Open Source as a Marketing Strategy

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.

Comments

[Bryan]

Absolutely agree that companies can still make money off of open source but it can sometimes require creative thinking on the part of companies.

[jeff paul forum]

I agree there are tremendous support services to generate revenue through various means of value added services like support, training, documentation, consulting and more.

[Ram's]

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[Tiberiu Atudorei]

Dawn,

I would like to make a personal remark about this post (and others).
Very nice message about Open source and Marketing. No point to argue about that.
But this message is way too late. It was Ok in 2001-2002, when Compiere emerged as an Open source project. I know about Compiere from March 2002.
Fast forward 5 years. What has changed? A few new features (minor, if you ask me). No database independance yet..at least endorsed by ComPiere (ask Jorg why Fyracle and PostgreSQL were not viable solutions, why Oracle XE was not an option at all and how Sybase and Derby / DB2 ports are doing lately). A lot of 'alternative' projects (OpenBravo, ComXE, CMPCS/Kompiere Libero, Fyracle port, and so on...oh, and ADempiere). Should I dare to call them forks? Maybe yes, maybe no..it doesn't matter after all. But the fact remains that true innovation came only from these projects. And of course, some investor funding (funny thing is, Openbravo got a bigger and earlier funding..). And a lot of discontent in the Compiere community. ADempiere is a direct result of it.
Please take a look Dawn:
http://sourceforge.net/project/stats/?group_id=29057&ugn=compiere&type=&mode=60day
vs
http://sourceforge.net/project/stats/?group_id=176962&ugn=adempiere&type=&mode=60day
I let you interpret the numbers and draw the conclusion.
And one more thing: you are director of community and partner programs. Very nice. What are your last three entries in the blog?
1. Open Source as a Marketing Strategy
2. Open Source Meets Business
3. New Partner Program.
Too much marketing. I know, return of investment and all that. Somebody has to do the marketing part, and you have the skills and the will to do it. But is not your primary job. You are a liaison, not a salesman.
So start doing your job. We know that you (and ComPiere) are able to talk the talk. The problem is..would you walk the walk?

Tiberiu

[Greg]

Red1,

I agree that Compiere has made some mistakes and has many areas for improvement. However, I also see a lot of potential in Compiere and think that we will do great things in 2007, including having an improved focus on our community and the relationships with our community.

By the way, I do read the Adempiere forums including the threads about me.

Dawn

[Red1]

Fine post, but just let me try some begging here. Could it be outdated deprecated stuff by today's standards.

1) "they are benefiting from our hard work without giving anything in return". They do give something back, and you mentioned that in the same para. But contention with this remark is - Why must giving back be associated with strict monetary terms? Aren't advertising, branding values and community strength more desired monetarily? And there is one cashless payback that Compiere is viewed as rejecting erroneously - screamings, contributions of bug fixes and enhancements from the community. The excuse that they are noisy and not to lofty standards is misleading. (refer to the debate between Linus and Prof Tanenbaum). I am surprised how fast the ADempiere project proves that so-called amateurs are truly poster children - once you go beyond some screams. And there is this one non-monetary factor - the viral spirit gives them more than any paycheck could ever do. And yes, they do have mouths to feed, and our cups do run over.

2) Dark Side - Your product needs to be really good for this strategy to work? No. Not your product. Your CoMmUnItY got to be really good.

Thanks for the rush.

red1

[Rajesh]

Great insights Dawn! Identifying the "fine line" is daunting task for the Open Source products especially those serving the business software segment.

With a clear intent and open approach there is definitely some possibility to make money with such solutions.

Cheers,

Rajesh

[Greg]

Alex,

Thanks for the comments. It is important to recognize this fine line. Companies can still make money off of open source (particularly if you think of some activities as part of the marketing strategy), but it can sometimes require creative thinking on the part of companies like Compiere to find good ways to make money while walking this line.

Dawn

[Alex Fletcher]

Dawn,

You're dead on when you mentioned walking the fine line between providing high quality open source and support/services without forcing users to become customers. The reality is, everyone who uses open source isn't going to be paying for it. Nonetheless, that doesn't imply that companies can't still make money it just means they have to find ways to leverage that fact.

Alex