Recently I have been reading up a lot about the hybrid open source business model. It is something quite different from the traditional model used by enterprise software companies. As the model is different, so are the pitches to customers. I am going to try and delve into the major differences but primarily from a marketing angle.
Traditional enterprise software is a little over 35 years old and stands a towering USD 60 billion. The advent of FOSS has changed how software companies run their own show and most of the enterprise biggies have taken to quite well (after all it is reducing their developmental costs).
Traditional enterprise software businesses have pitched the “one throat to throttle” concept. If anything went wrong with the software, there would be one company to blame for it, who is responsible for it. During the initial days of open source, this is precisely what was missing. With the hybrid model, it is addressed partially in that the community version is supported by the community and the enterprise version is supported for a fee (thereby providing a neck to catch hold of!).
I have a fundamental question at this juncture. If something about the software is unusable (for that business), which is it better to have – a blackbox binary or open source freedom which lets you change what you want to. Being able to craft a product to suit your enterprise ends is perhaps the largest advantage open source software provides.
Traditional software companies have focussed on licenses for usage ( not upgradation but just usage) of the software. Which is like buying a shirt with a one week limit or a movie with a 30 day expiry. If you want to wear the shirt after that one week, you need renew your licenses and same goes for the movie. Would you really let that happen in those cases? Why do people let it happen in the case of software?
The difference between charging for support and charging for permission to use is quite stark! Taking money without providing upgrades in like giving yesterday’s newspaper and still charging for it. For marketeers, this difference is quite important. With the hybrid model you are essentially pledging that you will not charge the company if they don’t use your service.
So why give out the source code a free community version? I suppose the answer lies in the concept of collective intelligence. With more people working on the product (as users, developers, testers or just advisers), it moves faster and in a direction more homogeneous with what the users (enterprise or community) really want.
This is not to say that traditional enterprise software has no role to play. It has a very big role to play. In markets where there is no software available, a more traditional approach maximizes economic returns for the company that created the software. Traditional enterprise software business model has a lot of marketing costs, which makes the products riskier. With a hybrid model, the risk is reduced as the software is try before you buy!
In India, we are already seeing traditional software companies (usually with proprietary data formats) providing companies the try before you buy alternative. The idea is that after 6 months, the data generated is stored in the proprietary format anyway – hence the user is locked in! To really give choice, the data storage should be standards compliant, thereby allowing the user to shift, if she so pleases. This freedom is the corner stone of the FOSS model.
The more we look at it, the more obvious it seems that this is a more beneficial model overall, considering economic gain of all parties involved. Only time will tell if the markets think the same way!
