What ails commercial open source software companies?

March 25, 2015

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.


2 technologies that are shaping business transformation

November 1, 2012

I wrote this blog first for my company’s website.

We all know how IT has become center stage of business transformation in last few years. It has its own challenges that are unique and at the same time has opened up new opportunities.

The senior IT executives have to deal with operational and strategic level challenges all the time.  On one hand there are project delivery, cost management, resource management, vendor management issues on the other hand there are other strategic challenges such as aligning IT to business needs, creating a roadmap for business transformation through IT, keep pace with new technologies and protect the bottom line while doing all the above.

Being in the IT industry for more than 22 years, I am able to understand how challenging it is to satisfy the constant demands from businesses.

I just wanted to share with you two trends that I foresee would be the foundation of enterprise computing (that would replace traditional IT ) and how we can help you.

Open source is one of the key technologies that has shaped the enterprise IT and now shaping the consumer IT. Actually with BYOD kind of trends, the consumer and enterprise IT is converging. I do not have to tell you how Linux, middleware such as JBoss, database such as PostgreSQL have come to become trusted technologies in large enterprises. The major stock exchanges, telecom companies, banks and technologies companies such as Google, Facebook, Salesforce etc, have embraced open source technologies to drive business needs.

We certainly see the bright ‘clouds’ on the horizons, as a new technology that we think would shape the coming few years of IT and business. Cloud computing does not mean putting everything on the public cloud. We certainly see big merits in bringing the cloud computing as a way of managing IT infrastructure inside your data centre. The agility, flexibility and scalability (both – up and down) this model brings, is what all the CIOs and CEOs have been looking for.

We, as a boutique consulting company are specialized in helping companies bring about business transformation by use of open source and cloud computing technologies.


Stop that innovation

July 22, 2011

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.


What I want my children to learn

April 12, 2011

“The knowledge and information that our children are getting through formal education system, is it good enough for them to face the rapid advancements in science and technology?”

“Are our kids getting ready to face the rapid changes in social structure?”

“Are our children developing the solid foundation to be successful in globalised world?

As parents of two under-teen children, my wife and I often go over these questions. Our discussions move around the education system, type of schools, curriculum etc. The fact that we often go through these discussions shows that we have yet to get satisfactory answer.

We realised that we are trying to find the answer in wrong place. School or curriculum system’s mandate does not include getting children ready for the new world. We have nothing against the education system – it is doing its job. We have nothing against the schools – they are teaching the curriculum that is prescribed by the board of education.

However we all agree that it is not good enough. Challenges are of different kind.

When I look at their curriculum and books and compare with the advancements in every field, the gap is yawning. In the coming years what our children are learning in schools would be outdated by the time they go to college. Our children are going to find so much of gap in what they know and what they are expected to know when they go out in the real life that it is going to baffle them. Till 10/15 years back the transition from education system to real life was quite smooth.

The challenges are not going to be only in education, they are going to be in social life as well. The contours of social circle have already changed. When we grew up we and our parents had an idea of the social structure we would be entering in and we were groomed accordingly. With the virtual societies and online social networking we do not know how the societies are going to be shaped by the internet world.

Also in the professional field our children would be working in a globalised environment. They would need different skills to excel in such environments.

To help our children prepare to handle such situations, we need to help them acquire skills. Following is my list :

Ability to learn “how to learn” :
Today’s learning process has a structure which is made up of class room learning and books. And there is an assessment process at the end of it. Most often the learning is guided by the assessment process. As the information and knowledge are changing so rapidly, kids would have to look at many sources of information beyond books and class room. There might not be formal assessment process in place.

Usually our mind processes new information based on what it has learnt, it tries to find the context with the available information. In the coming days, the new information that children would be coming across would be far away from the context of what they have learnt, very often the information would be contradicting what the mind already knows. This information would not be fitting in the mind’s frame of reference.

In such cases I would like my children to develop ability to understand new sources, process such information and learn from it. I would like my children to go through the skills development system that would help them face entirely new scenarios and face them confidently.

Collaborate :
While the education and school systems teaches student to be competitive and zero sum game, its not going to be the only trait that would see them through in the coming age. I would like children to learn how to collaborate and become stronger . The personal growth and learning are going to happen more through collaboration and understanding of communities than being just a competitive person.

Work in virtual teams :
Our children learn how to deal with their friends and people around them on a daily basis. But in the new world we increasingly find ourselves working with the people whom we don’t meet in person. We deal with problems by working with the team members through electronic and digital communications. Very often our decisions are based on our knowledge of our friend or colleague’s background. That is not going to be the case in virtual world where children would have to deal with people and their culture about which they have no idea. I would like my children to learn the skills of dealing with virtual teams.

Leadership through influence :
Today children are learning leadership skills that are oriented towards ‘command and control’ approach. In the new world it is the influence that would matter to become a leader. Also in the coming times, while working in different communities the role of a person would keep changing. The real leadership would come through influence and not through titles. I would like my children to understand the importance of being team player, influencer and a leader.

The conventional education system can not instill these skills due to paucity of time and often due to lack of quantification criterion. But we all know that these skills are important and in coming times these would be the skills for basic survival. I strongly believe that we as parents would have to come forward and create communities to help our children learn these skills along with their regular education system. If you know any such community which is trying to do so, please share here.


