There’s a lot of speculation about open source product development. How can a product with “no IP” be competitive? What are the viable business models, when the code is freely available? And how am I supposed to build and take a viable product to market if my open source company is focused on services, not products? The truth is, you can build — and successfully take to market — an open source product. But the rules are different, and must not be ignored. Product development is guided by different goals. Business models are based on different value propositions. And open source communities must be considered partners in the effort, not detractors or nay-sayers. This talk will focus on three areas of open source products: product development, go-to-market strategy, and balancing product and services work. We’ll look at examples of open source products who have threaded the needle and “made it,” as well as a few that have crashed and burned. Most importantly, we’ll offer clear tips and guidance for those considering building or marketing an open source product.

1. How “Open” Changes
Products
All Things Open
October, 2014

2. Karen Borchert
EVP, Business Development
Email: kborchert@phase2technology.com
Twitter: @karenborchert

3. Open Atrium is open source collaboration software
used to build intranets, portals, & collaboration
platforms for organizations.

4. the open product
conundrum.

5. 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.

6. what is a product?
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.

7. what is an open source product?
But in open source, things work a little bit differently.
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.

8. 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.

9. 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

10. 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!”

11. is open Atrium a product?

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

13. then you’re like…what?

14. because open atrium is a toolkit.

15. Except that people use it a lot of ways.

16. and sometimes, they go nuts.

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

18. Except one thing…
≠
are you selling a table? or a bike?

19. here’s that conundrum part.
The very thing that makes open source
awesome is what makes our products
difficult to define, deliver, and sell.

20. 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

21. 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.

22. 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.

23. It’s about 3 things:
1. Understanding the value you add.
2. Understanding your market.
3. Understanding your business model (and
what you’re really selling)

24. going to market.

25. What does that mean in open?
1. Understanding the value you add.
2. Understanding your market.
3. Understanding your business model (and
what you’re really selling)

26. 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.

27. 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.

28. 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

29. 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.

30. Stuff people buy in open products
• automation
• add-on functionality
• themes
• accessibility
• hosting
• configuration
• content
• training
• customization
• integrations
• documentation
• VIP access…to you!

31. When it’s your life…
What
you’re
good at
What someone
will pay you for
What you
love
hobby
job
fan
career!
I heart Tina Seelig at the Stanford Technology Ventures Program the most. This is her model.

32. 3 Questions About Your Business Model
Are you
good at
delivering
this?
Is it aligned
with your
mission?
loss
leader
bill payer
someone
else’s
business
model
YOUR
biz
model
Will someone
pay you for it?

33. 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)

34. 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.

35. questions people ask

36. “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.

37. 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.

38. 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).

39. “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.

40. 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.

41. Karen Borchert
EVP, Business Development
Email: kborchert@phase2technology.com
Twitter: @karenborchert