Month June 2011

Why Your Open Source Firm Needs a Marketing Strategy

Sandro Groganz Leave a comment

One of the questions I commonly hear from clients is, “Why do we need a marketing strategy? We already have [a PR agency/a Google Adwords campaign/a Facebook presence] that’s working for us, so what’s the point in spending time and money on this?”

In this blog post, I’d like to shed some light on this topic, listing some key reasons why every firm, especially (but not only) if it has an Open Source product, should take pains to create a marketing strategy for its offering. In my experience, this is one of the most critical activities a firm should undertake, and it invariably pays dividends over the long run.

After all, the most valuable asset of Open Source is open conversations that bring together users/buyers and vendors. Your firm should speak with a consistent voice to establish a strong and credible brand.

Understand Where You Are

To be successful in any business, a firm needs actionable, accurate intelligence about the marketplace. The typical marketing strategy will perform a thorough analysis of the firm’s current internal and external environment, thereby giving the firm an accurate snapshot of the status quo and key market trends. Strategic tools like SWOT analysis, market segmentation, and competitor arrays ensure that the firm has a good idea of where it stands vis-à-vis competitors, and offer some ideas about its unique strengths and advantages.

For firms that are creating a marketing strategy for the first time, this information is typically a major eye-opener. For example, the analytical output of the strategy document may help them realize that they’re competing against the wrong firms, or trying to attract the wrong type of users for their product. Performing this analysis may also throw up opportunities they hadn’t been aware of in the past.

Create Consistent Behavior

If a firm has a medium- to large-size marketing department and/or if it works with multiple outsourced agencies, a marketing strategy ensures consistent behavior across members, departments and third-party agencies. A marketing strategy clearly identifies the positioning of the firm and, by extension, its key competitors and target segments. This information keeps different arms of the same organization on the same page, ensuring that all work together on a common goal and mission.

So, for example, if the strategy identifies developers as a key segment, salespeople will know they need a technical sales script, PR agencies will know they need to pitch articles to developer journals, and copy writers will know that Website copy should identify developer benefits. Similarly, partners know which clients are best suited to the firm’s solutions, and will not recommend it to prospects who don’t match the profile.

Optimize the Marketing Mix

A marketing strategy will also help a firm optimize its marketing mix. Every marketing strategy will examine the classic “Four Ps” of marketing along with some additional Ps that are especially important in Open Source community marketing (participation, peer-to-peer, personalization, …), and this examination, coupled with the market analysis and trends, will help the firm better understand what it is marketing, and how it is doing so. For example, based on the SWOT analysis, a firm might refine its existing product/service offering (eg. a product specifically for PHP developers) to better play to its strengths, or it might review existing trends and thereby determine new delivery methods (eg. SaaS) that it can utilize to reduce its distribution cost and extend its reach.

Monitor Progress and Build Business Intelligence

Creating a marketing strategy is, in essence, a process of “writing things down”. The strategy developer is creating a journal or log of data, drawing conclusions from it, and then making operational recommendations. At the same time, he or she is also recording the results of previous recommendations. There are two key outcomes from this:

  • The strategy document works as a measurable checklist, allowing the marketing team to have a written record of planned high-level actions and thereby measure marketing progress and success. By listing and prioritizing marketing activities, it works as an action plan for the marketing manager or marketing department, helping them to organize marketing activities in an organized, systematic manner and with sound rationales and goals for each activity.
  • It serves as a “living document” of what worked, and what didn’t, thereby avoiding costly mistakes in the future. So, for example, if the strategy recommended attending a particular trade fair, but real-world analysis after the event showed a negative cost/benefit ratio, it serves as a flag to tell the marketer to consider dropping the event in the following year. As such, this written record adds to the collective knowledge of the firm and helps it learn from its mistakes.

