This is the second part of my two-part series on open source market strategies and implementations. I previously outlined the 10 strategy rules for open source marketing and emphasized building new markets, differentiating, contributing, pricing and innovating, and the customer relationship.
As I mentioned in part one, a year ago I wrote "Howells' 10 Rules for Open Source Marketing." Here we're looking at where Alfresco is a year later in its marketing approach. Many of our open source peers are adopting the same principles, and I believe this evolution of open source and the realizations we've experienced can be used by emerging open source entrepreneurs and commercial open source companies still looking for the best model for their particular business.
Implementing a Marketing Strategy for the Open Source Consumer
Implementation Rule 1 - Get consumerized. You can't beat a gorilla by being a dinosaur.
We used to talk about "Gorillas" like Siebel and Peoplesoft but now even being a gorilla isn't enough. Today there are mega-gorillas like Oracle, Microsoft, IBM, and SAP. All others are caught in a no-mans land and vulnerable to open source. Mega-gorillas will be generic and sell everything.
IT procurement has undergone a consumerization process where users go through:
• Discovery
• Research
• Try/Download
• Join a Community
• Buy - Support, Training, Consulting
• Process - The software is discovered through the Web, Sourceforge, blogs, keyword search, forums, RSS, podcasts, webinars, trials, downloads, traditional media, and word-of-mouth. Don't think you're big enough to play against the mega-gorillas on their turf by micromarketing. You need to get consumerized.
Implementation Rule 2 - Discovery - Consumer convenience means at their desktop.
Consumers evaluate when it suits them using source they trust. That means they read and listen, most often from their desktop. They don't want a face-to-face hard sell. This means the discovery phase is critical to get above the noise of the crowd. We've found search engines, blogs, and traditional PR to be the most effective channels. This has a number of impacts on what you do and don't do and how you measure success. Open source marketing must also be open and trust-based not big budget-based. Users don't trust ads. We don't advertise or use paid-for AdWords. In that game the gorillas can just outspend you. Your advantage is credibility and trust - use it wisely.
PR is traditionally measured by press coverage. Open source is a rapid consumer-driven closed loop. So it's easy to measure the impact of PR through:
• Traditional coverage
• Blog coverage
• Alexa
• Hits on your website (we've seen massive 300% spikes in traffic)
• Downloads
• Trials
There's an interesting story about how one customer chose us. They searched for "open source documentum" on Google and found Alfresco.
Implementation Rule 3 - Research & Try - Don't sell to me. I can make up my own mind.
Consumers don't want a face-to-face hard sell from an enterprise salesman to demystify complex space and complex product. Users want easy access to all the information they need to make a decision. This doesn't mean a face-to-face roadmap presentation after a non-disclosure agreement (NDA) has been signed. Users want to be able to join a community for either information or code that includes access to a demo, a trial, a download, a roadmap, the documentation, and technical tips. This is all that's required for a consumer-driven, self-service decision where the consumer independently qualifies himself as opposed to the salesman.
Implementation rule 4 - People like to talk but not face-to-face.
When an enterprise consumer has decides to go further with enterprise software he wants to talk to a human being not an e-store. This means he will e-mail and ask to be contacted. Salespeople are very important - but over e-mail, the phone, and GoToMeeting - not flying round to big customer meetings.
Implementation Rule 5 - The open source machine and the dinosaur.
Open source is a new world with discontinuity in the business model, marketing model, and product development model. This means that you need a new "open source machine" to cope with the number of people downloading your software, asking questions, accessing your website, accessing demonstrations, trying the product, discussing it in forums, updating the wiki. This is massive compared to a traditional software start-up. The extended infrastructure has to be able to support contributions, bug reports, and fixes from other individuals and companies, take feedback from forums and surveys, and support hundreds of thousands people downloading your software. Amid this, you have to be able to identify those who want to buy support, patches, and updates for a mission-critical environment and those who want to use open source as part of the community. Open source companies have to be masters of the whole open source software value chain to support the massive growth potential.
What's critical is that a new model and new machine is required to support the new price point. The enterprise dinosaurs can't compete with this. Even when they win business it's often at a loss since they have an old model and an old high-cost enterprise sales machine. Over time this becomes unsustainable. Typical short-term tactics are:
• Give the software away
• Bundle multiple pieces of software together to reduce the sales costs
• Stop investing in innovation
In all cases the customer loses and pays in another way - there's no free beer.
Implementation Rule 6 - Think global, act global, be electronic.
They used to say, "Think Global, Act Local." The advantage of an open
source blue ocean is it's global. That means a focus on
micro-segmentation and micromarketing wastes precious resources and
behaving the way a mega-gorilla does.
