When I read the news of “Stand up India” program, first thought that came to my mind was “entrepreneurship can not be thrust upon anyone by giving money in hand”. On the contrary entrepreneurship is all about brining your ideas to life despite having all the odds stacked against you. Second thought that went thru my mind was why government wants to encourage only one section of the society to be entrepreneur. Entrepreneurship should be encouraged for anyone who has deserving ideas irrespective of caste, religion and gender.
Open source software is mainstream, open source has made (and continues to) the world (not just IT) a better place in many ways. There are many example of open source software ( Linux, android, chrome etc) to open source projects (gov data, open hardware, educational contents etc) However, we can’t say commercial vendors of the open source software have been very successful (upward of $500 million and profitable) in selling their subscription model and create a robust business – of course the most notable exception to this is Red Hat. Although, of late, there have been investments in and buyout of some of the commercial vendors and I wrote about it in my blog ‘Millions of Dollars in open source software business ..’, I feel these investments are more based on the promise than the past performance.
Why are commercial vendors struggling to grow despite being in the business for around 10 years or despite the fact that open source project has seen very high popularity (number of downloads), active contributors and deployments in large orgranisations in real projects.
Based on my experience working at Red Hat for 8 years (from 2001 to 2009) and later on 6 years dealing with many of these commercial vendors I can point out few areas that these companies are not able to address or areas that they need to improve upon. At Ashnik we deal with some of the leading names of these commercial vendors and hence I am not going to name any one in particular.
Focussing on free download or community edition deployment –
I have seen many sales executives building their business model or selling the potential of commercial success to the partner network based on these numbers. The reality is that those customers who have downloaded open source product and have deployed the community edition in real projects have tasted the joy of ‘free’ and ‘great product’. Now going forward these customers build their IT budgets attributing zero cost for these products. There is hardly any reason for them to pay for the subscription. For a sales person these are the most difficult customers to deal with. You can’t build your business based on this pipeline. Only thing is these customers act as endorsement for quality and usefulness of the product.
Distributor / reseller model in the initial phase –
Many of the commercial open source software vendors appoint traditional software distributors and resellers. It looks great on the paper that you have a reach in the market and now you can sit back and watch your cash register ticking. But this has not worked at all. The reason is for the open source product you need to go out and create a strong demand for buying subscription along with the awareness of the product. Many vendors that I have seen have tried to piggy back on the success of the open source project and assumed that customers would buy subscription through resellers. But without on-the-ground engagement with customers there is not going be a demand for subscription. This needs a ‘push’ strategy. Whereas reseller network is (in general) geared up to address ‘pull’ demand – which means customers calling and asking for the price of a product.
In such a scenario, it is important to appoint resellers who would go out in the market and create a demand. For this, commercial vendors need to create different margins and engagement model for the reseller. Most of the vendors have not shown understanding of this need.
There is one more reason coming in way of convincing the resellers to put in extra efforts to create pull from the market and it is about thin margins in net dollars. The open source products typically are priced much lower than proprietary products, hence even a higher %margin and promise of annual subscription does not given enough incentives to the reseller to invest in setting up sales and pre-sales team for these products.
This challenge can be addressed with innovative approach and identifying right partners. ( I can say that we have been able to guide and setup such models with the commercial vendors where they were open for discussions).
Sales and Channels team composition –
We all know that it is the people who make difference in success and failure. I believe that good sales people and people with adaptability would fit in any company, but we also need to understand that selling open source software to customers and building partner network needs additional understanding of the business. Many commercial open source vendors tend to recruit people from proprietary software vendors (typically their respective competitors). But I have seen that this approach has not worked for most. First of all the cost of these sales people is high and they have to go through steep learning curve that results in longer time to deliver. In many instances I have seen that these people have antagonized the reseller network with their approach (that comes from the business which operates on ‘pull’ model) and failed to capitalize on the goodwill of the open source project. Hence just recruiting your team from your proprietary software competitor is not a guarantee of success – rather most of the time it is counter productive.
There are other areas that are equally applicable – whether you are open source or proprietary software company – to be successful in growing the sale and smart executives understand those things very well. What matters in case of commercial open source company is an understanding of the peculiarities of open source business and address them effectively.
