James Dixon’s Blog

James Dixon’s thoughts on commercial open source and open source business intelligence

The Analyst’s New Confusion II

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My response to Garner’s Brian Prentice’s reply to my post responding to his post got too big for a comment field… So here it is

What I care about is whether your business model creates incremental value for your intended customers. Those are the people I spend most of my time speaking to. And those are the people who clearly understand the value that Gartner provides in an increasingly open-world. What they want from us is to put vendor claims to the test – and that’s what I did in my blog…

If I have this correct, you’re saying that providing an equivalent product at 0% of the license cost is of no value? I’m skeptical.

…Believe it or not James I actually do understand the dynamics around S&M costs. I spent a good part of my career in product management, marketing and sales roles at software vendors. Those managing software companies should be concerned about these costs. But the nature of those cost structures are far more complex and entrenched than advocates of open core models make out…

I agree its complicated. I don’t doubt your claim that you understand the factors that influence proprietary software vendors. But you have no experience working for an open source vendor, and so you are starting to make (invalid) assumptions. What I don’t see in your posts is an indication that you understand the differences that exist between these business models. If you really understood these things I’m guessing you would point them out (to add value).

…And the jury is definitely out whether the open core approach will create a lasting impact. I personally think it won’t…

Let’s look at another domain that is in transition – cars. We can attempt to state that hybrid cars will create no lasting impact. This is almost certainly true given a long-enough timescale. Eventually hybrid cars will die, because, eventually, there will be no more oil. But probably, in order to get to an oil-free scenario, hybrids are vital during the transition. So can you really state ‘no lasting impact’?
Open core might be of value only during the transition from a proprieatry world to an open source one. If we ever get to an end game (20-30 years) my opinion is that open core will vital during the (long) transition

…But again James – so what? If you can lower your S&M costs you’ve increased your profit margin. Where’s the value to your clients?…

Thank you for proving my point. You don’t understand the model. We don’t lower our S&M costs to increase our profit margin. We lower our S&M costs to completely eliminate the up-front license fee. The cost of our subscription is less than the maintenance fee of the proprietary vendors, with 0% license fee. The software you previously paid $2million for, with a $400k maintenance fee, you can now get for $0 up-front and a $100k subscription. You see no value in that? Really?

…I think you should be spending more of your time blogging on that topic…

I do. You either don’t read, or don’t comprehend 😉

…What is about open core that makes companies like Pentaho uniquely valuable as a potential supplier…

We provide an equivalent product at 0% of the license cost. Simple.

… And there’s the rub – there isn’t. …

0%. Still not compelling?

…That doesn’t doesn’t detract from your company or product. It just means you’re like every other software company out there vying for people’s business. Therefore you should be treated by those potential customers no differently…

I absolutely agree with you. From the perspective of the mainstream customer, when they come looking for a solution, they should treat every vendor the same – whether proprietary, open core, or pure-play. In fact we do best under those conditions – better than both proprietary and pure-play open source vendors.

Over to you, Brian.

Written by James

March 31, 2010 at 11:55 pm

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