Impossible to compete with free software
discuss.joelonsoftware.com
discuss.joelonsoftware.com
* Piloting, operationalizing, and deploying the code.
* Staffing maintenance and support.
* Training.
* Tracking and deploying new revisions of the code.
In fact, I think a lot of people have had the same experience I have, which is that it can be easier to sell software to an enterprise than to give it away.
The flip side of this is that for business/enterprise software, there is very little risk in just making your code open source and then selling a commercial version. Prospects will download and play with your code. They'll pre-qualify themselves, calling you only when they're receptive to the software's value prop. The people who will operationalize the free version probably weren't good prospects to begin with.
Another place is B2C. All of the following sell B2C software:
- User experience that doesn't hurt. (Have you ever put a non-technical user through getting software from sourceforge?)
- Marketing. (It isn't evil. Most of your customers know how to describe their pain to Google but they don't know how to conceive of the solution, and they probably don't know the computer can help them. Your mission, should you choose to accept it, is to explain how the link between unhappy present and happy future is use of the appropriate software -- YOUR software.)
- Speaking the users language (hint: "GPL", "XML", and "multimedia engine" are three words that my B2C page does not share in common with my OSS competitor.)
- Design. ($25 of stock icons doubled my sales back in the day. Most OSS projects do not have anyone who would care enough to secure the equivalent.)
- Answering emails such as "I can't email the hard drive to the download" with respect and patience rather than that special brand of community the question would get on most OSS mailing lists.
- A web site that sells the product/download/etc. Rather few B2C OSS sites are written by someone who sounds like they actually WANT you to hit that download button. They're like sculptors adding navels to statutes: they know it has to have one but the task is boring and detracts from the interesting parts of the project, so it is completed in as perfunctory a manner as possible. You'll never hear an OSS developer saying "This is the 47th iteration of our Download Now button. Its 350% more effective at getting the click than v1.0"
Design. ($25 of stock icons doubled my sales back
in the day. Most OSS projects do not have anyone
who would care enough to secure the equivalent.)
http://www.kalzumeus.com/2006/08/26/the-visual-impact-stock-...
But its so long ago that both the before and after photos were overwritten in the the intervening years. I had icons, though, in roughly the same positions as they are currently. You can see the old version here -- not the best photo but it suffices:
http://www.topdownloads.net/section_images/software/11552149...
They were from Sun's Java visual identity set, which was attractively priced when I started working on a Java project with a $60 budget. You can see them here:
http://java.sun.com/developer/techDocs/hi/repository/
The ones I was using were the open, save, print, and new document buttons. If you notice, they do not look like the sort of thing you would expect an elementary schoolteacher to have in her classroom. I knew the sort of look I wanted: big, bright, bold -- like a Fischer Price toy. Then one day, while browsing the Internet, I saw an icon set that gave exactly that for about the price of one copy of my software. So I snagged it, on the theory that if it resulted in one marginal sale it was worth it.
I've used those buttons continuously since August 2006, so you can see them on the front page of my website (http://www.bingocardcreator.com). Note that they're big, bold, and colorful. That increased my visitor to download conversion rate and download to purchase conversion rate, instantly. Take a gander at the difference between the 08/06 and 09/06 bars here:
http://www.bingocardcreator.com/stats/sales-by-month
As you can see, it was worth rather substantially more than 1 marginal sale.
(Wow, thats a blast from the past, reminiscing about when the difference between $300 and $500 was a huge improvement to me...)
http://www.kalzumeus.com/2009/03/07/how-to-successfully-comp...
Hope folks find it useful.
The flip side of this is that for business/enterprise
software, there is very little risk in just making
your code open source and then selling a
commercialversion.
If a competitor takes your code, modifies it, and tries to sell it as a new open source project, nobody cares. It's a fork:
* For better or worse, real customers will stick with the "original brand".
* The fork won't get any of the community support the original did, and will always be out of sync.
