A Marketing Model for Open Source
A year ago I wrote “Howells Ten Rules for Open Source Marketing“. This generated a lot of positive feedback and was featured in “Enterprise Open Source Journal”
Alfresco is looking like it will be the fastest growing company I have been at. This made me review the rules and also think about a simple marketing model for open source. Marketing models are often dominated by position - Position in the technology adoption life cycle or Position relative to competitors. I have previously worked for companies focused on crossing the chasm in the early days and later being leaders. I have also worked for companies that were number 2 to a dominant player. The marketing models we used and the understanding of them was critical as it drove a coherent approach to:
- Segmentation
- Competition
- Differentiation
- Positioning
- Messaging
I have previously worked for:
- Ingres – Number 2 competitor to Oracle before they started dominating the market
- Documentum- Leader in Document Management
- SeeBeyond - Number 2 competitor to Tibco in Europe and number 3 in US
There are many approaches to marketing models – Moore with “Crossing the Chasm and Darwin and the Demo“, Ries and Trout with “Marketing Warfare” and ex Microsoft marketing people Zagula and Tong with the “Marketing Playbook”. Often you focus on your position in the market – a follower or a leader – the Avis vs. Hertz model or a gorilla, a chimp or a monkey model.
To make dramatic growth you need two things:
- A shift/discontinuity that shakes up a market – this may be legal, regulatory, technical …
- Customers who have a pain or are making a trade-off
A classic example of a trade-off is many people would like a fast, luxurious BMW but most would rather pay for a Toyota. In software terms it is common for users to have to choose between an expensive, hard-to-use ECM system with robustness, and performance or a low-cost collaboration portal that doesn’t meet their ECM requirements. This is a market that is ripe for commoditization and open source is the market shift to accelerate that commoditization. Martin Mickos of MySQL is famous for reputedly saying ” I want to make the the $10bn relational database market a $3bn market - and get a 30% share“. He also said “Business class is fine but economy gets me there at the same time and you don’t send all of your employees business class.” What is needed is a simple marketing model to capitalize on this situation.
Commoditization is taken for granted in many industries. We all drive commoditized cars. Commoditization is about:
- Efficiency of Development and Manufacturing
- Efficiency of Distribution
- Increased Quality – With high volumes things just have to work
- Reduced Cost
Open Source is made for these market conditions:
- Lower Cost of Software Development – Community, Best-of-Breed Open Source Components and world class engineers
- Low Cost Distribution Model – Internet and SourceForge
- Low Cost Of Sales – Model of Discover, Try and Buy with out a large costly sales-force
- High Quality – Large scale Community testing
This results in dramatically lower cost for the purchaser. The advantages that open source companies have are:
- The Internet, Blogs, RSS have levelled the playing field
- No Legacy
- Being able to start with a clean slate
So when these components are put into a marketing model you get the following. [We have used and field tested these ideas and I have used Enterprise Content Management as an example]:
Situation
Users are looking to rollout ECM to all desktops but have to choose between an expensive, hard-to-use ECM system with the robustness and performance you need or a low-cost collaboration portal that doesn’t meet ECM requirements and the alternatives don’t integrate. There is a resultant very low adoption of ECM – estimated to be 5% to 10% of users
Segmentation – Why Choose
What users want is a low cost, simple to install system that is easy to use and scale-out. It should be simple to develop content centric applications and fit in with a corporate architecture The target is all users who manage content and want a scalable, robust system – “Why Choose”. This is the massive under-served segment between the high-end ECM systems and at the low-end SharePoint. Often these users store content in a shared drive today and use email for collaboration. These are the tools of mass usage.
The segment becomes even more attractive when the focus has been in acquisition and integration as opposed to innovation. This is common as a post bubble strategy was to buy companies to fill out the portfolio at bargain prices.
The segment becomes even more attractive if standards are emerging.
Model Rule One Segmentation: Choose a segment with a large under-served mass between the high-end and the low-end. A lack of innovation in the segment makes it even more attractive. Emerging standards as well make the segment irresistable
Competition
Your competition are the high-priced legacy vendors that are effectively on their way to becoming boutiques. You need to become the brand for the masses with a high-end cachet.
High-End: Content Stack Players
Low-End: SharePoint
Model Rule Two Competition: Your competitors are primarily the high-priced enterprise vendors (and to a lesser extent the low price alternatives) not other open source vendors
Differentiation
This is critical as it has to be simple to explain and indisputable. It is critical to attack “the weakness in their strength” - classic Ries and Trout marketing warfare. An example is:
Differentiation/Comparison Content Stack SharePoint Alfresco
Low-Cost/Easy-to-Use_______N_______________Y________Y
Scalable Robust_____________Y_______________N________Y
Open Choice:______________N_______________N_______Y
OS, App Server,
Java vs. .NET, Portal
Model Rule Three Differentiation: Differentiate on high-end features at a price that people can afford. This is packaged as a simple to install, simple to use and simple to scale-out system. This also fits in with the existing corporate standards lowering TCO.
Positioning
You are entitling people to what they were previously denied. They no longer have to make a trade-off.
The Open Source alternative for Enterprise Content Management Model
Model Rule Four Positioning: Keep the positioning simply. We are the open source alternative for (generic term for expensive proprietary vendor)
Messaging
This should complement your positioning as offering the high-end functionality that users require at a price that they can afford and drive people to try your offering. This is much more campaign oriented.
- By the makers of Documentum® and Interwoven®
- When you are looking to rollout ECM to everyone you don’t have to break the bank
- If you know Content you know Alfresco - Content Wanted
Test Drive Alfresco today
Model Rule Five Messaging: This should say high-end functionality (without stating it explicitly) at a price users can afford and drive people to try your offering
Proof Points
All of this should be backed up by indisputable facts.
- Architecture – Choice of Operating system, RDBMS, Java vs. .NET, Portal, Office suite, Browser
- Scalable, Robust – JSR-170 Benchmark
- Low-Cost, Easy-to-Use – Customer Testimonials
Model Rule Six Indisputable Facts: Have a proof point for each of your key differentiators to make buyers feel comfortable to make a decision to try and buy your offering.
Alfresco is composed of senior executive from very successful traditional enterprise software companies such as Documentum, Business Objects and Interwoven who joined in the belief that open source is the future of software. Geoffrey Moore pioneered marketing for high-tech disruption in the 1990’s and then ten years later talked about marketing and business model discontinuity in Darwin and the Demon. In the 1990’s many enterprise software companies adopted basically the same fundamental marketing models. Open source is a significant change where different successful companies have become successful in differentiate ways. The understanding of open source is accelerating by the month as are marketing models, marketing execution rules and licensing. Hopefully this will stimulate some thought. Open source has to have a different approach to the massive gorilla software companies of today. It can’t use its dominant position to force its platform. There is a better way.
I’ll explore alternative models for different types of companies later.