When I was discussing the challenges of growing our business and hiring people, I said that our priority was to build the capability first and we can build the capacity later on. When I thought about this statement more, I realised that many organisations go through this challenge. Very often we have to take decision about hiring people in a given budget.
For example, the question that I was trying to address was whether to hire 2 people at entry level skills versus hire only 1 at an expert level.
With 2 people, it lowers our risk of failure (seemingly), it also allows us to regulate the cash flow.
On the other hand hiring one expert and having a cash outflow equivalent of two, increases the risks, if things don’t work out.
However the key question for me was more about capability vs. capacity. 1 expert gives us capability and 2 entry level skills gives us capacity. Based on the current needs I decided to go for ‘capability’ building.
While reading the news on Apple and MS’s results, one whacky thought came to my mind.
If these two IT companies along with IBM, HP are close to $100Billion in annual revenue each, then top 25 IT companies put together would be making $1000 billion annual revenue. There is a great race going on to growing these revenue faster. And there is a greater race for bringing ‘innovation’.
The other side of this revenue is consumers and enterprises are spending at least $1000 billion in buying these stuff made by these companies. Every year we are spending more money on these stuff. What is the primary reason for fast growing sale of Apple like products? Primarily we are buying new stuff every year. We are getting lured by so called innovation or new features.
The thought that came to my mind, if Apple, for example, does not come out with iPad3 or iPhone5 or Microsoft does not bring newer version of Windows or Oracle, IBM , CISCO all decide not bring any new features for next 2 years, what would happen?
My feeling is that they would stop growing but they would still collect $1000billion between them, but may be extra $100Billion (10% of $1000 billion) that consumers and enterprises would have spent to buy ‘innovation’ would not be spent on these products. If you take this logic further and apply to consumer electronics field, I guess we could help consumers in saving upto $500 billion from spending.
And then we create a system of channelizing this money into projects that are meant to save people’s life, make food available to each and every human being on the earth and help create more equitable place, we would be right thing.
If companies do not bring out these so called innovation in consumer IT and consumer electronics, world would not be poorer. My mobile phone, 6 years back, had made as happy as iPhone made me. So if there was no iPhone, I would still have been happy and talking to people. But today me and people like me are eagerly looking for newer version of iPhone and iPads with wallets in hand. Does it make sense? Does it make any world any better?
Please stop this innovation.
Last week, I attended one of the talks that SMU-IIE regularly organises. I went to the talk with no particular expectations. My main motive was to get out of my office seat and be among the people. .
But after the talks, I felt thousand times grateful to SMU-IIE for organising it and bowed million times to the speaker for such a wonderful insight. So let me share with you what I learned.
Firstly about the speaker. Dr. Bala S. Manian has been an entrepreneurial innovator, investor and a mentor in the Silicon Valley entrepreneurial community for the last three decades. You can read his bio at the above link. What makes him special is the fact that he has been on the entrepreneurial scene for long, much before it was fashionable. Has seen through 7 ventures successfully.
Now what I learned :
The one bit of advice which set me thinking most and which I liked was :
There are pieces of information with many people, someone who can organise it and present it gives knowledge but one who brings this knowledge with real life experiences is bringing wisdom.
My take on this bit is that, many of us know what is right thing to do. We know a lot about various subjects through reading. For example, by reading internet and books one can give good lecture on entrepreneurship, but when it comes from the person who has been there and seen it, it has weight, it makes more sense. Does this means we should spend time in listening to such people – no.. very clearly this means we should spend time in “doing” it, practising it, then we can preach.
On various other pieces of wisdom that he shared, that is important for the entrepreneurs and entrepreneurship are :
“It is not about state of mind, but ability to execute what is in your mind”
“Ability to read people, gives you ability to lead people”
“You need to be a good communicator, but more important is the ability to listen”
“Need to have passion bordering on addiction” and “Self confidence bordering on arrogance” But should also know the borders.
“Will to succeed is more important than desire to succeed”
” You go to school only to learn to how to learn”
“Risk taking is important, but more important is the ability to deal with and manage uncertainties”
Some interesting thoughts on business plans :
You need a business plan but the purpose of the business plan is “to show your analytical thinking ability, it is not a roadmap”. Another piece of wisdom was so important ” You should not believe in your own B**Sh**”. This was in the context of the what we communicate externally. While is good to be bullish and come across as a confident person, we should know the reality.
