Show Me the Money

A great deal of activity is happening around opensource – not just in the software but through overall forces of – collaboration, openness, sharing and networking. These principles are not new to the mankind. They have been used in the context of social development, education and research in many ways.

But the key difference this time is that these principles are being leveraged for businesses. Whole new businesses have come up and entirely new concepts of doing businesses are shaping the industry. eg. Wikipedia, social networking, Innovation Exchange, Red Hat etc…

Right in the middle of our own businesses in IT industry, open source software such as Linux, JBoss, KVM, Alfresco, SugarCRM are making impact on the our customer businesses. These software offer great value to the customers at the same time pricing, packaging, promotion are significantly different from what they are used to be with proprietary software.

While on one hand open source software is a growing trend and becoming all pervasive in customer’s infrastructure, it throws up interesting questions for the resellers and solution providers as to how to leverage this opportunity – given that open source is considered free or low cost. Can it increase the % margin, can it help get net new customers, does it need more investments, what kind of skill sets required, are the promoters of these software companies – RH, Novell, IBM doing enough to support the partner eco system. What kind of changes do we have to bring about in our business practices to leverage these trends.

While some questions would require to be dealt in the context of specific software and promoters, the common areas through which partners can leverage open source software are :

Acquire new customers

Acquiring new customers is the most difficult part of the business, more so in the proprietary software space. In the growing market of open source software and solutions there is a great demand for the suppliers. There is a tremendous pull from the market. Grab this opportunity to grow your business. It is relatively low cost way.

Gain customer mindshare :

If you don’t talk about open source software and solutions, some one else is going to. Apart from this, open source software is on customer’s mind. So you better be the first one to acknowledge it and garner customer’s mindshare which leads to garnering wallet share.

Additional opportunities

When customers try one set of open source software (eg. Linux) they are ready to adopt other software also. Partners should proactively tap into these opportunities and get grow its business.

Annuity business

Most commercial open source software are sold on annual subscription basis. It is important to keep in mind that these subscription are not the AMC of proprietary software. The subscription renewal business is a good opportunity in terms of $$ value as well for forging better relationship with the customer.

Uplift your profile

Every partner has an aspiration to move to next step of value chain from box pushers to solutions vendors. You can leverage open source software opportunity to bring about that transformation as the cost of acquiring technology is very low and number of customers are embarking upon the adoption cycle are still growing at a healthy rate.

Tap into services opportunities

Depending upon your plans, tap into the services business opportunity that open source software offers. This is equally true for existing hardware partners as well as software partners. There are many areas of services that each partner can tap into. For example – Hardware provider can get into infrastructure / implementation services of OS, the packaged software provider can get into customisation and implementation of software solutions. But these areas need to be based on individual partner’s plans.

One area to be mindful of :

Expectations about margins :

I have seen many partners take up to selling opensource software just because the margins on selling traditional software are falling. If you look at the $ value of margins on open source software, very often it turns out to be lower. So one must be clear about the expectations of why it is getting into this business. As mentioned above, the advantages are many, one needs right alignment of the business.

One Response to Show Me the Money

  1. Brian Reale says:

    I’d like to add some notes to your point about “tapping into service opportunities.” First, it would be useful to distinguish between commercial open source software and open source software (COSS vs OSS). Tapping into services in COSS is going to be different than with pure OSS.

    Most commercial open source companies have a formal partner channel and most of the executives from these companies come from traditional software distribution backgrounds. In fact, they usually get brought on to the COSS companies (seems like a lot come from Oracle and CA) by VCs who are looking to increase revenues, margins, and returns in a short period of time.

    In many cases the COSS company may decide that it won’t sell direct, but rather will just support the channel in its sales effort. When this happens, there is an enormous opportunity for resellers and VARs because these COSS companies will tend to kick off dozens if not hundreds of good leads per region per week. So, if you are sitting in Canada and notice that an open source company doesn’t have a partner there – call them up and arrange to be a partner. Leads are worth a lot. It costs good money to get leads. Most open source companies (ours included) get way too many. As a reseller/VAR you can take advantage of this by partnering with an open source company and have leads flowing to you all day. That is definitely a way to “tap into services opportunities.”

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