the cost of a proprietary equivalent... Please don't tell me I can't throw money at Alfresco or your partners without buying a product.