How “Open” Changes Products

All Things Open October, 2014

EVP, Business Development

Email: kborchert@phase2technology.com

Karen Borchert

Twitter: @karenborchert

Open Atrium is open source collaboration software used to build intranets, portals, & collaboration

platforms for organizations.

the open product conundrum.

what is a product?You can’t have a discussion about products

in open source without really understanding what you’re talking about,

and what you’re NOT talking about.

A product is a good, idea, method, information, object or service created as a result of a process

and serves a need or satisfies a want.

what is a product?

But in open source, things work a little bit differently.

what is an open source product?

In open source, we generally build tools and tool kits, not traditional “products.”

Why? Because tools and tool kits are more conducive to contribution, extension, and open source

goodness.

with open, products work more like ikea

You have all the right pieces, all the right instructions, and a lot of the

hard thinking done here.

You can definitely MAKE a table out of it.

But “out of the box,” it is not a table.

when we’re talking about software, most buyers are thinking about what they get

“out of the box.” And in their minds…

tool kits ≠ products

is Open Atrium a product?

“It’s an intranet in a box!”

“It’s a community portal but it’s totally open

source!”

“You can use it instead of SharePoint!”

is open Atrium a product?

so you download it and you’re like “yay!”…

then you’re like…what?

because open atrium is a toolkit.

Except that people use it a lot of ways.

and sometimes, they go nuts.

and that’s what’s awesome about open source.

Except one thing…

≠

are you selling a table? or a bike?

The very thing that makes open source awesome is what makes our products

difficult to define, deliver, and sell.

here’s that conundrum part.

so we try a lot of stuff.tool kits ≠ products

tool kits + hosting ≠ products

tool kits + hosting + theme ≠ products

tool kits + hosting + services + automation + content =

something closer to products

In short: table or bike?

Making an open source product is about doing what’s needed to start solving a customer problem on Day 1.

why are products a good thing?1. Making your “tool kit” into something more usable “out

of the box” gives you the potential to bring it to more people. Good for you! Good for open source! Good for customers!

2. The market is demanding open source alternatives.

3. Products provide a different opportunity for revenue and profit.

1. Understanding the value you add.

2. Understanding your market.

3. Understanding your business model (and what you’re really selling)

It’s about 3 things:

going to market.

1. Understanding the value you add.

2. Understanding your market.

3. Understanding your business model (and what you’re really selling)

What does that mean in open?

Value-Add: Consider the farmer!• Beware the tendency to

underemphasize the value you add.

• “ANYONE can use this to build a ____” is often not true.

• Hosting, customization, configuration, and automation are all value you add. And that means they could be part of your model.

The “we have two markets” thing• Open source products

often have two markets: one that gives the product credibility, and another one that pays for it.

• Know who you’re serving, building for, selling to, and expecting things from.

Community Market

• Wants tool kits and flexibility

• Needs documentation & a well-maintained product

• Is not planning to give you money

• Are possible contributors, champions, and salespeople

Paying Market

• Wants an experience out of the box, usually

• Needs a way to explain this to their boss

• Sometimes checks in with the community to see if you suck at maintaining it

Business Models

• “Dual-licensing” of proprietary software

• Open Core/Freemium: SendMail, SugarCRM

• Paid plug-ins for an Open Platform: Android, Wordpress

• Closed Source Customization: Cloudera, versions of Hadoop

• Services: RedHat, MongoDB

Thank you, Andrew Hall! Guys, go watch his talk from All Things Open. And hire him if you need a lawyer.

Stuff people buy in open products

• automation

• add-on functionality

• themes

• accessibility

• hosting

• configuration

• content

• training

• customization

• integrations

• documentation

• VIP access…to you!

When it’s your life…

What you’re

good at

What someone will pay you for

What you love

hobby

jobfan

career!

I heart Tina Seelig at the Stanford Technology Ventures Program the most. This is her model.

3 Questions About Your Business Model

Are you good at

delivering this?

Will someone pay you for it?

Is it aligned with your mission?

loss leader

bill payer

someone else’s

business model

YOUR biz

model

What about services?

• Services can be a really important part of any business model for a product, open source or not.

• Defining, automating, and packaging those services can help you “productize” a bit.

• It’s not “less of a product” because it has services as a key business model. (see also: guys with the big red building)

How to do it:• Do a damn market study. It’s

less scary than you think.

• Write a business plan. It can be 2 pages: value, market, model, goals.

• Be sure the right people are bought in and carrying out the plan.

questions people ask

“Is this going to be expensive?”

• Not necessarily. But it’s not going to be free.

• Poor planning and budgeting for taking a product to market is the equivalent of throwing good money after bad.

• Invest properly or don’t invest at all.

Am I going to make money on my product this year?

• Maybe. But you shouldn’t count on that, unless your go-to-market spend is focused on a very fast ROI.

• Don’t bet the farm on your product business until you’ve tested it in the market.

Everyone seems to just charge $10/month for this kind of thing so I’m just going to charge that. Cool?• Nope. You need to charge what the product is worth AND what

people will pay for it AND what you can afford to sell it for. Doing so requires some market analysis.

• Think: “how much I gain from selling this” minus “how much it cost for me to do this” divided by “how much it cost for me to do this.” That’s your ROI. Should be positive.)

• If you find that you cannot sustain a product at the prices the market demands, you need to change something (the price, the model, or the market).

“I’m not sure we want to be a “products company.”

• It is very hard to be successful in a products effort without organizational buy-in.

• Consider a pilot program, a timeboxed trial, or a set budget with clear success measures. Nobody wants these things to become a “money pit” but you also have to give them the chance to succeed.

• Write a business plan. For real. You’ll be super happy you did, even if it’s for one module. Even if only you ever read it.

Let’s review:• Development: you can either focus development on

a specific use case, or you can sell a framework/tool kit. But you can’t do both in the same product very easily.

• Value: know the value of what you are providing to your customer and recall: it’s value to them, not value to you.

• Market: beware two markets! Invest appropriately.

• Business Model: Keep it simple, find the sweet spot.

EVP, Business Development

Email: kborchert@phase2technology.com

Karen Borchert

Twitter: @karenborchert