* Whatever community forms around the original project will angrily reject the fork.
* Worst of all, any future development your competitor does on the product reverts back to your own code. You have all the structural advantages, as the original project owner. Your competitor is just playing to lose.
It's not like this is a supposition of mine. A great example of a project that executed this business plan: SourceFire/Snort (now a public company). Lots of companies have tried to piggyback on Snort, but for Snort's core customers, nobody has succeeded.
There's no clever algorithmic idea you can "hide" in closed-source code. Copycats are an issue (although far less of one than you think) regardless of your business model. Arbor Networks did all sorts of clever stuff under the hood (we were baselining the Internet backbone, after all), was closed source, and was beseiged by copycats.
I guess you're talking specifically about GPL-style copyleft, not Apache or BSD licensing?
There's an additional alternative: the competitor takes the code and adds features to it, then sells services on top of it. This is kind of a best-case scenario: you get free R&D.
* For better or worse, real customers will stick with the
"original brand".
* The fork won't get any of the community support the
original did, and will always be out of sync.
* Whatever community forms around the original project
will angrily reject the fork.
* Where superior here means technically, or aesthetically or friendlier to contributers or whatever.
Eventhough I'd love to see it otherwise, any aesthetical or technical superiority would need to come in enormous figures to even challenge the position of the market leader. For a unsurprising and worn example, look at Microsoft.
On the other hand, if some company takes your code and does better both in marketing and technical aspects, you _should_ lose! The better product is better for everyone in the developer/user base, including you. The community and users don't lose anything -- instead they gain! You do gain as well because you can incorporate the other company's changes back to your own codebase -- of course you did license the software under GPL.
15 years in the business, mostly in software, and my take is if you can trade some extra competitive risk to mitigate marketing risk, that's an absolute no-brainer.
Feel free to ask me when we're going to open-source our product. I have no idea. ;)
* Listen to your customers * Provide top-quality support * Constantly improve your product
you will see loyalty and a growing business through more referrals, all of which will make the other guy look like a cheap imitation.
- Open source is free (as in beer). This means that there's no support, no training and noone to blame if things go wrong. As anyone who has worked at a semi-large business will attest that is bad from a corporate buying perspective.
- The UI design of open-source software is often terrible. Open-source values code, not pretty design. I've never heard of an open-source solution that has gone through formal usability tests. Often customers don't care about pretty code, they care about a pretty UI.
- There's noone to turn to with feature requests, etc. And no, for most companies submitting a request to sourceforge or just coding it up yourself is not an option.
- There's no marketing for open-source software. Marketing sells producs, otherwise companies wouldn't spend trillions a year on it.
- You have no guarantee that your open-source software will be updated in the future. It might just be abandoned. And again, for most companies just doing it yourself is not an option.
In summary, using open-source software requires you to know what you are doing, being able to overcome installing and maintenance hurdles without support and living with the knowledge that the software might not be updated. And you'll have to actively go out looking for it, because noone will try to sell it to you.
Most business-types, who are the ones with money to spend, don't even know that there is such a thing as open-source software, and if they did many of them wouldn't use it for the reasons stated above.
- The UI design of open-source software is often terrible. Ever seen in house or enterprise software
- There's noone to turn to with feature requests Yes because I have Bill's cell phone # for new windows features I want
- There's no marketing for open-source software. Depends whether you look for software on the web or in the WSJ
- You have no guarantee that your open-source software will be updated in the future Whereas you have a guarantee that MSFT will stop selling XP
- Most business-types, don't even know that there is such a thing as open-source software That's why they have staff. They don't know how an IP datagram gets to their web server but they still have a web site. Or possibly they don't - they will be running DecNet or SNA because you can't trust this free TCP stuff.
My post was primarily aimed at explaining the difference in mentality between hackers and business people. Maybe I failed to convey that properly.
Business people have another mentality, different core values, and different goals and reasons for doing things than hackers. If you can grok this mentality you will find that you can outperform free. Both as in beer and as in freedom.
