Monday, July 27, 2009

The Commercial Open Source Failure


This post was also published in Rachael King's BusinessWeek column.

So what happened to open source as a business? There was a wave of “commercial open source” companies that were going to change the world, including SugarCRM, Alfresco, Jasper, Pentaho, and ActiveGrid, a company I started in 2003 to bring open source software into businesses. Each of these companies were going to lower costs with the open source business model and displace existing vendors in categories such as CRM, Document Management, Reporting, and Business Intelligence.

It’s been over six years, and no commercial open source companies other than Red Hat, MySQL, and JBoss have had liquidity events. So what happened? Oracle and IBM, which derive the vast majority of their software revenue from proprietary software, have an increasing share of the software market. And there’s a bunch of commercial open source companies still trudging along.

1. The only successful open source companies sell commodities. Linux, MySQL, and JBoss are the only open source companies with significant liquidity vents, and their success is more indicative that operating systems, databases, and application servers are commodities than that open source is a successful business model. No one can succinctly tell you the difference between Linux and IBM’s AIX, or JBOSS and Oracle WebLogic, so why not buy the cheaper one!

2. It costs as much to deliver open source software as proprietary software. Many open source companies exhibit at tradeshows, have salespeople, systems engineers, customer services departments, and on top of that employ the vast majority of developers that are working on their open source project. So their costs are comparable to proprietary software companies that offer free trial versions for lead generation. It’s great that some random guy in Lithuaniacan fix a bug for the commercial open source company, but the headache of maintaining a community and integrating random code patches is just as expensive as fixing reported bugs with your own people. So commercial open source companies have the same cost structure as the enterprise software companies that preceeded them.

3. Selling software is miserable. Selling software to a large business means approal from architecture committees, security audits, achieving approved vendor status, business unit sponsorship, executive sponsorship, etc. Enterprises see IT as a cost center and IT does whatever it can to not have to deal with yet another software vendor, especially a small startup that is likely to go out of business or get bought and then deal with software that’s no longer supported, making the IT buyer look bad.

4. Customers are switching to SaaS intstead of more software. Let’s say you run a division of a company and you need customer relationship management (CRM) or business intelligence. What are you going to do? Call your IT department so they can find software, purchase it, customize it, deploy it, and then roll out to your users, all while charging your through the nose? Or call a service provider like Salesforce.com or GoodData and be up and going tomorrow? No brainer.

So when is open source successful? When it’s free and supported by a broad community of developers, not just one company trying to extract revenue. At my own company Transpond, where we help companies reach their audiences and customers on social networks and mobile platforms, we use a ton of open source software including Apache, PHP, Tomcat, MySQL, JQuery, Debian Linux, Quartz, Eclipse, Maven, and more, and we haven’t paid anybody anything other than contributing code to some of these projects. The point of open source was for people to share the costs of developing, debugging, and deploying common infrastructure. That does not mean that every successful open source project can sustain a commercial company, especially when they are delivering complicated applications rather than simple plumbing.

Thursday, July 23, 2009

Business-as-a-Service

I remember during the .com how many companies wouldn't say what their products did or how much they cost on their website. The one that particularly comes to mind was E.pithany, whose website was laden with benefits and customer praise, but after spending 15 minutes perusing their website, I couldn't figure out what they did.

Business-as-a-Service is one of the best aspects of Software-as-a-Service: the commerce is frictionless. We at Transpond consume many services ranging from email to source code control to customer service systems, and we have never had to talk to anyone, negotiate a contract, or deal with anything complicated. We look around online, find a vendor that we like, check out their terms of service, use their free trial, and if we like it, we start paying monthly for the service.

What I have found surprising when looking for services is we still run into some that don't answer the three basic questions that every business should answer:
  1. What do you do?
  2. How do I get it?
  3. How much does it cost?

While looking for a SaaS subscription billing service, I checked out one that has received a lot of press lately but did not have any indication of pricing or a guide on how to integrate the technology. I sent them an email stating specifically what we needed and asked for information on pricing and integration. They wanted me to schedule a call with a sales rep! So perhaps they are delivering Software-as-a-Service, but definitely not delivering Business-as-a-Service. Of all companies, why don't these guys let me choose what I want from a menu and then start billing me for it!

At Transpond, we definitely subscribe to the Business-as-a-Service philosophy and answer these three questions quickly and simply:
  1. What do you do?
    Home page headline: Easily Create Apps for Social Networks, Mobile, and Connected TV.
  2. How do I get it?
    Home page and every page: "Get Started" button or link.
  3. How much does it cost?
    Products/Overview: Price list.


While it seems the entire web is Business-as-a-Service now-a-days, we should recognize the pioneers, which include Google, WebEx, PayPal, Intuit, and Salesforce. These companies were all very clear about what they did, how to sign up, and how much it would cost... and they all grew into huge businesses, some without ever publishing a phone number!

Tuesday, July 21, 2009

Real Time or Popular Recent Time?

On one hand the "real time web" is great, but on the otherhand it is overwhelming. I find myself checking in and out of the stream. In some ways, I miss Facebook's old weirdly algorithmic way of summarizing what everyone was up to on my homepage. There is a bit of that sandwiched to the right of the Facebook homepage, and Tweetdeck try to guess at popular tweets, but I find these interface lacking.

TweetMeme and The Hype Machine are interesting takes on what is popular on the overall stream.

What is ironic is that Facebook redesigned to mimic Twitter, but there are popular Twitter sites that are mimicing how Facebook used to work. Something in between the two is likely to be the eventual answer...

Introducing Transpond

As covered last month in the Wall Street Journal, VentureBeat, and other media, iWidgets is now called Transpond and has a new url: Transpond.com.

Why the name change? Since we started the company to deliver what we then called "native widgets", the market has developed a name for what we were doing, which is "Apps". Widgets became pigeonholed as blocks of Flash that didn't do much, while the kinds of units our company helps you build for Facebook, MySpace, iGoogle, and now Palm Pre, are definitely called "Apps".

So rather than hold ourselves back with our name, we update the name to Transpond, which in the telecommunication field means to "amplify a message on a different frequency." Well that's what we do, we take your message and amplify it virally onto new platforms!

In addition to our rebranding, we have also released an updated site that makes it supereasy for marketing and web folks to deliver native social network and mobile apps. The screen shot below shows a simple three step wizard that you can use to quickly deliver a fully branded, native App for Facebook, MySpace, iGoogle and Palm Pre.



Over the next few weeks, we will add numerous viral types of applications, reintroduce drag-and-drop styling, and add additional native platforms. Stay tuned!