Conclusion

It might be self-evident that as an Open Source marketing consultant, I would advise any Open Source organization to build and implement a marketing strategy (after all, this is how I earn my money). However, the fact remains that in my experience, this is never a wasted effort and the long-term benefits are significant, both in keeping the firm on track to meet its long-term goals and in giving the top management a tool or framework to define the evolution of the product.

Open Core or Solutions: Choosing the Right Open Source Product Architecture

Sandro Groganz 3 Comments

Today, more and more proprietary software vendors are choosing to go Open Source. Doing this enables them to leverage the community benefits of Open Source, shorten the sales cycle, and gain a competitive advantage over other proprietary products.

However, for those firms considering a switch to Open Source, there are some hard decisions to make with regard to their product architecture. Should they provide only a single Open Source product, and earn revenue from add-on services like support and consulting (RedHat)? Or should they adopt the Open Core model, offering their product under both Open Source and proprietary licenses (MySQL)? Or perhaps some hybrid of these two approaches?

In this post, I’ll consider two common architectures, which I’ll respectively call the “Open Core” and “Solutions” architectures.

Open Core Architecture

The term Open Core is used to describe business models where vendors offer both an Open Source “community edition” and a more fully featured, commercially licensed “enterprise edition”. MySQL is undoubtedly the most common example of this model, although it’s widely in use among other firms as well.

Typically, the enterprise edition product comes with vendor guarantees and support, thereby making it more attractive to larger enterprises. At the same time, it ensures that smaller firms and individuals, who may not require these attributes, are not excluded, as they can freely access and use the community edition of the product, albeit without any guarantees.

Solutions Architecture

Under the Solutions Architecture, a vendor offers separate packages or distributions of the same Open Source product, identified in terms of the functionality they add. Thus, rather than an “enterprise edition” and a “community edition”, the vendor might provide specialized offerings for different skill sets such as a “developer edition”, “database administrator edition”, “project manager edition”, and so on.

Typically, each solution comes with vendor guarantees and all the distributions are based on the same Open Source code base. This ensures interoperability and peace of mind. At the same time, this approach is economical for end-users, as they only pay for the product features that they need, and so it allows both individuals and large enterprises to participate in the product ecosystem.

Which is Better?

Given these two options, which should a firm choose? Here are some arguments to consider:

  • Under the “Open Core” architecture, the vendor’s community edition may be perceived as “crippleware” lacking the more advanced features found in the enterprise edition. Users may accuse it of cynically providing a functionally limited Open Source version merely to drive sales of its commercial version. This can lead to a negative impression of the vendor, and may adversely affect its market positioning.
  • At the same time, by using Open Core terminology such as “community edition” and “professional edition”, the vendor might be seen as implicitly categorizing some users as “non-professional”. Where these users are also contributing to the community, this will naturally cause friction and conflict. The Solutions Architecture, by contrast, makes no such claims and is less likely to produce an “us versus them” mindset.
  • In a fragmented, highly competitive market, a vendor faces competition from multiple niche products, both proprietary and Open Source. In this situation, the Solutions approach allows the vendor to compete effectively against these specialist products, as each distribution is narrowly positioned to attract a distinct market segment.
  • On the other hand, the Open Core approach is an easy sell to the enterprise market. The typical enterprise edition product will include technical support, warranties, SLAs and compatibility guarantees, all of which are critical to medium- and large-size enterprises. In general, it is also easier for a direct sales force to sell a single enterprise-focused product rather than a distribution-based product line.
  • The Open Core model is already successfully in use by many firms. It therefore has the benefit of pre-existing market awareness and acceptance, and it is easy for customers to understand its nomenclature and business benefits. This simplifies the sales process, as there is less customer and salesperson education required.

Conclusion

As the above arguments make clear, there aren’t any hard and fast rules about which product architecture is “the best”. However, it’s possible to identify arguments for and against each approach, and thereby decide which one will be best suited to the firm’s specific goals and requirements. Needless to say, the final decision will have a far-reaching impact on the firm’s business model, competitive positioning and marketing strategy…and so, it should be taken after due consideration of all the relevant factors.