Competing with the wrong companies (Hint: go after proprietary not other OSS)

On Competition and the Open Source Ghetto

I remain frustrated by the complete lack of marketing and business sense that many open source companies continue to display. I thought that we were past the whole foolishness of competing in the ghetto amongst ourselves vs. the big proprietary guys with lots of dough but it seems that the argument has just started taking other forms.

I just can’t see a point in competing against other OSS companies/products when none of them have cracked a major revenue barrier. Everyone should be targeting the incumbent proprietary vendors who have all the money.

Let’s make some assumptions

-The majority of OSS companies that launched in the last 3 years are doing less than $10m in bookings for 2007, but let’s assume $10m for ease of math

-If we take multiple proprietary companies within a specific market segment the impact on that company’s revenue is equal to 1% (this is theory and easy math) $10m bookings=1% of Proprietary Companies

Total opportunity=$1billion

So let’s say you go to investors and tell them that you want to target this $1 billion market and that there are 2 proprietary guys and 1 OSS player.

Proprietary 1: $500m

Proprietary 2: $490m

OSS: $10m

So, who do you target? The big guys who are responsible for 99% of the money or the other OSS who you probably know better and have more in common with?

The obvious right answer is you target the big market. Who does Zimbra target? Exchange, not Open-Exchange. Who does Alfresco target? Documentum and Microsoft Sharepoint, not Drupal. Who does JBoss target? BEA and Oracle, not Jonas (or Tomcat or whatever.)

The BS of download statistics (or almost any statistic at this point) have become so meaningless and diluted that there is almost no correlation between downloads and revenue. (See Javier’s post here.) In fact, you’ll note that projects like JBoss had consistent downloads for a long time but revenues grew as customers bought more and average sale size went higher as more value was demonstrated. The # of downloads, rank on SourceForge etc. is schoolyard crap which the proprietary guys absolutely love. And they should, since this kind of stupidity only takes the pressure off of them.

If you work for an open source company and your team is focused on trying to beat other open source products you are doomed to economic failure. That kind of focus means you can’t see the big picture and you should just return the money to your investors so they can invest it in companies that have bigger goals. It also probably means that your company is fueled by ego and your investors should probably take the money away from you before you start building Lenin-esque monuments to your engineers for refactoring a project ten times.

I have to admit that I am on a rage/disappointment roller-coaster with this kind of stuff every day. I can see the enormous opportunity that we all have and yet I feel like those who should be working toward the same goal insist on pissing contests with companies that feel the same exact way. In the meantime you probably just lost a customer to Oracle.

Open Source will only prove formidable if we are all working to kill the giants, not each other.