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The Linux Effect of the Enterprise Software Model

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No doubt, open source startups are changing the rules of the traditional enterprise software market. At least that’s what a panel made up of MySQL, JBoss, SugarCRM, and XenSource execs and moderated by VA Software chairman Larry Augustin was happy to proclaim loudly and clearly.
In one raucous LinuxWorld session, MySQL, JBoss, SugarCRM and
XenSource execs discussed how the companies are having an impact on
the enterprise software Model.

John Roberts, CEO and co-founder of open source CRM vendor SugarCRM, asked rhetorically whether spending most of an enterprise software vendor’s money on product marketing, as is usually the case, is the right way to go. Roberts argued that open source provides a more efficient model for software that costs less.

Peter Levine, the new CEO of XenSource chimed in that it was mind boggling to him how much attention Xen has gotten without spending any money on sales or marketing.

“Here we are, a small company, and it’s amazing to me how visible the brand and the technology are,” Levine said.

However, brand alone isn’t enough to pay the bills for an open source company.

Marc Fleury founder and CEO of JBoss commented that open source has significantly lowered barriers to how customer sales cycles work. With open source, customers simply download the applicant and they try it out.

MySQL CEO Marten Mickos  added that you still have to close the deal.

MySQL 5 has had approximately 50,000 downloads a day since its release, which presents a particular problem when it comes to leads and lead qualification.

Mickos explained that MySQL is careful with lead qualification and doesn’t go after reluctant customers. He admitted that out of 50,000 downloads MySQL may close only five customers per day.

“The rest help us fix bugs and write blogs about it,” Mickos said. “We don’t believe in conversions. Mostly we see the majority will never pay. They love to spend the time to fix it themselves.”

Fleury argued that the key to selling the technology is through developers.

“If you don’t have the developer base that digs your product, you don’t have a business in open source,” Fleury said. “That’s the complete bottom’s up approach.”

But for SugarCRM, that may not necessarily be the best approach.

SugarCRM’s Roberts said that in his case, the critical aspect is users and ease of installation.

“I think its not so much about being a developer, it’s the reverse,” Roberts said. “If people don’t use the project, it won’t materialize.”

As opposed to traditional vendors that rely on salespeople’s promises and one-off demos to sell a product, Roberts argued that when you decide to move forward with open source, you know exactly what you’re getting and not relying on a promise.

Augustin asked whether it mattered if users actually look at the source code for an open source application.

“Why do we have airbags when no one uses them?” Mickos said. “It’s completely irrelevant how many look at source code. If it’s one, 100 or 1 million, that’s fine.”

“It’s enough that the developer knows someone can see it,” Mickos said.

In his view, a developer that releases sloppy open code would be ashamed if it were open because others could see it, which is not the case with proprietary software.

Though free downloads and open source code are important, there may also need to be an economic benefit to the open source Developer, as well. That economic benefit could well be a slippery slope.

“We love the open source stuff and we love to make money,” Mickos said. “Sometimes we’re on too much one side or another. And when that happens we hear about it.”

This article was originally published on

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