Open Source Thoughts
There has been a lot of chatter regarding open source lately. Good and exciting stuff all in all. I thought I would just spend a few minutes pondering open source as it pertains to stuff I work on.
The most significant thing I have done programming wise is Savvy Content Manager. It isn't open source, but believe it or not people still use non-open source software. :-) We have talked about going open source in the past. It isn't a model I am familiar with other than being a consumer. Heck, I don't even know if I capitalize the O and S... But to be frank, business is business. If going open source meant more money for the company then it would be a no brainer. I have talked to the president about it and that's the bottom line.
Quick Note: No, this doesn't mean we are going to do it. Nor does it mean we feel pressure to do so. We are profitable and quite happy right now. It's just fun to think about stuff like this from time to time. I thought maybe I would start a conversation about it with others and learn a bit more, thus this blog post.
The question is how would the model work for something like Savvy CM to be open source?
Looking at models available online right now it seems the Professional Open Source Model seems the only candidate.
Our revenue is part software sales and part service work. Service work would include creative work (design), custom code, installation, support, training, etc. To drop the revenue from software sales we would need to make it up somewhere else, and not just through volume. If we make it up in volume of additional work then we need to add more staff since the service work doesn't scale easily. We don't mind growing, but I don't want to confuse the idea of more revenue == better bottom line. Perhaps a better metric would be revenue / employee. If that number goes up we are good.
To give an example with simple numbers (not real):
Commercial
Total Revenue $1,000,000 / Employees 10 = Earnings per E $100,000
Open Source
Total Revenue $1,600,000 / Employees 21 = Earnings per E $76,190
In the example above Open Source had more revenue, but needed more employees and thus made less money per employee then the smaller but more profitable commercial offering. Again, just an example with simple numbers, not actual figures for us. That could swing the other way as well.
Another aspect to going open source is what would happen to Savvy Software for an exit strategy? Someday we may be bought out. We wouldn't be opposed if it was the right kind of deal (company, compensation, etc). We have chatted with some in the past about that, but nothing has come from it. The question becomes would going open source hurt our chances of getting purchased and cashing in? Perhaps we could still be acquired, but not for the same multiple?
Certainly open source based software can lead to money and buyouts. Just look at the Sun purchase of MySQL. However I think that may be the exception case. Companies usually buy for assets or talent. I suspect a purchase of our company would be about our product.
Finally, for some software it isn't possible to go open source due to their licensing of other software that is bundled in. For us the only non OS software we bundle in that isn't our own is KTML. KTML is an editor that was made by Interakt, and bought out by Adobe. Adobe wasn't interested in the editor and has since killed it (big bummer). So there shouldn't be any issue there though it's best to get some sort of official permission I assume. What that means is that we would be limited in what other editors we may pick in the future. Potentially anyway.
So from what I see there are too many open questions and significant risk at this point, but still fun to think about. For others thinking about CF Open Source stuff check out Ray's presentation.
I am interested in others thoughts about this. Do I have some bad reasoning? Anything else to consider?
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You are not going to get the revenues per employee from professional services that you do from software sales, but a more reasonable target is to maximize profits. Total profits of $500,000 are generally better than total profits of $300,000 - irrespective of revenues and headcount (although both of those do have impacts on value depending on the industry and various other concerns).
However, I would be extremely surprised if you'd be able to increase profits by open sourcing Savvy (I could be wrong, but personally I wouldn't bet the company on it). Instead, the focus should be on continuing to keep it ahead of the open source offerings in terms of usability, quality, documentation and support. I'd also consider offering a Software as a Service solution where you provide hosted sites and possible broadening the range of features (discussion boards, shopping carts, dcument repositories) so you can up-sell existing clients with new products that integrate seamlessly with savvy.Then there is the AIR admin console available at an additional fee for easier content management and monitoring which might be another option (I'd sell the software before I built it just to make sure of demand).
I think over time OSS will continue to raise the bar for commercial products, but that's not a reason to quit, and while the professional services route can work, it's by no means a guarantee.
Open sourcing your product would broaden the appeal and usage. If your product is compelling, that is a lot of upside potential. Not to mention, a healthy eco-system of open source developers contributing to your software can allow your company to focus on services (high margin) and building feature rich add-ons (that aren't necessarily open source) targeting vertical markets and enterprise users.