Tuesday, June 29, 2010

Pentaho’s Road To Profitability - Take 2

Tom Barber, a collaborator of mine, one of the most active community member of the Pentaho project, posted a very interesting blog entry this week. He is looking back at the path of Pentaho Corporation, a commercial open source business intelligence company, and their latest strategies for growth. He notes that in the past months, Pentaho has put a lot of effort in marketing initiatives and hired many big wigs in their marketing staff. In his opinion, this is somewhat against the ideals of commercial OSS development.

The commercial open source business model is still very young and has not encountered many great challenges up to now. Nor has it sailed in very troubled waters. Yet some signs are already warning people to be very careful with the years to come. Sun Microsystems (now Oracle) was surviving thanks to donations. Compiere recently made the news for all the bad reasons. Red Hat is doing pretty well though. In a nutshell, anything is still possible; good or bad.

Tom’s wish was that Pentaho would rather focus on paying skilled engineers rather than sales people. Now, as much as somewhat agree with the general idea, one must keep in mind that there is no correlation between the number of talented people getting paid to be on a project and it’s success. Some notoriously successful projects depend almost entirely on it’s community base. Mozilla Corporation to name only one. Others employ thousands of employees, yet achieve mediocre results. One could also argue that an effective marketing campaign will in fact boost people’s awareness, thus getting more talented people to join the community base. There is no tested and fail proof recipe so far. As I said earlier, everything goes.

I worked for the past months for a commercial open source company, and the same questions and uncertainties were part of every day discussions. How can a software company making no revenues on licensing be profitable? SQL Power Group, my employer, sponsors the only open source data modeling tool that works cross-platforms and offers, for free, the majority of the functionality included in widely known proprietary tools like ErWin. There are on a weekly basis between five hundred and a thousand downloads of SQL Power Architect. This is a lot for an OSS project in such a narrow niche. Yet a very small proportion of those are actually paying for support/consultancy, or making donations.

There are a lot of factors in play. First off, people willingly using OSS have overall better technical skills than others. To be fair, not every OSS is of acceptable quality, but you get to try as many as you want. Proprietary software is not better in any way, but you won’t get to try many of them, short of having very good contacts and/or deep pockets. This is one reason why reaching the tipping point of adoption is very hard for an OSS company. The percentage of OSS users ready to pay instead of figuring things by themselves is low. Way low. Waaayyy loooww. If you paid for software, you want support (and vice versa). You feel obliged to use the software because you already invested much in it. (Yes, money is time, time is money.) If you didn’t pay for the software and you hit a snag, you are far more likely to stop using it altogether. By abandoning it, you feel like you are exercising damage control, since you save time (thus money). You didn’t pay so why invest time? I’m fully aware that once you do the math, you realize that it’s the exact opposite. People usually don’t.

What does all that have to do with Tom? Well first thing first. Starting next week, I’ll be an employee of Pentaho Corporation. Yup. Am I a big wig? Nope. Am I a marketing guy? Well, I’m good looking, but not good enough with oxymoron. Am I a marketer? I’m having trouble making this blog post interesting, so nope, not a marketer either. I’m just some skilled dude who got his hands dirty for years and now decided that he would devote some serious time to make things better.

Look at it this way. In Tom’s vision of Pentaho, my ass is on the line. I deeply respect his insights on the market and software development in general. Yet here I am, proud as a peacock on a Sunday brunch, about to be part of this fantastic project. Am I worried? Hell no. I’m very enthusiastic about Pentaho having enough budget for marketing initiatives. This is exactly what OSS companies need; market awareness. People need to know you exist and that you are just as good as all those Fortune 100 companies. Even better than these. It has nothing to do with being a sell out. Marketing is not bad for your grassroots values, unless you make it so. Then again, you have only yourself to blame.

OSS companies need to reach the critical mass of contributors and adoption needed to survive. There is simply no other way. OSS users are picky, grumpy, bitchy and unforgiving. I know that for a fact. You want to thrive in that market share? You need two things. Proper marketing and skilled engineers. I’ll be doing my part in the later, and I’m very confident that the good people at Pentaho have picked skilled people to cover the former.

We are competing against giants, so let’s give them a ride for their money.