What Do You Care What Other People Think?

Future of Commercial Open Source

I got to take part in a workshop in Santa Clara yesterday put on by SDForum - "The Future of Commercial Open Source" - unlike a standard event in the valley, this started with "opening comments" from the panelists and then broke out the 70+ attendees into 6 working groups, each discussing a question about "What will Commercial Open Source be like in 2010?"

Andrew Aitken of The Olliance Group was the instigator, and brought together a really outstanding set of people - Tim O'Reilly, Rod Smith of IBM, Simon Phipps of Sun were panelists, and the constellation of VCs and open source companies was amazing.  As a bonus, Mark Radcliffe of DLA Piper Rudnick summarized the first draft of the GPL 3.0. I've worked with Andrew Aitken in the past for insights into Open Source and given his knowledge and connections, it was no surprise that the event was a success.

It was no surprise that Microsoft was mentioned many times - but the big surprise to me was hearing Tim O'Reilly say, "If you consider companies that contribute to Open Source projects to be Open Source Companies, then you would have to say Microsoft is one, because they contribute a lot of source code."  He went on to say that his definition of Open Source companies is companies that use OSS, like Google, SugarCRM, etc.

Tim's insights:

• Open Source is about sourcing commodities - we should look at the core this phenomenon as the software supply chain enabled by Sourceforge
• Can SourceLabs, SpikeSource, and OpenLogic become part of the Sourceforge ecosystem?  This would mean that they are truly integrated into the software supply chain.  What about Palamida, Black Duck, and CollabNet?
• There is a linkage between OSS and the Long Tail - find niche markets and use OSS to source niche technologies
• Ultimately, success for OSS will come from applying the Dell model - instrument the front end and back end of your business and find the inefficiencies - this is where the opportunities for OSS ecosystem infrastructure lies
• By 2010, the business frontier and the hacker frontier will move.  The hotspots will be very different and we should expect to be surprised.  OSS will be part of every software business, and every company's strategy - much like the Internet has done.

Simon Phipps (who is the chair of OpenSolaris) commented that "customer progress with open source is much slower than the industry's progress, so we must be careful and not rush in where customers fear to tread."

We were told not to blog about the content of the roundtable "thinking sessions" themselves, and I won't, but I will say that I had the pleasure of working with some real luminaries in the space - John Roberts (CEO of SugarCRM, the most interesting OSS business model today in my view) and Mary Coleman of Walden International.  I learned a lot from the discussion and met some very sharp people.  It was very lively given our table consisted of two commercial OSS companies (SugarCRM and Alfresco), two commercial giants (Microsoft and SAP) and four VCs...

Finally Doc Searls had an amusing and insightful summary of the state of OSS and software in general, drawing heavily on the construction industry as a metaphor for the mature state of the software industry.

Where are the OSS/BSS companies for SaaS?

Most of the companies I've spoken with have had to build their own OSS/BSS systems to run their Software-as-a-Service operation.  Provisioning, metering, and billing are core business functions for service delivery organizations, and while there are custom aspects to them, and hence good reason to build your own, there are probably better reasons to buy them off the shelf… if they were available.

Companies like Portal Software and Convergys have long supplied these systems to the telco industry, yet I've seen no indication that they are moving to engage the SaaS segment; nor have I heard of VC-backed startups targeting this critical infrastructure space.

A related need is that for a robust pricing engine that is capable of handling multiple pricing schemes (i.e. per transaction, per user-month, or per CPU-month).  Again, this is a core business function, and as we saw in the great Telco battle between Verizon and AT&T Wireless, the winner is the one that can combine their difference service assets into the widest variety of packages.  The story behind this (from my perspective) was partly due to integration (Verizon made the investments required to integrate their dozen-plus backend billing systems) and partly due to pricing & packaging - the ability to target a new demographic or customer segment with a custom package that is more attractive than the competition.

One quote I heard in the last few months - and I apologize, I have forgotten who said it - is that in the end, telco margin per customer is probably the same between "friends and family", "small business", and "enterprise" packages… but the success of the business is in crafting the package that feels right to the target customer and incents them to make the purchase.  So Verizon won, because they used their pricing agility to win new customers.

The corollary for SaaS that I'm taking away is that pricing flexibility is going to be key to competitive advantage… which brings me back to "where are the OSS/BSS apps for SaaS?"