Hawking Open Source in Tough Times
When budgets are tightening pretty much everywhere, selling businesses on new software systems is not an easy job. However, open source development and support firms are using the world's economic malaise to underscore their value propositions, hoping cash-strapped companies may give free software a closer look.
02/24/09 4:00 AM PT
The ongoing economic meltdown has presented a unique strategic opportunity to vendors of open source software.
Slashed budgets and riffed staffs are forcing enterprise users of proprietary software business solutions to rethink the suitability of open source replacement products.
Many firms -- both large and small -- are discovering that the misconception that "free" means "cheap" is causing them to overspend on proprietary software. At the same time, some open source vendors are taking the chance to experiment with new marketing approaches. The goal is to deliver a wider message that buying open source products and services at a lower price than their proprietary-code competitors is serious business.
"Historically, there is increased level of activity around open source during challenging times, and we expect this trend to continue. The challenge is to convert this higher level of interest to increased adoption and commercial value for the open source ecosystem," Gopi Ganapathy, president and CEO of Essentia and the Open Solutions Alliance (OSA) community development chair, told LinuxInsider.
Open source marketing strategies, he explained, are wrapping around a variety of discrete trends, such as on-demand/software-as-a-service models with virtualization/cloud computing, mobile/location-based services, and Web 2.0/collaboration to various degrees of success. These trends reflect global forces that will drive a new economy based on valuing efficiency, productivity and cost-effectiveness across the board.
Buying Patterns Changing
One of the biggest adjustments being made to marketing efforts lies in responding to how businesses approach software migration from proprietary products. Companies are more willing to download open source software and try it out for free without ever engaging any paid support.
So the trick is to see how far along new adopters can get without having to open the wallet. The sales aspect kicks in when customers reach the point where they need support for mission-critical use, such as consulting and training.
For open source software firm Progress Software, that means going after non-users. The company's FUSE product provides open source enterprise service bus (ESB) for service-oriented architecture (SOA) initiatives and provides data infrastructure software.
"We are adapting from our traditional marketing to people who already know about open source. Now we also spend marketing funds to attract attention from people who don't know about it. We are using our Web site to add more information on things like how to get started with open source. We're doing more marketing programs and more content to offer through those programs," Debbie Moynihan, director of the FUSE Community for Progress Software, told LinuxInsider
Providing more free information to hook new open source users is part of the new marketing plan at Ingres as well. Ingres provides appliances that run on the Ingres Open Source Database, powered by the technology of an Ingres partner, Alfresco. Alfresco developed the Open Source Enterprise Content Management System.
"One of the key things we've done with this economy is our Web site and outreach program. We offer white papers to explain the open platform. We've been participants in panels and trade shows to push this concept," Deb Woods, vice president of product management for Ingres, told LinuxInsider.
One way Ingres is reaching out to new customers is by participating in virtual trade shows, where the company can hawk its open source wares at a booth online. This puts their product message in front of companies that do not spend money to attend a physical show.
As Ned Lilly sees it, any IT consumer that is not looking at open source needs to be looking for a new job. Lilly is president and CEO of xTuple. His company provides the Postbooks Projects Enterprise Resource Planning (ERP) system.
"We are seeing more enterprises that are looking for lower-cost alternatives to high-priced commercial products they currently use. A completely free ERP has to be compelling. We see this a lot with startups," Lilly told LinuxInsider.
Part of xTuple's marketing strategy is to provide a dual product line that draws support for high-end features. The fully featured community-backed software has over 200,000 downloads, he noted. Many of those users rely on forums and bug trackers. Others come back for support later on.
"We have a functional distinction between the core open source product and the functionality in the commercial product. These tend to be bigger company features that not all small businesses need. We avoid being too cute with annoying reminders on getting support," he explained.
Making IT Fit
Ingres tweaks its marketing strategy to make sure that open source fits what the potential new customer is doing. Woods calls it developing the new economics of IT.
"We're doing a lot of work with the JBoss application server and Red Hat. This is how we are trying to move people forward with open platform solutions," Woods explained.
Part of that strategy is advising potential customers to see if they have the right architecture deployed. Many companies have deployed architecture that locks them in for future decisions around continued use of proprietary software.
No longer is the sales pitch a take-it-or-leave-it option, with the "it" being open source migration. Rather than throwing out existing products, Ingres preaches the concept of phasing in or integrating open source. There's no one-size-fits-all answer for every potential customer.
"You can do both approaches. You also can look at porting existing applications into open structure. We are helping customers port their older apps over to Ingres. You can put new applications on the open framework or port older ones," explained Woods.
In the past, it took a lot of work to migrate a company to open source. Ingres is working to smooth out that process by partnering with other companies like Alfresco to help customers find more cost-efficient ways of operating.
Open source is often less costly and can have little or no changeover costs, depending on the tasks being handled and the talent in house. But lower cost -- rather than no cost -- is the real sales message.
"We have seen with our customers that they have saved money compared to applications they were using previously, so the total cost of ownership is an issue when they switched to the same type of application from a proprietary product. There are costs still involved, however. It is not free if you want to use it in mission-critical situations," Moynihan said.
Open source businesses have built up communities, and people would come to it as more of a grass-roots movement to find out about the software. Now Progress Software and other open source developers are doing more marketing to reach not just the community, the software developers and the grass-roots users, but also the buyers and users who are new to open source, she explained.
No Cost Lowering
Given the lower pricing threshold of open source, vendors are generally not resorting to price cuts on their support options. Instead, open source vendors are toying with how to push more value.
"Right now I'm not seeing a lowering of the cost of ownership with open source products as a result of the worsening economy. I have seen more creative pricing from players in the market. People are emphasizing the better choice with open source. I think generally people's prices aren't changing all that much," said Moynihan.
Instead, firms are thinking about how to get started with open source faster without spending much money up front. For example, Progress is getting ready to kick off a free two-hour tutorial over the Web where people can call up and help them get started at no cost to them.
One factor that does not come into play with open source pricing strategies is licensing. Once a product is established at the community level, developers have little wiggle room.
"It's difficult for open source communities to change their licensing once they've built up the community. They would only have the option to do this with new product offerings," said Moynihan.
Instead, the focus is user acquisition. How can you convert them to a paying or support customer?
For instance, the more permissive licenses like Apache and MIT make it much easier to get adoption. They have very few restrictions on how someone can use the software, she explained. In these economic times, those licenses will become much more attractive because developers do not have to pay any money to modify the software and consumers can use it in any way they want without any restrictions.
On the other hand, the GPL and the LGPL licenses may require more consideration in adoptions because they have more restrictions. Many companies will shift to commercial licenses when they go into production, so those licenses may be less attractive to a developer, Moynihan said.