In Search of an Open Source Business Model
The former head of Oracle apps and new CEO of an open source ERP vendor shares his tips for developing a successful open source business model.
By Don Klaiss, Compiere
Jul. 22, 2007
Open source is a disruptive business model that continues to gain traction with customers. But any open source CEO will tell you that there is no well-worn road to success. Finding the right open source business model takes a combination of research, analysis, experimentation, community relations - and lots of hard work.
Since taking the CEO reins earlier this year, I have worked with the Compiere team to restructure and expand the product offerings, reposition the company, launch a new Web site, rebuild the partner network, hire a world-class development and support team, open a European office - and we're just getting started.
Based on our first-hand experience, I've created a list of considerations for emerging companies aiming to find the right open source business model.
Find Your Market
After 15 years with Oracle, I decided to move on. Building and running such a large applications business had been challenging and exciting, but as the industry matured and began to consolidate, I felt there was a lack of innovation happening in traditional enterprise software.
On the other hand, outside the proprietary world innovation is rampant. Business solutions leveraging open source, software as a service (SaaS), software appliances, and other new technologies that traditional vendors would never adopt are proving their value to customers. After working with venture capital firm, NEA, on open source investment strategies, I became convinced that Compiere could leverage these disruptive forces in a very exciting way.
Why? The mid-market ERP segment was not well served - and it needed to be. On the high end, Oracle and SAP offer a variety of products. But these products are complex, bloated with features, and too expensive for most mid-size companies.
And, many of the traditional mid-market software vendors have disappeared in the consolidation crossfire. Customers continue to pay maintenance fees to the new owners for products that receive little new investment, and without access to source code customers have very few options. CIOs are left wondering how they will be able to meet their ERP needs in the future.
It became clear that a commercial open source ERP player with a flexible, easy to implement product, and the right ecosystem, could completely change the economics of ERP and deliver the solution that mid-size businesses desperately need. Prior to my arrival, the Compiere open source project already had a large and active community working with the publicly available source code and using the solution. The challenge was not creating a market but harnessing the innovative technology and community enthusiasm toward building a great company.
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Since taking the CEO reins earlier this year, I have worked with the Compiere team to restructure and expand the product offerings, reposition the company, launch a new Web site, rebuild the partner network, hire a world-class development and support team, open a European office - and we're just getting started.
Based on our first-hand experience, I've created a list of considerations for emerging companies aiming to find the right open source business model.
Find Your Market
After 15 years with Oracle, I decided to move on. Building and running such a large applications business had been challenging and exciting, but as the industry matured and began to consolidate, I felt there was a lack of innovation happening in traditional enterprise software.
On the other hand, outside the proprietary world innovation is rampant. Business solutions leveraging open source, software as a service (SaaS), software appliances, and other new technologies that traditional vendors would never adopt are proving their value to customers. After working with venture capital firm, NEA, on open source investment strategies, I became convinced that Compiere could leverage these disruptive forces in a very exciting way.
Why? The mid-market ERP segment was not well served - and it needed to be. On the high end, Oracle and SAP offer a variety of products. But these products are complex, bloated with features, and too expensive for most mid-size companies.
And, many of the traditional mid-market software vendors have disappeared in the consolidation crossfire. Customers continue to pay maintenance fees to the new owners for products that receive little new investment, and without access to source code customers have very few options. CIOs are left wondering how they will be able to meet their ERP needs in the future.
It became clear that a commercial open source ERP player with a flexible, easy to implement product, and the right ecosystem, could completely change the economics of ERP and deliver the solution that mid-size businesses desperately need. Prior to my arrival, the Compiere open source project already had a large and active community working with the publicly available source code and using the solution. The challenge was not creating a market but harnessing the innovative technology and community enthusiasm toward building a great company.
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