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Businesses Software

Converting an Open Source Project into a Business? 38

Posted by Cliff from the from-hobby-to-budding-career dept.
Yaztromo asks: "I'm about to try to make the jump and move my jSyncManager Project from being a time-consuming hobby into a full-time business. I'm hoping to follow the model of other successful Open Source businesses by selling integration, development services and support contracts. Has anyone in the Slashdot community attempted to move their Free/Open Source projects from hobby to business? What were the special challenges or obstacles faced?"
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Converting an Open Source Project into a Business? More

Converting an Open Source Project into a Business?

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  • Special challenges. (Score:5, Insightful)

    by torpor ( 458 ) <ibisum AT gmail DOT com> on Friday June 04, 2004 @12:55PM (#9336161) Homepage Journal
    What were the special challenges or obstacles faced?

    Finding customers. NEVER underestimate how important this is to the success of your company.

    All other problems, and yes there are many with relation to OSS in general, are insignificant.

    So many startup guys get rolling, only to be void of life 4 months later because they weren't daily working on getting clients on board who will pay the bills and provide lifeblood to the rest of the company.

    Sounds obvious, but I just wanna point it out before it gets lost in the /. responses ... Work *hard* on finding yourself customers, harder than you want to, even ...

    • Worth Repeating (Re:Special challenges. (Score:4, Insightful)

      by dmorin ( 25609 ) <dmorin@@@gmail...com> on Friday June 04, 2004 @01:14PM (#9336386) Homepage Journal
      Finding customers. NEVER underestimate how important this is to the success of your company. All other problems, and yes there are many with relation to OSS in general, are insignificant.

      Can't be said enough. How many times did we all hear about a dotcom that was gonna do just fine because they had exactly *1* customer who was playing sugar daddy (trans: had a piece of the action) and they swore up and down that they were gonna sign a second customer any day now?

      Technical knowledge alone won't get you half what you need. Team with a sales person. Just like there are born geeks in the world, there are born salesman. The sort of guys that see free stuff and just instinctively think "I can sell that 12 different ways, I can sell the service I can sell the support I can license the trademark I can merchandise the logo...." You should be able to at least get out of the starting gate with a good salesman on your team.

      Then you'll need somebody with business savvy to start making it look and act like a real company and not just a guy with an idea and a guy selling that idea.

      Good luck!

    • Sounds obvious, but I just wanna point it out before it gets lost in the /. responses ... Work *hard* on finding yourself customers, harder than you want to, even ...

      Funny how often that does get lost in these discussions, even though it seems obvious. Finding customers is now your number one priority. In the beginning, especially, all that time you're saving by not having a day job anymore will go to getting clients (and a bit of other business minutae). Coding the project will still be something you do

  • OpenSource to Business (Score:4, Interesting)

    by bensin ( 727667 ) on Friday June 04, 2004 @01:10PM (#9336328) Homepage
    I have been working on this project for the pass two years on allowing independent music website a way of selling individual tracks to their users. But after a year of no real bites i decide to turn it up a notch and make it my own business. Which is now . The transition is a whole lot different and a whole lot more stress. You have to be able to hang on and fight for your dreams. Make sure you look for the most efficient ways of promoting your product. Join Newsgroups and etc.... Starting up a business is very difficult so don't expect a cakewalk. Your competition doesn't nee any more competition so you are going to have to be creative in your product and how you market it. I wish i could find forums and website that help guide you through this process but i can't find any right now but if any one knows of any let me know.

  • I am going to do that too (Score:5, Interesting)

    by prostoalex ( 308614 ) on Friday June 04, 2004 @01:10PM (#9336331) Homepage Journal
    The support model for open source is somewhat interesting. It's pushed quite frequently as panacea for open-source businesses, but I was reading Chris Pratley's blog yesterday (he works for Microsoft), and he was pointing out some interesting and obvious problems:

    You can grow a business to the extent that there is "friction" in the marketplace that makes it not worthwhile to clone your product and business (say, to $100,000). But if your business grew to a significant size (say, $1 million) then someone else will come along, covet that money, and use your source to kick start a clone of your business. This is true in hardware as we all know (all the cheap knockoffs you see of original products), and the friction costs are higher in most cases for hardware. If for example you make an open source accounting app that starts to do well, I can take that source, study it, and start selling and supporting it for less than you offer it, and we can have a price war until we're both paupers, or one quits. Even better, as you make improvements, I get to incorporate them in my product as well, so you can't really stay ahead of me for any length of time.
    The full post is here [asp.net].

    So in a nutshell, good luck. But if you start generating any money on your project, a fellow developer can download the source and make it a policy to undercut your support pricing by 20%. Many customers will stay with you because of additional benefits provided (they like the service better, they like you personally, etc.), but some might switch, too.
    • I find it odd, that someone would refer to that as "friction".

      It's called barrier to entry. If the barrier to entry into the market in relation to the reward is low (ie, grabbing your source, and peddling their services with it) then you will one day find yourself staring at competitors with the same product.

      • He was just saying that the size of the market determines competitive interest.

