Below is an article I wrote in July 2001, that was published by ZDNET. The publication is no longer available so I thought I’d post here, especially given the momentous announcement today between Microsoft and Novell. Here is an excerpt of the Microsoft - Novell pact from an article published by ZDNET today.

Microsoft and Novell have just signed the mother of all non-aggression pacts, with Microsoft recommending SuSE for mixed platform work, undertaking to support the system and guaranteeing not to sue over patent issues.

For its part, Novell is committing to working with Microsoft on virtualisation, Open Document Format and Open XML interoperability and, according to the joint press release, “…will undertake work to make it easier for customers to manage mixed Windows and SUSE Linux Enterprise environments and to make it easier for customers to federate Microsoft Active Directory with Novell eDirectory”

The companies are also going to “create a joint research facility and pursue new software solutions for virtualization, management and document format compatibility.”

It only took 5 years for Microsoft to change and accept and even embrace open source. I can’t wait to see how Microsoft will change in another 5 years. Perhaps by then Windows will be available under the GPL.

Opening closed minds to open source
by Richard French, 8/14/2001
In his recent column Jack MacCrisken criticized open source advocates for treating the merits of open source versus proprietary software development as a simplistic battle between the forces of Good and Evil. Let’s be clear. It’s Microsoft that diagnosed Linux as a supposed “cancer” and polarized the debate to begin with. So I’m here to offer a second opinion: Contrary to Dr. Ballmer’s misinformed prognosis, the weight of evidence shows that Linux, and open source software in general, can in fact co-exist with proprietary software.
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In today’s article in CNNMoney.com entitled Is Slashdot the future of Media?, an idea was floated that Slashdot, and even VA Software, should be snapped up by another media company.

But it seems to me that any media company aiming to go deep into the modern world of user-generated media might want to think about buying this gem. Investment bankers, take heed.

Not only that, but whomever bought VA Software would be buying critical DNA — knowledge about what software the world is using. Sourceforge.net has essentially no competition, so effectively it has created a marketplace of producers and consumers.

Perhaps, my suggestion on January 3, 2006 in VA Software sells Animation Factory. Is there more to come? that VA Software divest of its media assets has been taken to heart and articles such as this are great ways to drum up interest. Or maybe VA Software itself is for sale and pushing its hottest media properties Slashdot and Sourceforge along with its affinity with Open Source, as the reason to buy the entire package.

Dan Kusnetzky, one of the earliest open source industry analysts will shortly be moving onto an open source company. I always enjoyed reading his interviews and quotes in Newsforge. Alas, no more.

From Cnet: Dan Kusnetzky, for years a fixture in the open-source software realm as an IDC software analyst, has joined collaboration software company Open-Xchange as executive vice president of marketing strategy.

I was very surprised to see that VA Software had sold the Animation Factory assets to JupiterMedia. This brings an additional $9.35M cash to the company, bringing the total equity to approximately $55M. Is this a single event, or is this the start of a strategy to re-invent the company? I hope it’s a re-invention. This is what I’d also like to see.

1. Quickly grow the equity by selling off the rest of the e-commerce business (Thinkgeek).
2. Divest of the media business (Slashdot, freshmeat, Newsforge, ITMJ and Linux.com), but keep Sourceforge.net.
3. Change the name of the company to Sourceforge Corp, — there is far more brand equity in Sourceforge than VA Software.
4. Change the stock ticker symbol from LNUX to SFRG.

Steps 1 & 2 should yield at least another $50M to $100M cash. Maybe Novell or Red Hat would be interested in the Linux.com url. If done correctly it would free up a significant server farm that could be used for the new Sourceforge on Demand ASP solution. By keeping one or two of the media ad sales team, revenue from ads on sourceforge.net would be easily accomplished. The cash on hand might very well be used to purchase companies that fit with the sourceforge business and result in faster company growth.

Of course this is wishful thinking. As the former executive who turned around OSTG, I would like to see VA Software succeed at last, and see OSTG become a part of a larger media business where it can take advantage of media synergies.

Technorati Tag: Open Source, Software, Slashdot, Sourceforge, Media

I have noticed an increase in the number of companies deciding to put their code in the open source arena. Here’s my concern: Open Source is not a silver bullet for ailing enterprise software businesses. Yet, entrepreneurs going into open source today seem to assume they will not need to budget money for sales and marketing. I disagree with this.

To be viable as a commercial open source company, management should consider emulating popular open source products. Most of the “successful” ones have been available as projects for several years, built a significant web presence and have thousands (even hundreds of thousands) of downloads. Getting to this enviable position can be left to chance. Is that a good idea for a commercial entity?

