Distribution Model for Vendors of Open Source Software

For a firm with an Open Source product, making the software available for no cost is a great way to build a community around it and foster bottom-up adoption. However, this is just the beginning: the firm still faces the challenge of monetizing the product, converting intangible assets such as “Open Source freedom” and “community goodwill” into real money that can be used to fund further product development and community building activities.

In a previous blog post, I discussed one possible strategy for monetization: a modules marketplace for open source products. However, this isn’t the only approach. At Initmarketing, we developed a distribution model to help identify distribution channels for commercial open source that add value and provide a way to put a price tag on elements of the commercial offerings (products, modules, and services).

Understanding The Model

This model explores three facets of distribution: product/service offering, delivery method and distribution channel:

  • The Offering column lists the firm’s available market offerings. These could be different flavors of its product(s), product plug-ins and extensions, and related services such as consulting, training or technical support.
  • The Delivery Method column lists all the available delivery methods for the firm’s offerings. For Open Source software, the most common method is usually online delivery, but some products and services (eg. training) may also be delivered directly at the customer’s premises. Many firms also choose to make their products available as a Software as a Service (SaaS) offering.
  • The Channel column describes the distribution channels available to the firm. The obvious one here is the firm’s Web site, which is typically the first place a customer will look for the Open Source product. Many firms also enter into relationships with partners (eg: OEMs or system integrators) to achieve higher distribution for their product. Finally, firms can also opt for the direct sales route, as a supplement or alternative to partner relationships.

An Example: Typical Open Core Product

The model described above becomes valuable when you begin to connect the elements in the three columns together in the context of your firm’s business model. To illustrate, consider the case of a typical Open Core product, which is available in two flavors: Community Edition and Enterprise Edition. If you were to model distribution channels for such a product, here is what it might look like:
From the above it should be clear that:

  • The Community Edition is available for direct download from the firm’s Web site. It might also be available in the firm’s online shop (if present) as a free download.
  • The Enterprise Edition is delivered on-premise and as a hosted offering, either directly by the firm or through partners.
  • The firm also offers both commercial and free modules for the product, which are available for direct download from its Web site (free modules) and for purchase through its online shop (commercial modules). Both types of modules can also be delivered on-premise through partners or direct sales.
  • Services such as consulting and technical support are available on-premise through partners and direct sales.

The above diagram represents some of the typical cases for an Open Core licensed product. For other types of business models, the diagram would change accordingly.

Base for Further Analysis

In addition to providing a birds-eye view of the current or proposed distribution strategy, this model also provides a base for further analysis. For example:

  • It provides a way to identify which delivery methods and channels are most utilized, simply by looking at the number of connections, and thereby derive additional information about sales process requirements. For example:
    • Where products, modules and services can all be delivered on-premise, this imposes a requirement on sales staff to have sufficient knowledge and marketing collateral for all these offerings.
    • Where products and modules are available both for free download and purchase via the Web site, the Web site must provide corresponding information and support infrastructure (eg: payment processing, security, account management).
  • It quickly identifies areas of under-utilization, which in turn represent potential opportunities for product distribution. For example, the diagram has no arrows entering or leaving the SaaS delivery method. This might be an opportunity for the firm to develop a new business model, by delivering its product as a SaaS solution for a specific market niche.

Summary

Distribution is key to getting an Open Source product into the hands of users and developers, and monetizing on top of user adoption. This model is a useful tool to add to your Open Source marketing toolkit as it provides a way to identify key distribution channels for different elements of the commercial offering, identify areas of concentration or under-utilization, and find unexploited opportunities.

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