Is Linux Killing The Enterprise Software Model?

BOSTON — Open source startups are changing the rules of the traditional
enterprise software market. At least that’s what a panel made up of MySQL,
JBoss, SugarCRM and XenSource heads and moderated by VA Software chairman Larry
Augustin was happy to proclaim loudly and clearly.

John Roberts, CEO and co-founder of open source CRM vendor SugarCRM, asked
rhetorically whether spending most of an enterprise software vendor’s money
on product marketing, as is usually the case, is the right way to go. Roberts
argued that open source provides a more efficient model for software that
costs less.

Peter Levine, the new CEO of XenSource chimed in that it was mind boggling to him how
much attention Xen has gotten without spending any money on sales or marketing.

“Here we are, a small company, and it’s amazing to me how visible the brand
and the technology are,” Levine said.

Brand alone isn’t enough to pay the bills for an open source company.

Marc Fleury founder and CEO of JBoss commented that open source has
significantly lowered barriers to how customer sales cycles work. With open
source, customers simply download the applicant and they try it out.

MySQL CEO Marten Mickos noted, however, that you still have to close
the deal.

MySQL 5 has had approximately 50,000 downloads a day since its
release, which presents a particular problem when it comes to leads and lead

Mikos explained that MySQL is careful with lead qualification and doesn’t go
after reluctant customers. He admitted that out of 50,000 downloads MySQL
may only close 5 customers per day.

“The rest help us fix bugs and write blogs about it,” Mikos said. “We don’t
believe in conversions. Mostly we see the majority will never pay. They love
to spend the time to fix it themselves.”

Fleury argued that the key to selling the technology is through developers.

you don’t have the developer base that digs your product, you don’t have a
business in open source,” Fleury said. “That’s the complete bottom’s up

But for SugarCRM, that may not necessarily be the best approach.

SugarCRM’s Roberts said that in his case, the critical aspect is users and
ease of installation.

“I think its not so much about being a developer, it’s the reverse,” Roberts
said. “If people don’t use the project, it won’t materialize.”

As opposed to traditional vendors that may well rely on salespeople’s promises and one-off demos to sell a product, Roberts argued that when you
decide to move forward with open source, you know exactly what you’re getting
and not relying on a promise.

Augustin asked whether it mattered if users actually
look at the source code for an open source application.

“Why do we have airbags when no one uses them?” Mikos said.
“It’s completely irrelevant how many look at source code. If it’s one, 100 or 1 million, that’s fine.”

“It’s enough that the developer knows someone can see it,” Mikos said.

his view a developer that releases sloppy open code would be ashamed if it
were open because others could see it, which is not the case with proprietary

Though free downloads and open source code are important, there may also need to be an economic benefit to the open source
Developer, as well. That economic benefit could well be a slippery slope.

“We love the open source stuff and we love to make money,” Mikos said.
“Sometimes we’re on too much one side or another. And when that happens we
hear about it.”

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