Many open-source projects begin with a techie who has an itch to scratch. None of the existing tools do exactly what he wants, so he builds his own solution—then makes the source code available to the world at large. Other developers, excited about the new approach (and with an itch in the same hard-to-reach spot), contribute bug fixes or add new features. This model works, as long as the primary adopters are themselves technical folks… but enterprise managers aren’t quite so keen on the idea. They want a single phone number to call.
That’s why I was particularly interested in talking with John Newton, CTO and co-founder of the open-source enterprise content management system (CMS) Alfresco. The company, founded in 2005 by John Newton (co-founder of Documentum) and John Powell (former COO of Business Objects), has something I’ve rarely encountered in the open-source community: a PR agency and marketing consciousness.
Instead of a project that began with the attitude of “My Dad has a barn; let’s put on a play!” the Alfresco team started with a core competency in content management and looked for new market opportunities. Alfresco saw open-source as a unique distribution mechanism. That’s the same phrase you hear from techie open-source proponents, but they generally mean, “We build it, and they come… and if they don’t come, that’s okay too, because our code is groovy.” The projects may have succeeded, but nobody made money. And, last time we looked, landlords wanted to be paid.
Sure, they knew what they wanted to accomplish product-wise. Alfresco envisioned a CMS that reflected enterprise needs; while plenty of open-source CMSs are available, they’re generally streamlined for a single use such as Web site development. Alfresco’s competition isn’t drupal, joomla and plone as much as it’s FileNet, OpenText and Documentum. The software emphasizes the core CMS pieces. Open-source lets the company bring out a cost effective platform, Newton said, with 80% of what people use, including records management, image management, a collaboration platform and content repository. Newton would have been perfectly happy to discuss product features with me, and obviously enterprise users are reassured by the founders’ stellar backgroudn. But my interest primarily was piqued by this unusual situation of a “regular” company that Speaks Enterprise, which also happens to be open-source.
The team interviewed open-source experts to learn what works, and built its business model on those best practices. The founders were new to open-source, but were open to experimentation: should they sell services? apps on top of the base product? What made the most sense? “We experimented with a couple of models,” explained Newton. Some were soon rejected. For example, the open-source model wherein part of the code is free, but enterprise features cost money didn’t work for governments that mandated completely open-source products.
Instead, claimed Newton, “We found that there’s an OEM and VAR opportunity.” People will download the software and try it out. But when they’re ready to put open-source into production in an enterprise environment, they can and do purchase services, such as tech support, rapid maintenance response and immediate access to bug fixes. The code is 100% open source, under a GPL license. (They’re not alone in this. According to Newton, companies like MySQL are beginning to adopt this business model.)
Community-wise, they got all the benefits of the open-source development process. Because Alfresco used a lot of open source software in its creation, the project went very quickly. In six months, the first version was ready for beta testing; a production system was done by the end of 2005. Although they’d expected to build a developer community from scratch, “There was a disaffected group of people who were part of the enterprise CMS ecosystem but who were not necessarily treated very well,” said Newton. Those individuals were happy to participate in an open-source project where their contributions made a real difference.
Although Alfresco is very marketing aware—I was, after all, contacted by a PR professional to suggest this meeting—its typical sales cycle is completely different from the standard enterprise process. According to Newton, Alfresco doesn’t sell into the enterprise directly. Someone in the customer organization (primarily a techie involved in the content management role) discovers the software online, pokes at the it long enough to determine that it’s feasible for their needs, and then sells it to her own management. By the time the customer picks up the phone, they’re pretty well sold; larger enterprise customers (and they do have some big ones to brag about) might require a single visit. As a result, their sales cycle is 40-50 days from first contact, versus 9-12 months for typical enterprise software vendors. Newton estimates their open-source “cost of sales” as 20% of what the proprietary vendors budget. “We can sell software cheaper at a profit,” he said. “All low cost, convenient alternatives totally disrupt the industry.”
“Marketing is the best way to do it—but sales is not,” said Newton. That’s a lesson that other enterprise application vendors, and those who buy from them, can learn from.