I read several perspectives on Open Source applications last week. Open Source has been more successful in infrastructure areas - Linux, Apache, MySQL - less so in enterprise applications. Jeff Nolan of SAP Ventures argues that open source vendors' manufacturing efficiencies do nothing to offset their lack of sales/distribution. Zoli Erdos's points that SugarCRM is not "pure" open source. The facts support them - but unlike Chris Selland's views, this sounds like unexplored green pastures to me.
If Open source applications vendor need a role model for becoming bigger players, they should turn to Southwest Airlines. Who would have predicted 10 years ago that Southwest would be the only profitable, major domestic US airline? It has become so by doing the opposite of what the other major airlines did to irritate customers. The other majors persisted with yield management and yo-yo air fares. Southwest moved to cap fares at $ 299 no matter when booked or where on its network. The others charged refund fees of $ 100 or $ 200 - Southwest allowed you to bank the ticket value and use the funds in the next 12 months. The majors had all kinds of capacity controls on award travel- Southwest decided to have none.
Open source vendors can similarly focus on things incumbent software vendors do to annoy their customers:
- Maintenance at 12 to 25% a year with gross margins in the 90% range
- Complicated and double-count licensing models - some user based, some "engine" based, some server based
- Overpricing for a number of "utility" products, for which they long recouped investments
- Change fees for "triggers" that have little to do with enhancing the software's value.
- Shoddy quality
- Little empathy for customer budgets as they bring in expensive partners - systems integrators, tools vendors, others
- Complex support and staff needs to keep systems going
- Difficult upgrade paths
Southwest Airlines has also learned over the years that customers do not care for some of its principles it considers "core", and they have quietly been morphing. Five years ago Southwest refused to even think of boarding passes. Now over a quarter of its customers print those at home. It still does not have assigned seats but what a huge improvement. A few years ago it proudly served peanuts - and nothing else. Now, on longer flights it hands out snack boxes.
Open source vendors need to similarly morph away from their "core" principles. Customers do not really care - in fact they are suspicious of the open source business model. They worry more about scale and maturity and viability of vendors - little to do with the open source principles.
There is a saying which goes "If you are not a socialist till you are 18, you do not have a heart. If you stay one after you are, you do not have a head". Time for Open Source apps vendors to quit focusing on their own purity and instead exploit the "impurity" of incumbent vendor models.
