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.


My take on Twitter IPO : Keep doing the right thing, you will invariably find the commercial model.

September 25, 2013

Twitter IPOOn 12th September, Twitter twitted “We’ve confidentially submitted an S-1 to the SEC for a planned IPO. This Tweet does not constitute an offer of any securities for sale.” 

For many reasons it was an important announcement. In its 7 years of journey, it has seen huge challenges – technical challenges as well business model challenges. So called pundits have questioned very existence of Twitter on commercial scale. It was dwarfed by the two towering giants – Google and Facebook. Even today it is not very big in terms of revenue it generates – between $500 million to $600 million by some estimates.

Given that Twitter had started off as a side project in early 2006, it could have died easily, specially when it did not have predictable revenue model till very recent times. I remember reading many articles when people wondered whether Twitter would remain relevant to the consumers. There were lot of uncertainties when third party apps like TweetDeck, Tweetie etc had threatened to gain more consumer traction than Twitter itself. After all company revenue ( specially Ad revenue) entirely depends on the extent of consumer interaction you have and insights you gain.

Despite these challenges Twitter has survived, flourished and is reaching an important milestone on the journey of successful companies – through this IPO it is being valued at around $12Billion company.  Today it is one of the most important platforms for the politicians, the civic societies, the celebrities and all the influencers to directly engage with their followers. You can not imagine some of the great events of the century – without Twitter being used as a tool – President Obama’s election and re-election, Arab spring movements etc.

My take on this success is that Twitter kept doing what was right for its users. It started off small, but improvised, improved and delivered what users wanted – great engagement platform, search and ability to influence.  As an outsider I believe Twitter was able to achieve this because it did not succumb to the pressures of to go after commercial model first. It apparently pursued what was right for its users and did not clutter the platform with ads. I believe that if it had only focussed on doing the ad and ad revenue, it might have distorted the user experience and acceptance and might not have got this tremendous user engagement – which is a real reason for its success so far. I believe that Twitter, continued to deliver what users were looking for, it became relevant and sticky and eventually found a way to monetize it. And I think thats the way it should be.

I hope it continues its journey and I wish it all the success.

What I learnt from Amanda Palmer’s Ted Talk

March 23, 2013

Ask pic_sLong after I delivered my talk on “Psychology and Science of selling” various issues are still ringing in my head. While watching this Ted Talk by Amanda Palmer I could instantly connect it with the job of a sales person.

I didn’t know about Amanda Palmer till I watched the Ted Talks and then I briefly read about her.

Her Ted Talk about ‘The art of Asking’ took me back to my thoughts on ‘Psychology and Science of selling’.  I wanted to address the question on why people are afraid of selling, what are those fears and how can I help people become better at sales. Among the things that I had heard from people who are afraid of selling was this huge resistance to ‘asking something’ from people.

I could instantly connect with Amanda’s view that if we ask we get it. I realized how effectively she has leveraged crowdsourcing. How she is able to organize gigs in less than 24 hours ( read about it on her blog here) just by asking.

It is so important in sales role to be asking – asking for information, asking for purchase order, asking for referrals.  At the same time we have to approach it very confidently. We need to remove the notion that asking is akin to begging. We need to be clear that we are also giving something in return so it is absolutely fair – the point Amanda has highlighted in her experience with the family in Miami neighborhood. Same thing in sales cycle – as a sales person we are brining something valuable to the table and we are asking their money in return, so it is absolutely a fair thing to do.

I found people are more comfortable when they have this feeling of ‘giving’ (at least in Asian culture). We need to realized that sales is not just about asking we are also giving something in return but unless we ask we will not get an opportunity to ‘give’.

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.

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.

Ashnik and EnhanxIT create a cross continent platform for business development services

September 9, 2010

This week we (Ashnik) signed a collaboration agreement with a Spain based business development company EnhanxIT . This is an exciting news.

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.

That 1st presentation… 1st pitch

June 9, 2010

While pitching to the investors one has to address many things, lets see what are the key elements of the pitch that investor is listening for the first time from you.

Even before you pick up any tool to start making the presentation, you have to prepare the outline in your mind or on paper. It should address the following elements :

1. Who is the audience. Most often a standard product presentation is given to the investors, users and well-wishers. How is that going to help to create interest. As a creator / entrepreneur you have reasons to love your creation, but why others should love it and pay attention to its features and functions. Each audience has different interest. Hence your pitch has to be different for each of them

2. Second thing that you should ask yourself – what do you want to achieve after this presentation. As Jerry Weissman, in his book “Presenting to Win” says that you should be ready to take the audience from Point A to Point B.

This is just the initial preparation. Lets talk about these two points in more details from Entrepreneur pitching to Investors perspective.

Fine-tunning the pitch to the audience :

It is important to note what would be the interest of the investors. Most often the entrepreneurs do the product presentation. They think, if I love this product so much, others would also do. Not true. Investors are putting in money and they are interested in return on their money. They would look for :

Are you solving any problem, is it a big problem, would it address large enough market size and how well are you in a position to address the market.

More often entrepreneurs shy away from saying what is the key problem they are trying to solve. They start with market size, market opportunity – but most  of the time investors know about the market, because they have sat through hundreds of such pitches and updated fairly well – unless it is a very niche market you are addressing.

To give an example – there are lot of products / offering people want to bring to market to tap into the growing use of smartphones using location based services. Most investors, by this time, know the impact of smartphones accessing internet in terms of number of smartphones being sold, use of social media sites through smartphones etc. What is of their interest is what problem are you trying to solve in this space.

The best way to articulate the problem is story telling. Tell a story of a typical user and highlight what limitations he / she has, how it is not being addressed, how through your offering if you solve this problem he/she going to be so happy that he/she would be ready to pay.

You can make the storyline quite engaging by use of audio-visuals, nice pictures etc. The simpler the better.

What do I want to achieve after this presentation – End in Mind

Once you have created this outline, that what do you want to tell to whom, then you have to ask the next question, what do I want to achieve after this presentation.This is similar to ‘End in Mind’ thinking as highlighted in Stephen Covey’s book ‘7 Habits of Highly Effective people’

Though, your ultimate objective is to get funding from the investors, you are not going to achieve that in first step. Your first step should be (more often) to get him /her interested in you, your offering. He / she is not going to cut a cheque after first presentation.There are going to be series of talks / meetings, exchange of information before you get the money in your bank. So your first presentation should be to really make him/her say :

“wow, lets talk more”

Wow, it was great, lets see how much money you need”

Wow, this is interesting, this is a real opportunity and we are impressed with your understanding and energy”

Now, he/she may not say all of the above adjectives publicly, but if you get a 2nd meeting with positive impact on the investor’s mind to cut a cheque, you have achieved the objective of 1st presentation.

Then of course there more factors that you have take into consideration while presenting – such as style, energy, timing etc. We would see those as we go.

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