With several hundred thousand open source projects, it is easy to get lost in the melee. Having a better mouse trap, and a free one at that, is not enough. More and more open source companies are turning to traditional ways to get their product known. Firefox, last week, announced it would be turning to its user community to create and produce video ads for future TV and Web campaigns. Other successful open source companies such as SugarCRM and JBoss are turning to Google AdWords and web banner advertising campaigns to get noticed.

Given that users will have even more choice among open source products, gaining more downloads and converting them to paying customers will require innovative and potentially costly marketing and sales programs. If commercial open source company management teams don’t plan how to grow their businesses, we will end up with a dot com fiasco once again.

Technorati Tag: Open Source

There are many open source business models. Perhaps the most notable are the following three: The services model, the product subscription model and the product dual license model. A recent article, How to make money from open source, published at the Australian web site Builderau, perpetuates the myth that the open source revenue model is only a service revenue model. Although services are fundamental to all open source business models, as they are with most proprietary software models, they are not the only source of revenue.

The Services Model
Many services business have been created around open source projects. Nagios, a well respected open source network and application monitoring application, list approximately 100 companies and several individuals offering support, implementation and other consulting services centered around their open source project. Cnet’s recent article, Open-source services field heats up lists several companies that have adopted this model.

The product subscription model
The product subscription model, simplifies delivery of the software. Companies using this model save customers time and effort by eliminating the need to download software, compile source and figure out how to install it. In this model, the open source project is packaged into a standard installable product that can be downloaded, delivered pre-installed on hardware, such as an appliance, or published on a CD. In addition to the standard packaging a set of support services are also packaged into a single SKU. An annual fee is charged for the combined package — including product and support services — along with guaranteed future deliverables, such as tested patches and updates provided during the subscription period. This is not unlike the 10%-25% annual maintenance fee charged by proprietary software vendors. Commercial Linux distributions such as Red Hat and Novell’s SUSE utilize the subscription model.

The product dual license model
This model only works when the commercial open source company owns all copyrights to their open source project. With this model there are two licenses. One is a free open source license, such as the GPL, offered with the standard product. The other, is a more restrictive fee based license which includes product guarantees, and is often associated with a more feature rich and robust product. MySQL and SugarCRM are examples of commercial open source companies that implement the dual license model.

Common characteristics
There are several common characteristics among viable commercial open source companies that implement either the subscription or the dual license model. The most important is that their open source project is ready for commercial success and has an existing base of users and a growing demand for support and other services.

All offer supplemental services in addition to those packaged with the product as additional revenue streams. These supplemental services offered by commercial open source companies are not unlike the services offered by proprietary software companies and may include:

• Multi-level support services including 8×5 email and forum support through 24×7 service level agreements
• Education and certification training with product discounts and incentives for fully certified or trained customer teams
• Standard professional services including installation and implementation services
• Custom projects.

Other characteristics include: giving back to the community through open source code drops, hiring developers and encouraging them to spend a percentage of their time working on other community based open source projects, and a strong advocacy of open source development and business models.

Technorati Tag: Open Source

Over the past few months there has been an upswing in venture capital funding used to establish commercial open source companies.

What makes an open source project a candidate for a commercial open source company? I see three key aspects.

A well established market
The current group of high profile commercial open source companies are all participating in market segments led by one or more dominant proprietary software vendors. MySQL and PostgreSQL are both participating in the relational database segment, well established by Oracle, IBM and Microsoft. Compiere participates in the ERP segment dominated by Oracle and SAP, while SugarCRM and Compiere both participate in the CRM segment, established by Siebel, Oracle and others. None have needed to create a market for their products.

Proven popularity and reputation
These open source projects initially built their brand, not in the traditional sense with multi-million dollar advertising and marketing budgets, but instead through grass roots customer acceptance models with downloads, use by developers and early adopters, interactive web sites and word of mouth as their main approach. They have established their initial reputation among developers and early adopters with high quality software licensed under the GPL, or a similar open source license. All have strong communities of contributing developers, testers and doc writers.

Need for commercial infrastructure elements
Once an open source project has enough downloads among developers and early adopters, it is poised to, or has “crossed the chasm” and is ready to be adopted by mainstream IT and end user organizations. However, most IT and end user organizations are risk averse and will not adopt open source software for business critical situations unless it is guaranteed by a commercial entity. Betting the business on an AS IS license guarantee is unacceptable, especially for more complex solutions such as relational database or ERP applications. Having the source code available doesn’t really help. Having an entity that will continue to exist, provide support, product releases as well as other services is a critical factor in the adoption of open source solutions among this risk averse segment of the market. Building the necessary infrastructure is expensive – this is where outside investors can fill the gap.

Open source projects with these three attributes are well positioned to transition to one of the emerging commercial open source business models and attract the interest of the venture capital community.

Technorati Tag: Open Source, Software, Venture Capital, Entrepreneurship