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Open source = market development

Marten Mickos is a very smart man who gets market development, says CNET Blog Network contributor Matt Asay.

Generally, when a company wants to open a new market it needs to spend months to years dumping money into it to stoke demand.

MySQL and other open-source companies do market development a little differently. They dump software to seed a market. Lots of software.

Sun executive and former MySQL CEO Marten Mickos discusses this in a recent article with Computer Business Review:

I would say the ratio [between raw downloads and installations] is between one in one hundred and one in one thousand. If you look at averages you get useless information, because we might get 10 million downloads in China and we know almost none of them will pay anything in the near future. In the web 2.0 space, most will pay. In countries with a high GDP, many will pay, and in those with a low economy absolutely nobody will pay today.

The old model would have had MySQL spending money on sales and business development teams in these emerging markets, trying to figure out when and how to scale teams there. In open source, the customers download the software and tell you when they're ready to buy.

More efficient. More productive. More intelligent. And it's not just a matter of emerging markets. It's also a matter of emerging customers. Mickos goes on to say:

In open source we say fail fast, scale fast. Many web 2.0 ideas will fail, but when Google or Facebook [two of MySQL's biggest customers] get it right they suddenly need to scale like crazy. Open source is the only model where they can scale fast on exactly the same code base; it's the same product. All of the [commercial] database players have free versions, but when you need to scale you need a slightly different version [of the database].

Customers tell you when they're ready to buy more (support or other services around the software). You don't have to spend the same amount of time trying to convince them to deploy the software to get the value of Feature X. They already have the software. They already know.

It is such a simple model, and so effective. The only thing preventing more software vendors from changing to the model is years spent cheating customers on an anomalous 20th-century proprietary model. That model is dead: just look at what VCs are funding. The dinosaurs of the proprietary world will be with us for many years to come, but the new companies being born are open-source and SaaS (software as a service). That is the future.