I once worked with a business guy that had a yearly budget of around $200 million, and his stance was that if someone wanted him to use something they had better sell it really well or he wouldn't use it. The whole process of selling, procurement, contracts, delivery, etc. was important to him. Both because this is what he valued (just like people here would have a hard time buying something they knew was coded in a flaky way) and because it gave him plausible deniability and removed responsibility in the sphere of corporate games. If he had used open-source software there would be noone to point the finger at if it didn't work - it sould be his responsibility.
And buying decisions are usually placed with business poeple , not hackers.
If you want to sell software to companies you need to understand these processes.
* The UI for most software is often terrible. There are dynamics that can even push OSS towards better UI's than commercial; for instance, OSS code often uses more modern UI toolkits, and commercial code often gets away shipping on stuff that looks like Foxpro.
* You're no more likely to get your feature wishlist with commercial software than with OSS. Commercial vendors pay product managers to pick the features that will expand their market and close deals with their top N customers; if you don't fit the bill, or (worse) if they farm the product for revenue, you're S.O.L.
* The cost of marketing software has changed drastically; nobody buys their software from the WSJ anymore. Read Eric Sink on advertising, and go back to the BoS board and read other people's stories on advertising. A well-trafficked blog can generate more leads than a $20k/mo marketing budget.
* The constant cycle of pointless updates is an irritant, not a win. Look at graphic design, where professionals often stick with archaic versions of Adobe tools and bitch about CS2/CS3/CS4/CSx.
Don't let fan-boyism cloud your ability to form a rational argument.
WordPress has.
http://wordpress.org/development/2008/10/usability-testing-r...
http://live.gnome.org/UsabilityProject
KDE too, apparently: http://usability.kde.org/
- As for support, I've used many open-source solutions with great support, and seen money move around there. Support is generally bad in any software but as long as there's a company willing to give support, this is no problem for businesses. For example, Canonical provides support for thousands of programs available via their Ubuntu distributions. Many of them provide support of their own as well if there's need for a more in-depth support. But it's easier for a company with a marketing budget to advertise the illusion that they actually provide support eventhough it usually turns out to be worth nothing much.
- UIs tend to be mostly bad both in commercial and open-source programs. The problem is more in the general acceptance of how important a good user interface is. Both open-source and closer-source makers have an incentive to make good UIs if they choose to see the lack of them as a problem. Besides usability is generally so bad that you don't even need a trip to a damn usability laboratory to make the first leap a huge one. Just someone with interest and insight can do wonders and make the user interface tolerable for most people. Investing in a good is really not a competitive advantage against open source software: it's a cheap but greatly unharnessed competitive advantage against any software, available both to open source and closed source software.
- I would say that feature requests are much eagerly fulfilled in the open source world than with commercial closed source software. On the other hand, open source projects will make trivial enhancements and features often _too_ gladly. Closed source companies tend to evaluate the usefulness of a feature against development costs. Not really an advantage for commercial vendors, I would say.
- Marketing for most open-source solutions is non-existent. This is they key reason for open-source being a minor player. Marketing can make wonders in smoothing out all the issues you pointed out; the quality of the actual product then becomes tangential.
- You have absolutely no guarantee that a commercial company won't turn red in the near future. They usually take their software down with them and I've seen this happen so many times that this is actually one of the key reasons why many companies would turn into open source. Not really an advantage for closed source software, rather quite the opposite!
In summary, there's a huge market for companies that sell the missing pieces of open source software, channelling all support and commercial whatnot through a single desk and market it as such. The business-types really don't care what's running on their computers but they care about money. An open source codebase can afford these middlemen to sell the software cheaper and make a profit from it. Just let the companies battle in the realm of marketing and conveniently have them grow existing open source software better as a side-product. Everyone benefits from that.
