Why open source? Companies have many different reasons for embracing open source ranging from idealogical beliefs to economic and business arguments to technological motives. In most cases, companies based on open source software probably have several reasons for choosing open source. In this blog entry, I want to explore just one of the many benefits of having a business model based on open source software: Open Source as a Marketing Strategy.
There are many different open source business models, but most of us generate revenue through the sales of value added services of some type: support, training, documentation, consulting and more. In contrast, many proprietary companies also have licensing revenue as a significant revenue source. This difference results in questions like “how do you make money if you give your software away?” or “how do you make people buy support from you?”, and these questions often come from very smart people with dozens of years of experience in software. My favorite answer to these questions is “you need to think of open source as a marketing strategy!”
Since Compiere is freely available for download, anyone can install the software, try it, and see if they want to use it in their environment. Many of these people will never generate any revenue for Compiere, but maybe they tell a few other people about Compiere, and maybe those people tell a few more people ... This viral marketing helps to promote and market open source products with little involvement from companies like Compiere. Having an open source business model can generate a level of awareness that might otherwise cost a substantial amount of money to achieve through trade shows, advertising, etc.
Using open source as a marketing strategy requires a shift in thinking for anyone coming from a proprietary background. As open source companies, we need to encourage people to download our software for free – the more, the better! It does not matter to me that someone gets our software for free without paying Compiere a dime. Yes, they are benefiting from our hard work without giving anything in return, but all I need is for them to tell someone who will eventually want to attend training or purchase some type of support or other services from Compiere.
Open source companies also need to be a bit careful not to be too heavy handed with pushing people into revenue generation. We cannot (and do not want to) force people into purchasing support agreements or other services, because this would severely limit our ability to benefit from open source as a marketing strategy. Instead, we need to provide compelling services (support and others) that benefit our customers. Those customers who need and want our help will pay for it.
Open source as a marketing strategy can also have a dark side. Your product needs to be really good for this strategy to work. Otherwise, the negative publicity can irreparably damage the product's and the company's reputation. Even with a great product, people can expose every little wart, and when you mess up, they will let you (and everyone else) know about it. I like to think that this feedback just helps keep us on our toes.
Despite the dark side, open source has a marketing strategy has its advantages. The viral marketing of the tell a friend variety can get quite a bit of awareness for a product in a short amount of time. As long as you embrace the need to think about marketing in a slightly different way, open source can be a great marketing strategy.