        If your open source support business (that relies on the product you wrote and GPLed) generates $30,000 a year, that's hardly enough for someone to get excited. (Oh, we could get a 33% market share by undercutting prices and then earn $10,000 this year!)

        Things start to happen when the revenue number hits six digits. Then it's time for some bright college student to download the source, study the app and then buy a newspaper ad

      • market friction (Score:4, Informative)

        by rm007 ( 616365 ) on Friday June 04, 2004 @01:25PM (#9336508) Journal
        For what it is worth, "friction" is economics jargon for anything that prevents markets from allocating resources with the perfect efficiency usually assumed in basic economic theory. Barriers to entry are one source of friction, but anything from information assymmetries, to transaction costs, transportation costs, etc. etc. all contribute to "friction". Part of the hyperbole of the late 90s was that information technology would enable "friction free markets" - but while it did reduce a lot of sources of friction in some markets, it created new forms in the guise of information overload, complexity due to choice proliferation, uncertainty from the speed that products and services became obsolete etc., etc.
        • One of the best places to see this is in financial markets. It used to be that you had to own a seat on the exchange, or be a heavyweight to get anything close to real time quotes. Now you can see level 2 quotes for free or nominal costs. That is a huge reduction in friction. It enabled proprietary trading (somthing that brokerage firms did with mainframes and millions of dollars) to be profitably accomplished by anyone with a PC and a decent internet connection.
          Some friction remains in the market (ac
    • Your reasoning is flawed. You are assuming that the guy who comes along and downloads it will be as intimate with not just the code but how to use it effectively as well.

      Also, as the principle developer or author of the software, you have a certain "ownership" that no one else can have unless you abandon it. You can claim, "They don't know it half as well as I do. I wrote it. I've seen X iterations of it. I know what works and what doesn't. They are just now getting familiar with it." You have instant cred
      • You are assuming that the guy who comes along and downloads it will be as intimate with not just the code but how to use it effectively as well.

        It's the issue of time. Right, you cannot pull a guy off the street and expect him to know the internals of a Java PDA sync utility, but if you're serious on starting, you'd do your research and prepare yourself, since this is your core business. Also, it's likely that you won't have to have complete familiarity with the code down to the for loops and if statement
    • Many successful open source services companies retain closed source utilities or dual licensed products. This raises the barrier of entry to would -be competitors while retaining the benefits of open soucre for the core of their codebase.
    • Now of course he works for Microsoft, so he's going to have a somewhat limited view of open sourcee. But seroiusly, has that happened with MySQL AB (the company the makes MySQL)? Even in the enterprise linux market nobody makes a direct copy of, say, Red Hat Enterprise Linux and sells cheaper support. I've found it useful to always take anything that comes out the Microsoft Machine with a grain of salt.

    • The Zesiger License [zesiger.com] is a license that addresses this. It allows an open source project to be commercialized for 2 years before being required to release the source openly. This provides a healthy lead over competitors that simply want to tweak and repackage someone else's commercial products, without doing any R&D, or other risky investment of their own.

      During that two years, a business could package their source for their clients under another license, such as the GPL, which will prevent the code fro

  • Comment removed (Score:4, Insightful)

    by account_deleted ( 4530225 ) on Friday June 04, 2004 @01:20PM (#9336441)
    Comment removed based on user account deletion

    • The GPL's popularity is what causes this chasm between commercial vendors and Open Source. In a way, the GPL's belligerent and iron-fisted stance on Open Source has encouraged closed source by drawing an uncrossable line between that which is GPL and that which is not. The OpenBSD project's goals [openbsd.org] appear to be a rare negative reaction to the GPL. They aim to keep their project open source, but without any of the GPL's heavy-handedness.

      If people started converting their Commercial/GPL projects to a license


  • I don't know this guy's product in detail, but I quickly looked at the website, and it seems that he shouldn't be aiming for street-customers - I think he should be pitching to hardware vendors who want to bundle the software in with their hardware, but don't want to develop/manage it in house.
  • It seems to me the real barrier is going to be that this is functionality people expect their *hardware vendor* to provide; so to turn it into a profitable business you need to do OEM licensing instead of GPL and target manufacturers of PalmOS devices.

    • It seems to me the real barrier is going to be that this is functionality people expect their *hardware vendor* to provide; so to turn it into a profitable business you need to do OEM licensing instead of GPL and target manufacturers of PalmOS devices.

      This is something I've tentatively looked into. It is certainly going to require further investigation.

      Currently our primary users are corporate environments that neeed synchronization services and support on non-Windows platforms. PalmSource does a fin

      • I admit that I'm MUCH more familiar with the PocketPC market than the PalmOS market. However, here's two business models that seem to have worked well in the PocketPC market (at least among the hardware vendors I know and have had machines from: Hitachi, LG, Audiovox, and HP):

        1. Get on their Shareware Catalog. Almost all third party vendors (I doubt you could do this with Palm, Inc. but Handspring and Sony spring to mind, and I'm sure there are others) want to differentiate their product by having mor
  • Start by reading this book [amazon.com] cover to cover.

    Take a class on how to run a small business.

    Start part-time, and hire people to help you as you grow (refer to the book a lot).

    Provide exceptional service.

    Good luck!

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