What would Singapore gain through OSS

January 6, 2011

One of the key issues why open source software has not taken roots in Singapore is the mismatch in messaging and perception in what open source offers. Though innovation is the key message as the benefit of open source software, the more dominant message that persist in the country regarding OSS is cost saving. In the society and nation like Singapore where there is abundance of economic wealth and which is more interested in banking on the big brands, why should they care about saving cost and working with smaller companies? The common perception related with cost savings is not positive aspect but of compromise with quality or functionality. Why would a nation which can afford to spend money adopt the products with such messaging.

Though open source software is not just meant for cost saving and it has more positive messages and benefits associated with it, it needs to be communicated.

So what are those key benefits that nations and societies like Singapore should look for in open source software.

Lets us first look at the reasons and benefits the biggest economy of the world – America derived from adopting open source. America and some developed economies adopted open source software to address many challenges that these nations have to address. Even if you have economic wealth the key engine for growth and leadership lies in innovation, pace of development and giving tools in the hands of people to drive growth. As a leader, it is not enough to be in sync with developments, but it is important to set the pace and create tool-kits for innovation.

With the traditional model of software development you can’t do this, in general.

Open source software development model presented America and all those who are aspiring to address various challenges of society and nation with the model that allowed them to drive innovation in a ubiquitous manner. Open source software has enabled collaborative development leading to faster pace. It enabled the enterprises to remove vendor lock-in and set its own (often faster) pace leading to more business. Open source software has fueled the competitive environment challenging the inefficient monopolies which are impediments.

In the same way Singapore should embrace open source software development model to inculcate the habit of innovation, to help drive competitive environment and remove the inefficiencies caused due to proprietary development models in software industry.


Open source Database market gets boost in ASEAN

September 21, 2010

Recently, Ashnik tied-up with EnterpriseDB as its Master partner for ASEAN region. This is exciting for customers, partners as well as developers in the region, as they have Ashnik  to approach for their PostgreSQL needs, closer home. ( For those who are not aware of EnterpriseDB, it is a commercial vendor behind PostgreSQL – the leading open source RDBMS )

Having worked for 9 years in OS layer of open source, it is personally a very important step for me and Ashnik to bring more value to the customers in the form of leading open source database. Through Red Hat Enterprise Linux Ashnik continues to bring open source OS, virtualization and Cloud services for its customers. But the database market is far bigger than OS market.

Total database market is estimated to be around $21Billion for 2010 and growing at 6-8% per annum. To me, this shows that enterprises continue to pay a huge amount of license fees to the proprietary databases – as the numbers show that top 3 vendors Oracle, IBM, Microsoft garner almost 3/4th of the market share. In my discussions with enterprises almost every time I have heard that CIOs are not happy with the returns they get from the license fee they pay for these proprietary database vendors. Most CIOs have been voicing a need for strong alternatives.

While open source databases have been around for many years – PostgreSQL and MySQL being the leading names, with recent acquisition of Sun (and in turn MySQL) by Oracle, there have been doubts in the minds of enterprises about MySQL’s ability to remain independent and thriving open source organisations. On the other hand I found that EnterpriseDB has been silently strengthening its commitment to make PostgreSQL commercially successful. Even industry has responded very positively not just by adopting PostgreSQL but by investing in EnterpriseDB. The big names such as NTT, Kore Telecom, Intel, Red Hat, IBM have invested and are partnering. The $50 million that EnterpriseDB has been able to raise so far signifies the importance industry is attaching to the success of EnterpriseDB.

On the technology front PostgreSQL was always considered as true relational database and with EntepriseDB’s involvement it has been able to offer good user acceptance, ease of installation etc. EnterpriseDB has successfully positioned it as replacement for Oracle Database in the enterprises.

At Ashnik we see this as an opportunity to bring more value to customers, partners and ISVs in the region. Ashnik would be working with EnterpriseDB to develop the customer base and partner eco system to grow this market collectively.


Any app, anywhere on any mobile phone?

March 2, 2010

The recent announcement by the global telecom operators, if operationalised, has interesting ramifications.

Twenty-four telecom operators have formed an alliance to build an open platform that will deliver applications to all mobile phone users in an effort to compete with Apple’s successful apps store.

Analysts have already voiced the doubts if this would happen in reality. But if this happens and I wish that this should happen, it would mean a lot to the mobile subscribers and a lot to the technology industry.

This is what I, as a user, would like to see coming out of it :

  • Ability to access applications irrespective of any instrument
  • Ability to access applications while international roaming – likes of geo specific apps : ATMs, local restaurants, local address etc.
  • Very low tariffs for accessing these applications in international roaming mode

From the technology point of view, if this becomes reality, this would mean example of “mobile apps on clouds” at never seen before size. Imagine 3 billion subscribers accessing thousands of apps.

This would also mean need for massive standisation. No longer would developers have to worry about mobile device or carrier issues. This is a not easy to achieve given that it is on such a massive scale. But we have seen in case of open source software industry, that if collaboration starts working in right earnest, it brings massive gains for the industry, it brings openness, it brings standardisation.

Then the question for operators would be, how to differentiate their offerings. and how to compete. I guess the answer would be on service quality and innovation.


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