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Make Markets Not War

A simple marketing model for open source - Part Two

Implementation Rule 6 - Think global, act global, be electronic.
They used to say, "Think Global, Act Local." The advantage of an open source blue ocean is it's global. That means a focus on micro-segmentation and micromarketing wastes precious resources and behaving the way a mega-gorilla does.

It means that in the discovery phase enterprise consumers have to be able to access all relevant content easily, attend webinars, and listen to podcasts over the Web. Local now means local time zones and, where necessary, the local language. Gone are the days of hearing, "Things are different in my country…"

The Open Source Impact- A Disproportionate Effect on the Market
Open Source Impact Rule 1 - Be a low-cost machine
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Creating an enterprise software company, or to a certain extent a SaaS company, is expensive, driven by the need to invest in a large sales force or a large infrastructure. Open source companies have a distinct cost advantage that shouldn't be squandered. Open source is not about creating another traditional enterprise software company. Open source is about innovating through a business model and a marketing model and creating a new company with a low-cost model for product development, marketing, and sales that delivers much greater value to the customer. Organizations need to use the principles detailed here to create a low-cost machine. Otherwise the advantages will diminish as the company grows.

Alfresco was built with significantly less VC funding than traditional enterprise software companies.

Open Source Impact Rule 2 - You're a barbarian at the gates. Your impact is far-reaching and disproportionate.
By using a low-cost machine effectively and delivering a new level of value to the customer you have a disproportionate effect on the industry. If you deliver a better product for a tenth the cost the reality is the impact is 10 times larger on the industry than your revenues but more importantly you're transforming the industry and making the old model redundant. This is what the Model T did to the horse and buggy and what Apple did for the masses.

Open Source Impact Rule 3 - This is a gorilla game. You don't want to be a chimp.
Geoffrey Moore was always my marketing hero and in The Gorilla Game (1998) he makes some points that are particularly applicable today and to working in "open source time." Moore talks about the differences between "applications and enabling technologies" and says:

Enabling technologies commoditize extremely well, allowing them to proliferate into markets far a field from the original starting points and generate a high degree of network effects. These in turn put pressure on the overall marketplace to standardize exclusively on a single set of components driving market shares to extraordinary levels.

Open source is key driver of commoditization and a modern example of the network effect. These principles explain why many of the leading open source companies like MySQL, Red Hat, and JBoss are infrastructure companies. They can be commoditized more easily and benefit more from the network effect. The traditional enterprise software market moved from hundreds of suppliers in a space to a pack - like with Oracle, Ingres, Informix, and Sybase - to a gorilla emerging form the pack like Oracle did. Here, being a number two was still good. In open source the network effect and commoditization happens much more rapidly - in open source time. That's why in many open source categories there's one clear leader very quickly.

Being an infrastructure software company in a commoditizing market with a massive network effect Alfresco has benefited from these principles. That's what's made it the clear leader in its segment in just over a year.

In open source you get a number one gorilla quickly. The GPL accelerates commoditization and the network effect. A number two in the enterprise open source world is a much more distant number two than in a traditional enterprise software.

Open Source Impact Rule 4 - You can't be half pregnant.
To quote from Blue Ocean Strategy, "Monopolistic practices, by consuming more of society's resources, also incurs a deadweight loss for society at large. Monopolistic practices, therefore, are achieved at the expense of consumers and society-at-large."

Open source is the biggest shift in the market this decade and market shifts are what the old guard hate. It destabilizes their ability to set high prices at will. Tim O'Reilly recently remarked:

Does Microsoft's claim that free and open source software infringes on 235 Microsoft patents remind anyone of Joseph McCarthy's famous claim about communists at the State Department? Whether or not it's true, citing such a number without providing any detail is such a classic FUD move that, to me at least, it just makes Microsoft look ridiculous. More recently, it's reminiscent of the bluster of the SCO case against IBM.

As they say you can't be half pregnant and you can't be half open source and half proprietary either. Open source companies partnering with Microsoft are siding with a company trying to kill open source - the reason they're in business. The open source community recognizes this and these firms risk becoming outcasts. In a separate article and blog - "The Open Source Barometer" - I wrote about the impact of partnering with Microsoft and posed the question, "Is partnering with Microsoft good business for an open source company?"

It's no longer compelling enough just to be the "open source alternative." In a rapidly maturing market, open source software companies must find new ways to differentiate and position their solutions relative to existing products. It takes a combination of technological innovation and marketing innovation to win today; leading open source companies have done both. It's about offering dramatically higher value and innovating, first by recognizing commoditization in the infrastructure and second through simplifying use, installation, rollout, and scalability. This lets you roll out to folks who have previously been denied your technology. A new model for development, business, and marketing is underway. Embrace it and don't try to compete with old companies in old ways. The key is to stay anchored to a philosophy that works for your company while being aggressive enough to challenge traditional ways of thinking. If you do, the impact will be large, far-reaching and industry changing.

More Stories By Ian Howells

Dr. Ian Howells is chief marketing officer of Alfresco and has more than 20 years of enterprise software marketing experience in the fields of content management, service-oriented architectures, and relational database systems. Ian earned a PhD in distributed databases from University College Cardiff. He has long been on the forefront of technology and marketing, holding early positions at Ingres, Documentum and SeeBeyond. You can read Howell's thoughts on open source marketing at http://blogs.alfresco.com/ianh

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