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Closing an open-source deal through your systems integrator

How does an open-source company foster unfettered adoption of its software while preventing would-be partners from undermining its ability to make a profit?

In an open-source business, a vendor's biggest competition often derives from a freely available, "community" version of its product. By extension, an open-source vendor's biggest competition comes from the systems integrators that provide implementation services around that vendor's community software.

Crippling this competition--so tempting on the surface--tends to cripple all the benefits that come from it, including facilitated adoption of the software, and lower sales and marketing costs.

The question, then, is how to foster unfettered adoption of one's open-source software while still preventing would-be partners from undermining one's own ability to profit from the software.

Over the past two and a half years, my company, Alfresco, has struggled with this tension and has, I believe, come up with some winning strategies and policies. I share them here, in case they're helpful to you in your own efforts to build an open-source business.

  1. Require your systems integration partners to invest in your company's success. This means that they should be contractually bound to distribute a company's commercial versions. You're not giving the their services away; why should they give away your software?
  2. Don't let partners start implementation services until the prospective customer has purchased a subscription. In the open-source world, the software is not generally the trigger for a purchasing decision, as the prospective customer already has the software--or some variant of it. Service thus becomes the trigger: the promise of support and, as I suggest here, the promise of implementation services. Held together, they provide prospective customers a compelling reason to purchase, which generally is as much in their interests as it is in the vendor's, as the IT buyer needs a reason to purchase today instead of next month or next year.
  3. In return, invest in the partners that invest in you. Alfresco has a lot of partners, but there is a core of partners that we trust absolutely with customers to do great work and to promote our interests in tandem with theirs. These are the companies that get our leads. Any would-be SI partner that approaches you with palms up should be sent away with its tail between its legs. This isn't a charity.
  4. Make partnership meaningful. In addition to the leads you provide your SI partners, invest in co-marketing and other differentiators to help would-be customers choose them over the more parasitic members of the community, which opt for the community version of your software because the SI has no value beyond cheap labor and cheaper software.
  5. Align interests with your SI partners. Alfresco made a conscious decision not to get into services. This means that our partners know that they will earn maximum dollar doing services for our customers and that we will never compete with them for a customer's services dollars. It also means that our valuation is enhanced by predominately holding subscription-based product revenue on our books.

These are a few strategies that we use. They provide incentives to prospective SI partners to commit to an open-source software company, leading to better value for the partner, the vendor, and the customer.