I think that Free Software, in all forms, has helped raise the bar for paid software. I remember paying for some really simple and crappy stuff (commercial software) back in the 80's and early 90's. A lot of it was stuff that has a comparable free counterpart today.
I do not believe that any legitimate valuable software product has lost a significant piece of their marketshare to free software. The free options HAVE required that the paid software have a true value though.
My company is still paying for really crappy software instead of using free alternatives. They just slap the label 'Enterprise' on something crappy, and sadly companies just eat it up. Granted, there aren't really a lot of free alternatives to most enterprise software... most likely because ERP middleware is not fun to do in your spare time.
Which browser are you using?
Not only have open source browsers like Firefox gained huge market share, but if you remember back in the day, you had to pay for any browser until MS decided to start giving IE away.
I remember browsers backs to Mosaic, don't remember there ever being a charge for personal use. As important as the browser is, in many ways it is also transparent (or least supposed to be ;) ). I'm not sure that there ever really WAS a market for browsers. I remember Netscape was trying to make their money by selling server software, not the browser itself for the most part. A little like the razor blade model.
Your point is well taken, and there are exceptions to every rule.
Opera was un-free for a long time.
So were a number of Mac OS browsers. (iCab, etc.)
Perhaps you should have your memory checked ;)
Linux is another exception, especially for servers. And Apache httpd.
Plenty of people get done what they want done and walk away satisfied with the paid alternatives such as IIS or in the case of Linux another server platform (SSI, mainframes, Windows, etc.). How are these things "illegitimate"?
I agree with your point overall, I was just pointing out exceptions.
Another one is Xen vs. VMware.
There is no commercial market for compilers on Unix-based systems. Gcc is just too good.
Our Open Source products have millions of users.
Our proprietary software has thousands of users (well, actually one thousand and some hundreds...I don't think we've crossed the 2000 licenses sold mark, yet, but it's getting really close).
So, in one sense (raw numbers), we can't compete with Open Source. Even with our own software. But, when I look at the percentage of paying customers we have that we wouldn't have without the Open Source products, the math begins to look less depressing. Maybe we just have a really high marketing budget made up of lots of development hours spread over the past 11 years...and over time we'll convert more and more of those Open Source users into paying customers.
That said, it's definitely possible to convince people to pay for software. Just make it better, easier, better supported, and more predictable over time (make upgrades that work, for example; almost nobody gets upgrades right, including most Open Source software...so if you do, people will remember it and won't be nearly as tempted to try a new product every time a major upgrade or new system is needed).
Also, it matters who you target. We have some Open Source users who want our commercial products to be even cheaper, insisting that we would sell huge numbers if it just cost half as much. But, I know the reality is that the difference between free and $69 is almost as big as the difference between free and $138, in terms of how many people will make the leap. So, targeting the low end of the market for a product that has Open Source competition is insane. Target the high end, luxury end, or enterprise end. Power users, Apple users, professionals who make a lot of money by using your software, etc. We actually decide what goes into our Open Source vs. our proprietary product based on whether it helps someone make money. That's pretty much our only determining factor: Does it make money for the customer? If yes, it's proprietary software. If no, and there are lots of cool non-commercial uses for the feature, then it goes into the GPL version. That won't work for everyone...but it works for us, since our market is one that has a pretty clear divide in who uses the software and for what.
You can charge $$$ for Free Software and "open source" software.
One day I'm going to get pissed off enough to start selling the GIMP for $100 or something, just to prove this point. Maybe no one will buy it, but you can do it. And hey, maybe it'll encourage people to "pirate" it and increase the number of users?
A concrete example: a friend is a project manager at a local design shop. He is a designer by trade, so he knows his way around the Adobe suite. But, his employer doesn't have the budget for another Photoshop license, but I'm guessing they would shell out $100 for GIMP and a "GIMP for Photoshop Dummies" book.
The more successful your fork, the more likely it's going to be packaged and distributed by the one of the top distributions for FREE. The higher your sales price, the more likely people will buy just one copy and share additional copies among themselves.