It means that in the discovery phase enterprise consumers have to be able to access all relevant content easily, attend webinars, and listen to podcasts over the Web. Local now means local time zones and, where necessary, the local language. Gone are the days of hearing, "Things are different in my country…"
The Open Source Impact- A Disproportionate Effect on the Market
Open Source Impact Rule 1 - Be a low-cost machine.
Creating an enterprise software company, or to a certain extent a SaaS
company, is expensive, driven by the need to invest in a large sales
force or a large infrastructure. Open source companies have a distinct
cost advantage that shouldn't be squandered. Open source is not about
creating another traditional enterprise software company. Open source
is about innovating through a business model and a marketing model and
creating a new company with a low-cost model for product development,
marketing, and sales that delivers much greater value to the customer.
Organizations need to use the principles detailed here to create a
low-cost machine. Otherwise the advantages will diminish as the company
grows.
Alfresco was built with significantly less VC funding than traditional enterprise software companies.
Open Source Impact Rule 2 - You're a barbarian at the gates. Your impact is far-reaching and disproportionate.
By using a low-cost machine effectively and delivering a new level of
value to the customer you have a disproportionate effect on the
industry. If you deliver a better product for a tenth the cost the
reality is the impact is 10 times larger on the industry than your
revenues but more importantly you're transforming the industry and
making the old model redundant. This is what the Model T did to the
horse and buggy and what Apple did for the masses.
Open Source Impact Rule 3 - This is a gorilla game. You don't want to be a chimp.
Geoffrey Moore was always my marketing hero and in The Gorilla Game
(1998) he makes some points that are particularly applicable today and
to working in "open source time." Moore talks about the differences
between "applications and enabling technologies" and says:
Enabling technologies commoditize extremely well, allowing them to proliferate into markets far a field from the original starting points and generate a high degree of network effects. These in turn put pressure on the overall marketplace to standardize exclusively on a single set of components driving market shares to extraordinary levels.
Open source is key driver of commoditization and a modern example of the network effect. These principles explain why many of the leading open source companies like MySQL, Red Hat, and JBoss are infrastructure companies. They can be commoditized more easily and benefit more from the network effect. The traditional enterprise software market moved from hundreds of suppliers in a space to a pack - like with Oracle, Ingres, Informix, and Sybase - to a gorilla emerging form the pack like Oracle did. Here, being a number two was still good. In open source the network effect and commoditization happens much more rapidly - in open source time. That's why in many open source categories there's one clear leader very quickly.
Being an infrastructure software company in a commoditizing market with a massive network effect Alfresco has benefited from these principles. That's what's made it the clear leader in its segment in just over a year.
In open source you get a number one gorilla quickly. The GPL accelerates commoditization and the network effect. A number two in the enterprise open source world is a much more distant number two than in a traditional enterprise software.
Open Source Impact Rule 4 - You can't be half pregnant.
To
quote from Blue Ocean Strategy, "Monopolistic practices, by consuming
more of society's resources, also incurs a deadweight loss for society
at large. Monopolistic practices, therefore, are achieved at the
expense of consumers and society-at-large."
Open source is the biggest shift in the market this decade and market shifts are what the old guard hate. It destabilizes their ability to set high prices at will. Tim O'Reilly recently remarked:
Does Microsoft's claim that free and open source software infringes on 235 Microsoft patents remind anyone of Joseph McCarthy's famous claim about communists at the State Department? Whether or not it's true, citing such a number without providing any detail is such a classic FUD move that, to me at least, it just makes Microsoft look ridiculous. More recently, it's reminiscent of the bluster of the SCO case against IBM.
As they say you can't be half pregnant and you can't be half open source and half proprietary either. Open source companies partnering with Microsoft are siding with a company trying to kill open source - the reason they're in business. The open source community recognizes this and these firms risk becoming outcasts. In a separate article and blog - "The Open Source Barometer" - I wrote about the impact of partnering with Microsoft and posed the question, "Is partnering with Microsoft good business for an open source company?"
It's no longer compelling enough just to be the "open source alternative." In a rapidly maturing market, open source software companies must find new ways to differentiate and position their solutions relative to existing products. It takes a combination of technological innovation and marketing innovation to win today; leading open source companies have done both. It's about offering dramatically higher value and innovating, first by recognizing commoditization in the infrastructure and second through simplifying use, installation, rollout, and scalability. This lets you roll out to folks who have previously been denied your technology. A new model for development, business, and marketing is underway. Embrace it and don't try to compete with old companies in old ways. The key is to stay anchored to a philosophy that works for your company while being aggressive enough to challenge traditional ways of thinking. If you do, the impact will be large, far-reaching and industry changing.