This is the second part of a series.
- Part I: Is Open Source right for your business? – Introduces some of the advantages of open source licenses but also makes clear that you should make the decision for open source based on your go-to-market strategy.
- Part II (this post): Your go-to-market strategy should drive the decision for open source – discusses a basic framework to determine if open source or at least a freemium strategy is something you should consider.
- Part III: Which is the right open source business model for you – discussed the different options for open-source-based business models as well as adjacent models.
Let’s assume that your business already has a general strategy. This means that you in general know what your desired market position is and how you want to get there. Your product, marketing, and sales strategy should all follow this strategy of course. One key area is your go-to-market strategy which defines:
- who are you selling to,
- what resonates most with this group, and
- how are you selling to it.
To figure this out, you need to look at different dimensions of your business. The most important ones are your customers, your company itself, the ecosystem you are operating in, and your product. Every company is different, and so is your go-to-market strategy. This post does not intent to cover all aspects on figuring out how to go to market. Our goal is to “just” find out if open source is the right licensing strategy for you or not. To do this, you need to answer the following 15 questions:
- How is your market segmented? Developers or end users? Technical buyers? Line of Business buyers?
- Is a high level of innovation needed for your target segment?
- What kind of company are you selling to? SME vs. enterprises?
- How much awareness do you need to create? Can a user community play a role in this?
- What is your approach for demand generation? Do you sell to users? Cold calling?
Indicators for the need of open source: Your market segment is developer-centric, or at least you deal with technical buyers. Your buyers care a lot about a high level of innovation. It is important to quickly integrate the latest technical developments.
Indicators for the need of a free offer: You mainly sell to smaller companies. Your most important lead source are the users of your product. Cold calling, events, or other forms of lead generation play a less important role. A user community exists for your product created through word of mouth.
If nothing of the things above applies to you, you can stop reading. A traditional enterprise software approach is more likely to work for you.
- What is your mission? What motivates your employees?
- What is your sales channel? Direct or do you have a large focus on indirect channel? Is the indirect channel creating own intellectual property based on your product?
- How service-intense is your offering? Is your product a self-starter?
Indicators for the need of open source: Your mission anchors around changing the life of many people or disrupting industries. The main path to achieve this mission is to build allies. You depend on partners who create their own intellectual property around your product.
Indicators for the need of a free offer: Your mission anchors around market leadership and owning a market. Your product is a self-starter and does not need a complex setup or lots of education.
- Do you need to make a fast land-grab or are you in a market where you replace an existing solution?
- Who are your competitors? Are they already offering products for free or even under an open source license?
- Is your product part of a technology stack? What about the other products? Are they open source?
Indicators for the need of open source: You have many competitors and some offer their product already open source. Your product is part of a technology stack where all or most other products are open source.
Indicators for the need of a free offer: You follow a land-grab strategy trying to own your market quickly.
Be careful if you are in a market with only a few competitors and none is open source yet. It often does not make sense to open your own product in the early stage if there are no other reasons for doing so.
- Is your product supposed to be the best-in-class leader in your field? Or are you following a good-enough strategy replacing an existing solution?
- Can a community fill gaps in quality assurance, documentation, or education?
- Do you offer an API so that developers can augment your product through extensions?
- Is your product running on-premises or is it Software-as-a-Service?
Indicators for the need of open source: Your product is solid but not best in class. You follow a good-enough strategy for replacing current market leaders. You have a strong user community which is willing to help you on documentation. You have an API for extending your product or envision a marketplace for extensions.
Indicators for the need of a free offer: You have a SaaS product with only little time commitment necessary to get started.
It is hard to motivate a user community to provide documentation. Do not over-estimate your ability to get input from your users on those things!
How to read your answers to those questions?
Now three things can happen:
- No or only a few indicators for open source: If you only got a few positive hints that an open source license is the right thing for you: don’t do it. You will only get the disadvantages of open source but none of the advantages.
- Hints that you need a free offer but the license does not matter: Use a freemium-based business model instead of an open source license.
- Hints that you need a free offer and open source matters: Go with an open source software license. And chose one of the open-source based paradigms for packaging & pricing (next post).
To illustrate this framework with an example, I give you some of the key answers for RapidMiner:
- Our buyers are technical buyers and developers (data scientists in our case).
- Data science is a field with a high level of innovation.
- We already have a user community of more than 200,000 users attracted by word of mouth.
- We use a PQL approach for selling, i.e. customers become users first before we sell to them.
- RapidMiner’s mission is to change the way of how the industry of data scientists is working.
- We sell directly and through partners, who often create own intellectual property.
- The data science market is still premature and a fast land-grab is the desired strategy.
- Crowded competitive landscape with many open source technologies.
- The technology stack for data scientists is full of open source technologies.
- The evolution of data science and machine learning is so fast that an API for extensions or a marketplace is a must.
There are also some points which make RapidMiner not perfect for an open source or even a freemium approach:
- Data science is complex; the product has some learning curve.
- We sell to companies of all sizes, especially also to larger enterprises.
- The product is among the best in class.
But as you can see, there is more evidence that an open source license is beneficial for RapidMiner than not. You can do the same exercise for your business which should tell you if open source is something you should consider. The next step is then to develop a business model around a good packaging of your product. We will discuss this in the next post.
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