The Open Source CEO: Satish Dharmaraj, Zimbra (Part 8)

In this eighth installment of the Open Source CEO Series, I spoke with Satish Dharmaraj, CEO of Zimbra, the industry's leading open source email/collaboration software.

Satish is the rare CEO who whose intelligence dwarfs his ego. He has managed to build one of the most interesting and media-hyped startups in the software world, with a highly competent team (which includes Scott Dietzen, former CTO of BEA), and yet he remains humble and seems happy to let others on his team shine. You'd think that more CEOs share these qualities, but in my experience Satish is a rare find.

Name, position, and company of executive
Satish Dharmaraj, CEO, Zimbra.

Year company was founded and year you joined it
The company was founded by me and my co-founders in December 2003.

Stage of funding and venture firms that have invested
We are now past our Series C, having raised money from Benchmark, Redpoint, and Accel.

Background prior to current company
Prior to Zimbra, I managed the messaging business at Openwave Systems which, interestingly, had little or no influence on Zimbra's open source initiative.

Rather, I got the open source "bug" while leading servlet/JSP efforts at Javasoft. We had a free servlet engine/JSP compiler that was downloaded many times and became viral to the point that the web, which had once been dominated by ASPs, slowly started seeing JSPs. This taught me the immense value that a viral/developer/community impact and influence can have on a product. We took on a behemoth like Microsoft and became the more prevalent development platform (I would submit that JSPs are today more prevalent than ASPs).

Since that experience, the power of community has always been in the back of my mind. The power of cool technology is multiplied many, many times by the power of the developer community.

Biggest surprise you've encountered in your role with your company
This will sound cliche or possibly self-serving, but my biggest surprise was that the cost of sales in open source is dramatically cheaper than any other company/role that I have seen in my career. I had heard the hype around this, but seeing that it was true, and to such an incredible extent, really opened my eyes.

Basically, our cost of sales is picking up the phone, walking through pricing/discounting and support packages, and getting the P.O. If a customer is not interested in purchasing our product they never even call us; instead, they download and use our forums for questions. This means that 100% of our customers have been inbound leads. I would have never ever thought we could build a fabulously succesful company without a single cold call. But that's precisely what we're doing.

Hardest challenge you've had so far at your open source company
The issue of indemnity comes up many times at large customers. There is a lot of FUD and confusion around IP and open source. Unless the customer is very savvy, they think the best course of action is indemnity when many times its not a big deal at all.

If you could start over again from scratch, what would you do differently?
This might appear cocky but we wouldn't do a single thing differently. The stars aligned for us amazingly well and we executed this play exactly the way we wanted to. The timing was perfect so I wouldn't even say I wish we had started this company a year earlier or later.

Top three pieces of advice for would-be open source CEOs

1. Focus on innovation and differentiation.
2. Do not make open source your value proposition. Something else in what you create needs to be your differentiation.
3. Do not compete on cost of license/software against proprietary software.

Also, I believe that a combination of open source and software as a service is a powerful business model that will challenge incumbents in a very real way. It takes a certain kind of sales manager, sales person, and commission plan to support our business model: one that cannot be easily replicated and one that provides a dramatically low cost of sales and very predictable and smooth revenue curve. Year 1 revenues may not be as good as a traditional license company but in years 2, 3 and 4 this model comes out ahead easily and is the right long-term revenue model to adopt.

Very true that Zimbra has fortuitously (or through intelligence, or likely both) fired on all cylinders. To those of us on the outside, the company has not done much wrong: it was not the first with an Ajax-heavy email "client" but it proved to have the best, most focused company behind it. Satish should get a big share of the credit for this.

Next up in the Open Source CEO Series...Ranga Rangachari of Groundwork, an open source systems management company.