Open Source Strategy Rule 4 – Enterprise Software Companies don’t “Own” Their Customers
One school of thought is that open source is low cost and great for small medium businesses (SMB’s) because that is where the large enterprise software companies (read large and supposedly terrifying) aren’t present. Software companies don’t “own” their customers. In the case of Alfresco, any company may already have Documentum, FileNet, Interwoven or Vignette. The reality is that there is only a 5% to 10% penetration of this software – either on a desktop or on the shelf. What is critical is to focus on people and users in companies and not companies as software fiefdoms.
Alfresco has been very successful in the Global 2000 (particularly financial services, media and professional services) and Government by targeting the non-users of existing ECM systems in these companies. Rather than competitively trying to replace existing installations, Alfresco has targeted the knowledge workers who use shared drives, Microsoft Office, forms for Web contributions and now Social Software for collaborative activities and ECM enabled them. Existing ECM vendors are becoming boutiques, the Gucci and Prada of ECM.
I recently read an excerpt of an excellent report by the 451 group - 451 Commercial Adoption of Open Source - The SMB Market Opportunity. It had a similar opinion. In there it stated:
- The SMB market opportunity for open source software vendors is limited - SMB customers are highly cost conscious and generally lack the IT resources to effectively manage much beyond the simplest project.
- More than 70% of vendors surveyed for this report rely on a direct model to reach SMB customers - Channel strategy is fraught with problems with thin margins and the cost of effectively managing the channel buildout
- Microsoft’s dominance in the SMB market is unlikely to change anytime soon - Open source software that integrates with and support Windows and other Microsoft products will have an advantage
- … may other markets, including Asia, Europe, India and South America may experience rapid growth of Linux and open source software fueled by local government and commercial directives and preferences
Details on the full report can be found at:
http://www.the451.com/caos/caos_detail.php?icid=476
My colleague Matt Asay also wrote a great post on this which can be read at:
http://blogs.cnet.com/8301-13505_1-9831424-16.html?tag=head
So the next time an enterprise software salesman tells you he “owns” an account tell him he will soon be as rare as the Prada suit he wearing (funded by the cost of sale of Enterprise software)
A summary of “A Simple Marketing Model for Enterprise Open Source” can be found at: