= analogy for Open Source Software Business Models
"Professional Open Source Software (POSS) companies exist as an exchange system between two sets of consumers: an open source community (motivated by mutual contribution) and a mainstream market (motivated by economic rewards). Organizations in need of support, services, training etc contribute financially for those services as paying customers. That money is used by the POSS company to pay for full-time resources (engineers, product managers etc.) whose efforts (the majority, if not all of it) end up as open source software, freely available to an open source community. The open source community contributes to the software by helping improve the design, functionality, quality, translations, and documentation of the software.
The improved software attracts more customers and the cycle continues, hopefully perpetually. In this model all three parties gain:
- The community gains open source software they can use for their own purposes. This software has more functionality and more resources than a 'pure' open source project could provide. In this way the community profits directly from the POSS company and its customers.
- The customers gain higher quality software at a better price. The customers profit from the open source community's ability to produce high quality software.
- The POSS company gains by growing and increasing its valuation as a result of keeping both sets of consumers content.
My analogy to this is 'The Bee Keeper'.
The Bee Keeper creates an environment that is attractive for bees: accommodation and a natural, food-rich habitat. The bees do what they do naturally and make honeycombs. The Bee Keeper sells the honey and bees-wax to his customers and uses the money to grow his bee farm.
The analogy goes a little deeper.
- Bees can fly and so have the opportunity to leave the bee farm if they decide to. So the Bee Keeper must tend to his bees. The Bee Keeper has very little control over his bees and has no ability to direct them to do his bidding. Likewise the community can desert, or even worse fork, an open source project if they so desire (see the Wikipedia entry on Fork). So the POSS company must keep their community happy. The POSS company cannot rely on the community to follow any directive or schedule it might have. Bees can sting. Community members can publicly object or criticize the POSS company on its own or other web sites.
- The growth of the bee farm depends on how much honey and wax the Bee Keeper can sell to direct customers (passers by), channel partners (the grocery store), and OEM's (the candle maker). How much he can sell depends partly on his business skills and partly on how much honey and wax he has. How much honey and wax he has depends on how many bees he has. How many bees he has depends on how much honey and wax he let the bees keep for themselves. In order to achieve maximum growth the Bee Keeper must grow both his bee population and his customer base at the same time. Likewise a POSS company must perform a balancing act and grow the community and customer base together.
- The bees and honey came first. There is no chicken-and-egg dilemma here. The Bee Keeper invested time and effort in his beehives before he had anything to sell to his first customer. The longer he spends building his bee population before he starts selling the quicker it will grow. Likewise the POSS company must build a community that helps create the software before they can engage in the commercial world. The longer the POSS company can focus on adoption before having to worry about revenue the better it will be.
- Each bee hive has a queen. In order to start a new hive the Bee Keeper needs to attract a queen and enough of her bees to make the hive viable. Likewise open source projects often have a single founder or administrator that is the main leader of the project. Open source projects can be 'acquired' or 'merged' if the project leader and prime contributors are convinced that the move is beneficial to the project.
- The customers don't want to deal with the bees. A single bee or even a swarm of bees cannot directly meet the needs of any of the Bee Keeper's customers. It is the work of the Bee Keeper that turns the efforts of the bees into products that the customers desire. The honey in the jar is the same honey that was in the hive, but the customers will only pay for it in the jar. Likewise the commercial customers don't want to deal with open source. They want 'whole product'.
- The customer's cash is no good to the bees. A crisp bank note or a pile of coins is of no use to a bee but the Bee Keeper can use that money to buy hives, bee feed, or bee medication (those varroa and tracheal mites can be problem). Likewise the POSS company's customers do not directly help the open source community. Its only when the POSS company uses that money to pay for engineering resources to improve the open source software that the community benefits.
- Each individual bee makes a small contribution to the system. It takes a large number of bees for a successful outcome. Likewise the contribution of the POSS company's community are vital to the model but the individual contribution of most community members is small.
- Customers are not bees, bees are not customers, and you cannot convert one to another. It is impossible for a bee to pay for a product, for a customer to make honey. I call this the Consumer Dichotomy. It seems that this might not apply to the POSS model and so is limitation of the analogy but it is not. The customer in the Bee Keeper analogy equates to the organization that is paying for the 'whole product' from the POSS company. The bees equates to the community of individual employees and enthusiasts. Consider:
- The POSS company often knows a community member for a long time before finding out who they work for. Sometimes they never find out. Community members often remain part of the community as they move from employer to employer.
- For business software the sales contract is between an organization (customer) and the POSS company. If an employee in a role that is a touch point between the customer and the POSS company leaves their employer, a new individual is nominated to fill the role, and the old employee is no longer a part of the relationship but the organization is.
Customers are corporations, the community are people. They have very different needs that need to be met.
This inherent distinction between customers and community is important when it comes to attempting to turn members of the community into customers. The sales and marketing groups within a POSS company need to be aware that, in most cases, it is not possible to convert a community member into a customer. However is it possible to convert the employer of a community member into a customer. Slamming community members with a marketing pitch is unlikely to achieve this.
Community members have the potential to persuade their employer to become a customer. The members themselves typically have no budget or no control over how the budget is spent. A POSS company needs to educate its members on the services that are available and the long term advantages to everyone if those services are used. The POSS company needs to find a way of presenting this and enabling members to present it to their employer without de-valuing the capabilities of the community member." (http://wiki.pentaho.com/display/BEEKEEPER/3.+The+Beekeeper+Model)