Now consider the costs: Changing the UI of GIMP seems to be no easy task, otherwise someone would have done it, already. People are complaing about the interface for the last ten years or so.
In other words: Yes, you may be able to make revenue by adding features to the GIMP, but you're unlikely to make a profit!
I will post on this forum if you actually purchase the link...
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I don't think anyone is making a killing on that model, but I could be wrong.
As far as I can tell it's reasonably difficult to find people who are able to work through simple network connectivity problems without paying a lot of money.
Here's a two minute business model for someone who aspires to start a mISV:
1. Learn how to methodically diagnose connectivity problems between points on tcp/ip networks.
2. Identify a niche with money that relies on connectivity.
3. Write some software for people in the space (or find some free stuff that does it that other people don't have time to learn how to learn)
4. Become known as a person who uses such software to solve problems.
5. Profit!
It's been proven that you can create a profitable business by creating open-source/free software and building a business on top of that. Same goes for SaaS apps that have free plans.
Take a look at the article on Zimbra that was just posted. 40 million paid email boxes. Yet, there is an open-source version of Zimbra's software suite. Similar things going on for places like RedHat, MySQL, Google Apps, SugarCRM, etc.
You can create an open-source app and reap the benefits of it ... and still make money by:
- selling premium versions
- selling support
- selling hosting with per-seat licensing
- selling add-ons and custom development services
- using the OSS to power, sell, etc a closed source application
Anybody can come download my shopping cart any time they want. It still earned me a few hundred dollars this week.
See also Rails (open source framework powers immensely profitable closed source applications), etc.
You'll note that the guy who asked the question was trying to find an excuse not to start a business, and how quickly cooler (and more experienced) heads prevail.
That paper has a (simplified) model for the economics of free and proprietary software in the same marketplace. It basically shows that the best programmers have incentives to work on free software. It also shows that the price that the proprietary software maker places on the product directly affects the number of programmers working on the free alternative. Very cool paper that I reviewed for an economics course.
The key question is "What if something goes wrong?"
Because a business owner can’t really use open source stuff unless they (a) know enough to edit the source competently or (b) can afford to hire someone who does. Assuming there’s a large market of founders who can’t edit source code themselves and don’t want to pay $100+ an hour to have someone else do it you end up with a pretty wide open market.
Corporate America will always be risk adverse which means the deck will always be stacked against free stuff. The trick to competing is just stoking the fires of that fear and then making your software look like the remedy to all of them.
For the kinds of products that need the whole dance of vendor selection, budgeting, pilots, and rollouts, then yes: feature parity, or even a small feature deficit, is easy to overcome with a strong support pitch. That's because the sales process for these products gives you the opportunity to lay out a business case.
But a lot of software doesn't get deployed that way. They may have a more casual value proposition, they may be more "niche-y" (and thus less visible to the pointy hairs), or they may be early adopter products.
In this second category, I think it's harder to make a "support" pitch. If your prospect isn't 100% sold on the value of the product (and companies buy "phase 1" deployments of products to test the water all the time), they're a lot more likely to optimize for cost.
I think it's worth being cognizant of which category you fall in to. I think if you're in the second category, the right play might be to open source yourself. Again, just because you open up your code, doesn't mean enterprises will be significantly more resistant to pay for it.
I think this highlights where Open Source competes the most, applications which the engineers build for themselves. Apache, for example, makes building a paid for web server pretty uneconomic (IIS is bundled).
When engineers doing Open Source are scratching their itch they tend to make world beating products, when they aren't scratching their own itch the momentum tails off because there isn't another driver (such as a wage, or a product manager).
It's a dude who thinks he wants to start a business, but he's saying "You can't do this." Is it a question, or is it an opinion?
And anyway, we all know, of course you can compete with free. Look at Microsoft. Look at Apple. Look at Adobe. Look at all the indie Mac devs and small shops. There are free alternatives to every one of their major products.