Questions

Is a semi-open source model for enterprise software viable?

We have and idea, which significantly simplifies access to messy and diverse knowledge bases and complex intranets. We're still trying to evaluate it, but it's already clear, that it gains value as the size of the company (customer) grows. Smaller companies don't have that much mess and probably won't pay for any solution for that. However, I'm pretty sure they would be willing to try it for free and free users also have value as they form a community around the product. So, my question is how good is the model when most of the product is open source (e.g. community edition) and enterprise version, with advanced features, only relevant for big companies, is sold for a fee. Without any experience it looks attractive, but what are the downsides? What's the investor opinion on such model? It seems like such approach would delay the first revenue and require significant engineering effort from start. Would it be even possible to raise money for it?

3answers

Free 'basic' versions and paid 'pro' versions of software are very common, so it's definately _possible_ that it could be viable. If you want to get investment you'll have to make as convincing an argument as possible that 1) in your hands, 2) with your product, and 3) with your market, it _will_ be viable. The more convincing the argument, the more likely you'll be able to get investment.

That means getting some preliminary data (which can take many forms) which makes a convincing argument. See the examples below:

Not a convincing argument:
"This other company did this and made 10 billion dollars".

More Convincing Argument:
"In our pilot program, X% of our free users with company size Y ended up converting to paid advanced options, and here's a graph of the increasing rate at which we're able to recruit companies of size Y to the free program."

If you'd like more tailored advice for your specific product, send me a link to more background info and I'll look it over,

best,

Lee


Answered 3 years ago

There's no such thing as "semi-open source" It either is open source, or it isn't. The nature of open source makes it so that everything built upon it must be open source according to most of the open source licenses.

The idea you're proposing is very popular and used all the time by big successful companies. See Redhat, Atlassian, vTiger, SugarCRM, WordPress (Automattic). The key is offering value on top of the open source free/community package. The value for an enterprise would be your service and expertise in maximizing the software, professional support, or customizations for them, or even hosting it for them.

The upsides of doing it via open source is that the small companies that won't pay to license or service fees will customize some of it and hopefully contribute back to the software which will make it stronger for everybody. And as they grow they might eventually need your services or paid offerings.


Answered 3 years ago

Yes!!! Very possible. I was Head of Growth for an open source company that offered a strict enterprise solution and those were our main revenue numbers.

It's important to have a sales team for this to close and upgrade your current customers.


Answered 2 years ago

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