May 2007

Finally catching up on some reading…I came across this post at ZDNet that discusses an upgrade of Red Hat’s stock by Credit Suisse.

The analyst (Jason Maynard) seems to be on the same point that David Skok (of JBoss VC fame) made at OSBC. How can JBoss/Red Hat monetize a larger percentage of their user base? Currently only 3% of JBoss customers (or downloads? How would JBoss have a count of non-paying customers) actually pay for support.

I quickly thought about Marten‘s customer groupings that he summarized at OSBC.

[1] Those willing to spend time to save money
[2] Those willing to spend money to save time

I knew that I liked his two groups for a reason. I totally forgot that I had come up with 3 groups of OSS users a little while back. My groupings were, more or less, based on willingness to accept risk.

{1} Cost Contentious: Unlikely to ever pay
{2} Scope Contentious: Pay based on app criticality & perceived need for support
{3} Risk Contentious: Likely to always pay (i.e. CYA)

Both views make sense, but willingness to trade off Time & Money doesn’t happen in a vacuum. That’s why I believe willingness to accept (varying levels of) risk is important when trying to categorize OSS users.

On the surface, there is little change to the Time vs. Money equation as a result of JBoss adopting the Fedora model. A customer that wants to spend time to save money can continue to use JBoss “Community Edition”. As a result, one could refute Mr. Maynard’s claims that JBoss adopting the Fedora model will drive more revenue.

This is where risk comes into play. Keep in mind that the JBoss “Community Edition” will include the latest features, some of which won’t make it to the JBoss “RHEL” version or may be dropped from future JBoss “Community Edition” versions. JBoss is clear that backwards compatibility isn’t guaranteed with JBoss “Community Edition”.

If you’re a customer that wants to spend time to save money, and you’re somewhat risk averse, than you don’t like using a product with features that may disappear in the future. You have the option of buying JBoss “RHEL” and getting backwards compatibility. You can also look elsewhere for an application server solution.

Taking Risk into consideration is likely the #1 reason that an OSS user will turn into an OSS paying customer.

 <Updated 2007-05-30> “Risk aversion” shouldn’t be considered a dirty secret of OSS.  I can’t think of an analogy in the traditional software market. But you don’t get to choose whether to pay for traditional software or not :-) </updated>

As a first-time attendee of OSBC this past week, I really didn’t know what to expect. In a word, I’d say I was impressed with the conference.

I’ve never been surrounded by so many lawyers, VCs or startup CEOs for such a concentrated period of time. Most of the breakout sessions were quite interesting (regardless of whether I agreed with the speaker’s pontifications on OSS).

Some highlights (i.e. things that I agreed with):

MySQL‘s CEO Marten Mickos claiming that there is no OSS business model. That we are all participants in the software market; and we use OSS methodologies to develop, distribute and profit from software. Marten also distinguished between two customer types:

[1] Those willing to spend time to save money
[2] Those willing to spend money to save time

He discussed how customers seldom move from group 1 to 2 or vice versa. A very interesting point for folks who hope to convert the 12mil downlowds into paying customers.

The two customer keynotes on day 2, Rob Curley from the Washington Post and Lee Thompson from E*Trade spoke a lot about their use of OSS to drive business results. Rob showed us some really cool news products his team was able to develop using various OSS products. The crowed oohed, ahhed and laughed appropriately. I asked a question that I pretty much knew the answer to:

“Rob, can you talk about how much your team spends on OSS licenses or support contracts?”

This seemed like a hugely appropriate question for a conference attended by hundreds of folks hoping to make a living (and them some!) from OSS products and companies. Rob’s answer was:

“Well, we don’t spend anything. We don’t buy support. It’s likely not the answer you wanted to hear”.

I’m not sure how many in the audience heard his answer or took a second to process what it means for someone hoping to cash in on OSS. I asked Lee the same question in person as there wasn’t time for questions during the keynote. His answer was the same as Rob’s “we don’t pay for anything from OSS, no licenses, no support. We use the OSS project forums for support.”

Anyone else find it funny/strange/unsettling that the customers chosen to speak to a group of VCs interested in OSS and OSS CEOs aren’t spending a single dollar on OSS?

I don’t mean to imply that we should extrapolate from these two customers to “there is no money to be made in OSS”. What we’re seeing here is what Marten described in his two customer types. I truly wonder how many attendees really understood the impact of the two customer types on their aspirations to strike it rich with OSS.

I had a great discussion with Michael Cote from Redmonk about Pragmatic Open Source….Cote’s term for some thoughts that have been popping in and out of my head lately. The discussion deserves a post on its own. For now, I’m just giving Cote props for the term. More later.

Off to the airport!

During the Redmonk unconference at CommunityOne, there was a discussion about whether REST was going to kill Web services (WS*). This discussion followed a discussion on OSS and how ‘different’ OSS really was from the Traditional software model at the end of the day.

I’d read a good deal about REST being the death blow to WS*, but didn’t know much else, so, I was looking forward to learning more.

During the REST/WS* discussion, folks pointed out that Amazon processes about 80% of RESTful service calls (from 3rd parties), with WS* making up the remainder. Then someone from eBay mentioned that 80% of 3rd party service calls are Web service calls, with REST making up the remainder. Would those percentages change? Maybe, would they become 100% to 0%? Unlikely. There were things that REST & WS* were each much better than the other at, and vice versa. For example, if you just want data and the service provider isn’t wholly concerned about how you use that data, REST is probably a good model. If security matters, WS* is likely the best practice. etc., etc., etc.

The big “ah-ha” I took away from the two discussions was more evidence against the “there can be only one right answer” line of thinking that seems to be widespread amongst OSS proponents.

One size fits all is a great motto for a sock vendor. Not so much for a software vendor; or the software vendor’s customers!

PS: Thanks to the Redmonk guys (Cote, James & Stephen) for keeping us engaged in the discussion.

PPS: I’m going away for 2 weeks, so my next entry will likely be about how freakin’ cool it was to walk (or in my case, be carried along) the Inca Trail

Just read news about Microsoft potentially buying or merging with Yahoo. These are just rumours, and lots of analysis will discuss why the deal may or may not make sense.

I’m more curious about the OSS usage impact if this deal goes through. Everyone knows that Yahoo is a heavy user of OSS. Heck, it’s hard to think about PHP without Yahoo coming to mind. With this deal, Microsoft could become one of the biggest users of OSS overnight. Just think about that for a second.

Hotmail used to run on BSD when Microsoft bought it, and now Hotmail is on Windows and uses .NET stuff. If you haven’t played with Hotmail Live, give it another look, because it rocks. I still use Gmail (works better with Firefox and there’s too much peer pressure around using Gmail), but hope that Google borrows some ideas from Hotmail Live (or Windows Live Hotmail as it seems to be called).

If the deal goes through, I think Microsoft will leave the OSS usage within Yahoo at a fairly high level for a fairly long period of time. Things may get replaced with Microsoft technology over time, but even Microsoft has bean counters that are going to ask “why do we need to spend time & resources on that?” The deal could also be impetus for Microsoft to take a leap forward with its OSS strategy.

Will be interesting to see what we hear from the Microsoft folks over at Port 25

Interesting times!