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

Archive for the ‘licenses’ Category

Alfresco (Open Source CMS) Adjusts Business Model

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It looks like Alfresco has changed back to the ‘open core’ model judging by John Newton’s blog.

Just over 2 years ago Alfresco used a modified Mozilla Public License for its open source code and provided enterprise extensions for its customers. Then they switched to a dual-license (commercial / GPL) model with no enterprise extensions. Now they are moving to a position closer to their initial one.

This does not mean that Alfresco does not know what they are doing. It is merely an indication that they are one of the pioneers in a new business realm and are refining a model that works for them. I think John does a good job of defining the principles used to distinguish between open source and enterprise features. There is also no mention in John’s blog about switching away from the GPL V2 license that they use, and there is also no mention of introducing the attribution clause they had before.

The attribution clause is interesting: Alfresco, SugarCRM, and Pentaho all started with attribution clauses in their licenses. They have all since dropped it. Ironically the  Common Public Attribution License (CPAL) did not exist at the time. All those companies are now operating a open core with enterprise addons and commercial licenses and so are MySQL, and Zenoss, Zimbra. All of these companies except Zimbra have a GPL core, Zimbra still has an MPL-based license with attribution clauses.

Maybe the best options for the single-vendor commercial open source business model are getting clearer. Hopefully I’ll find some time soon to update the Beekeeper Model.

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Written by James

April 1, 2009 at 7:29 am

Cancellation of $13m Cognos Deal Highlights Problems of Government Software Procurement Process

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Government software procurement processes have a blind spot. Even if State of Massachusetts had followed its own guidelines on the procurement of the Business Intelligence package the outcome would possibly (or probably) be non-optimal for the tax payers.

The State of Massachusetts administration has reviewed and criticized the bidding process for the deal and The Boston Globe reports that the state will start a new bidding process. Salvatore Dimasi, the Speaker Of The House, has taken an interest in the situation. I hope he can improve it.

A problem with the procurement process is that there is a disconnect between intent and execution when it comes to open source software. The facts are straight-forward.

  • Intent: Many local, state, and federal Government organizations are in favor of open source for reasons of economy and protection from vendor lock-in.
  • Execution: The bidding process during software procurement is intensive and costly to participate in.

One of the advantages of open source software (whether organic open source or commercial open source) is that an organization is able to prove to their satisfaction that the software does what they need it to. The organization does not have to rely on marketing materials and the efforts of a vendor’s sales/pre-sales staff to determine if the software meets their needs.

In the Business Intelligence space the sales and marketing costs of the large independent vendors are roughly equivalent to their revenue from new licenses. This means that the up-front license fee paid by customers is largely used to pay for next quarter’s marketing and sales efforts. By contrast commercial open source software has no up-front license fee, just an annual subscription that is typically less than the maintenance fees of the proprietary software. But in order to operate in this manner a commercial open source company uses mass-marketing techniques instead of enterprise marketing techniques and inside sales reps instead of outside sales reps.

By using a software procurement process that is costly (for an open source vendor to participate in) Government organizations introduce a bias that is contrary to their own intent. An open source vendor either does not participate in the process or has to raise prices to cover the costs of participating. Either way this leads to the procurement of more expensive, not less expensive software solutions. If Government organizations really want to benefit from open source software their procurement processes will have to adapt.

Written by James

July 2, 2008 at 11:34 am

Re: Subscription vs. license: When do you take your profit?

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In response to Matt Asay’s post:

http://news.cnet.com/8301-13505_3-9952545-16.html

This is interesting Matt.

It is a common assumption that a proprietary vendor makes their money upfront with the license fee. In a lot of cases the assumption is not valid. For example I have heard that SAP makes $4 to $5 in services for every $1 they get in license revenue. You can look at the SEC filings of publicly-traded enterprise software vendors to find out where their profit it. In the cases that we looked at they are spending about 35-40% of their overall budget on sales and marketing expenses and get 40-45% of their revenue from the sale of new licenses. In these cases almost all of the upfront license fee is used to fund the expenses of selling the software to other people next quarter. In some cases the sales and marketing teams are authorized to spend over 100% of the license fee in order to make a sale. In these situations the sale person is quite happy to make a sale that is close to (or even below) the break-even point for the company, they’re just trying to make their quota. After the initial sale, in order to be profitable, the vendor will need to augment the deal with services (low margin), training (low margin) or maintenance (higher margin).

So your large enterprise buyer is possibly mistaken. He may be in the situation where he ‘thinks’ the vendor will be happy just making the sale but where the vendor needs to find ways to augment the sale to make any profit at all.

Written by James

May 28, 2008 at 2:58 pm

Posted in licenses