Comments on: Subscription vs. license: When do you take your profit?

Perhaps MySQL and others are wise to blend the best of open source and license-based business models to ensure a more equal footing between their current and future ability to service customer needs? The object isn't lock-in but rather buy-in. No

[odubtaig]

Isn't it all about what you get for your money? A good example is of what I want to choose to run MS Office in if I absolutely need it but I primarily run Linux I can pay £26 every 6 months for CXOffice or I can pay £90 upfront and run OEM Windows in VMWare Server. Unless I specifically need integration between the two (and VMWare shared folders, which actually work in Ubuntu last I checked, make this less necessary) it's actually cheaper to do the latter over a two year period and a lot more compatible.

On the other hand, if I want to run games, $5 a month to Transgaming isn't a bad price even if it does amount to $60 a year.

[jimmyed2000]

This is interesting Matt.

It is a common assumption that a proprietary vendor makes their money upfront with the license fee. In a lot of cases the assumption is not valid. For example I have heard that SAP makes $4 to $5 in services for every $1 they get in license revenue. You can look at the SEC filings of publicly-traded enterprise software vendors to find out where their profit it. In the cases that we looked at they are spending about 35-40% of their overall budget on sales and marketing expenses and get 40-45% of their revenue from the sale of new licenses. In these cases almost all of the upfront license fee is used to fund the expenses of selling the software to other people next quarter. In some cases the sales and marketing teams are authorized to spend over 100% of the license fee in order to make a sale. In these situations the sale person is quite happy to make a sale that is close to (or even below) the break-even point for the company, they're just trying to make their quota. After the initial sale, in order to be profitable, the vendor will need to augment the deal with services (low margin), training (low margin) or maintenance (higher margin).

So your large enterprise buyer is possibly mistaken. He may be in the situation where he 'thinks' the vendor will be happy just making the sale but where the vendor needs to find ways to augment the sale to make any profit at all.

[jrepenning]

The open-source form of "customer retention" has been called "not lock-in: love-in." If your community involvement is allowed to keep your product in that "love-in" place, your end users will be your salesmen, and your economic buyers won't _need_ to understand why: for them, it'll mainly be a question of retaining their own best talents!