Where to find business advice for open source software

September 26, 2009 7:52 AM

Where can I find professional advice on the business possibilities for an open source software project? Is there a good location to ask a very specific question and get an experts advice.

Its for a large project, of which 75% is already completed. I've already asked for advice on it from a couple of forums I frequent with no response besides the usual "make it and find out". I need to get a better idea before I dedicate too much more time to it. I just recently discovered a site had developed a hosted version, which might negate my efforts so far.

I need to find somebody who knows the business aspect of these things as i only know software.

posted by anonymous to computers & internet (4 comments total)

Do you have a business plan?

If not create one before you do anything else.

Business plan in hand, you'll have identified a target market. Since you're interested in the "business possibilities" of your product, I'd suggest polling a segment of that target market to determine demand for your specific product.

After you've got some idea of how much of the existing market you can capture, what is the state of this market? Growing, declining or static in size?

If you are targeting a declining market the business possibilities are limited, as you'll be facing at least one entrenched competitor, and in such markets we see declining, not growing, margins (i.e., the only growth comes from stealing existing customers).

If you are targeting a static market the view is mixed - why isn't it growing and when will it grow?

However an expanding market is ideal, and will seriously help the viability of your business idea.

Now you'll have to determine quantitative metrics for your proposal; how much revenue could you reasonably expect to generate, as well as your gross and net profits. Because the market is expanding we can, subject to various assumptions, project the viability of your business for six months, one, two and three years.

These assumptions can be perturbed to reflect various scenarios i.e., specific changes in your target market, cost of capital, labour costs, etc, etc.

Only now will you have the information needed to approach a professional; assuming you're US based how about a local Small Business advisory bureau, or even a University incubator if there is one nearby?

If you don't have a business plan you'll seriously limit the interest in your idea. And professional will need this information, and you'll have to provide it one way or another. Best to capture it into a spreadsheet NOW.

While I'm sure your idea is fantastic, you have to understand that ideas are commodity; the value add is in execution, and without a business plan you simply will not be able to execute.

Hope this helps!
posted by Mutant at 8:35 AM on September 26

After everything Mutant just said, you also need to ask yourself "and given that our competitors will have access to our source code, what are we going to offer that they can't or won't?"

Most successful open source-based businesses make their money by selling services, usually ones designed to make up for the shortcomings in open source software. So one approach is to have an open source product that is just good enough to interest customers but not good enough to actually use in a production environment without a support contract. This is how IBM makes billions from Linux.

The other major approach is to sell hardware based on an open source product. So long as the hardware is sufficiently attractive and unique, then people have to go to your business to get the hardware. This is the route taken by various router manufacturers and (to a certain extent) Google with Android.

Up-and-coming approaches include selling programs through App Stores. The iPhone App Store is particularly good for this because it allows you to keep the product open source while still forcing most users to pay for it, as installing an app from source is a non-trivial task on the iPhone.

One additional observation: many commercially successful open source products have a strong trademark associated with them. This prevents competitors from using the name of your product, which gives you a kind of 'official seal of quality' indicating that your business is the sole source of the original (and presumably best) version of the program, even if competitors start using your source code.
posted by jedicus at 9:15 AM on September 26

You should also read Eric Raymond's The Cathedral and the Bazaar, which explains the economics of open source software. I think it'll give you a great sense of the questions you should be asking yourself and others.
posted by puckupdate at 10:01 AM on September 26

The two major business models for OSS I know of are hosting and support contracts.

Support contracts target large enterprises. Home users will generally not bite if the source is available and builds on their platform. Small IT shops will generally avoid contracts as well until things don't work; however, if they hire talented people to run the place, there's a chance they'll to contribute patches back to you for review, if you make the benefits to everyone clear. Large customers are the most likely to pick up a support contract, but require you go through some very tedious procurement processes such as sealed bidding. Companies submit sealed bids, which are opened after the close date. The lowest acceptable bid wins, provided you're qualified to bid. Open source companies sometimes find themselves unable to qualify, for a lack of accountants, business insurance and money in the bank.

Hosting is more appealing to smaller clients and individuals. I pay 20 dollars a month for my Linode, and it's nice. Smaller IT shops might choose to outsource hosting to you if the price is good. IT for large organizations generally has the staff and hardware for on-site hosting, and would rather integrate it with their existing infrastructure. Market research here is finding out who already offers hosting, what they're charging, and how you can differentiate yourself on price and features. With cloud computing and Virtual Private Servers, it's easier these days to outsource the hardware maintenance and focus on application support, which is good for you.

The key point to all this is that it isn't necessary to be the only player in the field, just a strong one. If your competitors aren't doing a good job reaching their customers, it's still an opportunity for you. If your business plan is to sell to large companies and governments, pick up some books on procurement and outmanuver your competitors. If your plan is to sell a network service to the masses, promote it.
posted by pwnguin at 11:40 AM on September 26