Notes from Open Source Business Models, with Jim Whitehurst

I meant to write and post this earlier this week. Unfortunately, I ended up being too busy/tired from preparing my upcoming travels.

It’s been two weeks since the original event. It was very rewarding. What originally drove me to the event was the topic of business models for open source technologies. While I am uncertain of my future ventures, I am very interested in making contribution to the open source community. Here are some notes I’ve jotted down from Jim’s talk:

Jim Whitehurst is the President and CEO of Redhat. Coming from the airline industry, he took the torch from a line of successful CEOs and scaled it beyond its Linux business. His talk was mainly focused around successful business models around open sourced software. There was a hint of evangelism for open sourcing technology in his message, but he’s certainly preaching to the choir with me.

User-driven innovation is the strength behind open sourced technologies. What makes open source projects so powerful and innovate so quickly is because most of the contributors are users of the technology. Dogfooding is a powerful driver to push the technology forward. Leaders of a open sourced business must always keep that in mind.

Value and defensibility are the keys behind a successful business model. Often, the key innovation from a startup is how it changes consumer behavior by creating a new way to purchase an existing value. For example, Uber changed the way we purchase rides; just as Amazon changed the way we shop for, well, anything.

Enterprise users require the stability of long software life cycles, thus creating an opportunity. A key hurdle for open source technology adoption at large enterprises is instability from the rapid innovation. Bridging that gap, however, is where many open source technology companies create monetizable value.

The contributor community is essential for any successful open source project. To continue promoting the rapid, user-driven innovation to sets open source technology apart, creating and managing the community is critical. For a project-leading business, this may include supporting features and fulfill requests that does not generate monetary value. They must not overlooked, however. If the community fails, so does the lore of the project, and thus the business.

Lead the open source community by being the largest contributor. Besides supporting the community, it is also important for to properly lead the project. A business can lead an open source project by becoming its largest contributor. But do balance the business requirements and the community requirements. It’s not a proper community if your engineers are the only ones contributing.

Product road map are crucial to enterprise users, creating another opportunity. Knowing, and perhaps influencing, where a critical open source technology goes is critical for enterprise users. It allows them to plan internal development cycles in conjunction. Thus, the influence a business gains by being a project leader is a tangible value that can also be monetized.

Full stack compatibility and stability can be guaranteed through certification, while only innovating one component. Thinking along the stability requirements for enterprise clients, a open source technology business can implement capability certifications for third-party products across the vertical. It allows the enterprise clients to have trust in the full vertical, while only requiring the business to build a particular layer.

A scalable business must have a scalable business model that extends beyond the initial product. Consider that a key innovation behind a successful startup is its business model. Then for the startup to scale, so must its business model. A scalable business model can allow the business to extend beyond its core product, but also other verticals. For example, Google’s key business model is targeted ads. By staying true to it, Google was able to support many seemingly unrelated products, including Gmail and YouTube, that ultimately strengthens its portfolio.

Enterprise clients buy business solutions, the technology is only a piece of the puzzle. This is a key learning for me, recalling my experiences in B2B sales. Ultimately, the technology isn’t nearly as important as the product owner would like to think. Any B2B deal must be driven by a business need and provides a business solution.

I am extremely fresh with building businesses around open sourced projects. Meanwhile, I do believe in its cause. If you have tips and tricks to share, please let me know!