He also talked about VCs, about exit strategies, about pace of advancements in technology, about the importance of mentors.
On a particular question regarding pace of change and a narrow window of go to market, how should entrepreneurs look at it, his advice was very helpful. He said, ” if you find you are little late in coming to market with a particular product, you can re-purpose it for next problem to solve. You would be the first one with ready answer”. In this context he also mentioned that don’t get hung up on a particular product per se, focus on the opportunity. If you know the opportunity well, you can find different technologies to solve the problem. In the same context he said ” the answer we get depends on how we frame a question”.
He also talked about India’s strategic place in this context. His advice was India offers an opportunity to entrepreneurs to fail inexpensively and hence is a good place to leverage.
For me this was a great learning. I am sure most others who attended would have found it too.
Note : This is an attempt to share my learnings. This not a transcription of the talks. The words in ” ” are very close to what he said in exact words.
More than the opportunities it brings for Ashnik and EnhanxIT, it is a good news for the software solutions providers who are looking to grow in Asian and European territories.
From my personal experience dealing with many ISVs, I always got a message from ISVs that they were looking for a platform that would be trustworthy, professionally competent and would understand the ISVs needs while helping them to go to market. ISVs always voiced concerned about the opportunistic approach of the so called “consultants”.
Drawing upon these learnings, Ashnik set out to provide a platform for the solutions providers who want to enter the Asian market in a serious way. For non-serious players there are many other resellers whom they can tap. While we certainly understand the challenges of tight budgets and need for quick wins, we also try to help solutions providers understand the local market dynamics and opportunities.
Entering the new markets has certain learning curve. When solutions providers show some understanding this process, we see a synergistic approach and things work out in a better way.
This collaboration is a step in this direction. EnhanxIT has a very professional and experienced team and we look forward to work with them to help bring European solutions providers to Asian markets and vice versa.
You are alone when it matters most : Even if you may have found support and encouragement from your professional network while making the plans, when it comes to execution you are alone and it becomes your sole responsibility. You can not count on any one else whatever they would have promised. People like to join you only after you are successful.
No amount of prior work experience is good enough : Even after spending 20 years in work, the situation and circumstances that you face are totally unique and you come to know about it only after you have taken the plunge. So if you get a chance to take the plunge earlier, don’t stop yourself.
Be prepared to avoid ” I have arrived” feeling : I am not sure if this happens with everyone, but I guess must be true particularly for those like me who start after long years in job. You are given feeling of special person, person who has shown courage by the people around you. While this is a good thing, very helpful in the beginning, but it might give you a feeling of ” I have arrived” and take you away from rational and practicality of the entrepreneurship. It might give you sense of accomplishment and slow down your hunger for real success. Just taking a plunge is not enough, succeeding is more important.
One thing I would like to share that happened with me. I realised, pretty late, that I made a classic mistake of not building enough pipeline even after running sales for so many years. Every lead that I generated, I thought would convert into business. When I look back today and ask myself, what could be the reason for getting into such complacency ? I realised that it might be because of the feeling of “I have arrived”, ” I could do no wrong” sense that might have been developed. Hence wanted to share this story.
Many possibilities, many avenues takes you nowhere : This again may be because of long years in the job. You tend to think – I know so many things, I have network in so many areas, I can do so many things and you get proposals for many business ideas. In the initial stages, it may sound good, it may satisfy your ego, it may give you feeling of being busy, but soon you would find, it has not taken you anywhere. This may happen despite you having a good business plan.
Sounding board : When you start as one man army, it is very important to have someone around you who is well wisher, aware of the market conditions and who can be your sounding board. At least I found it very difficult to keep talking to myself or keep coming out with ideas without someone around. It helps tremendously when you hear yourself talking. You immediately realise the wrong and right.
I have gone through many more personal learnings. It has been very enriching experience from that point of view. At the same time it has been challenging times. Things have not gone as per the plans. Lot of things have fallen through at the last moment bringing me back to square one etc.
Family support : I think if there is one thing that you absolutely need is family support. Entrepreneurship is as much a an emotional journey as a commercial venture. When you feel alone it is only your family that you can reach out to. That is the only support system you can count on. I am fortunate that I can count on such.
Now I think I am much more grounded to reality. Looking forward to next year.