3 success factors and 3 things to avoid when building an open source business

On June 7th Stephen Walli invited me through his blog to list three success factors and three things to avoid when building businesses using open source software. This is coming from a challenge initiated by Mikko Puhakka that tagged three people to jump in (one of them was Stephen) and there is already a good number of opinions being posted through this interesting pyramid (e.g, Marten Mickos, Javier Soltero, …). So here I go:

My three success factors for open source projects are listed as follows:

1. A great product at least equivalent to successful proprietary competition

• Very obvious point but a must that becomes a "killer" aspect when combined with open source. A great product generates positive word of mouth from its users which is directly amplified through the natural dissemination mechanisms of open source.

2. Active and relevant community

• Mandatory to properly leverage the two most critical aspects that open source enables from a business standpoint of view:
• Facilitate the development of quality software
• Facilitate the Sales & Distribution of software

3. Solid business plan executed by a great team of professionals

• The business plan of any successful open source vendor should be build leveraging a mix of low touch-high velocity products & services sold arround the core open source product. An excellent team of professionals is the key ingredient to define, build and maintain the right business.

My three things to avoid:

1. Unbalanced leadership

• A great product is developed by excellent product engineers. A great business is developed by a team of professionals with the right balance between technology and business skills. Typical business issues that should be well thought are: h2 build a leading brand in a world full of proprietary software?, h2 accelerate community growth and foster dissemination?, h2 acquire, develop and maintain best in class partners when starting up?, ...

2. Mismanagement of company growth

• Open source by definition is international as of day one since software is available in the internet. If things go well … demand is much larger than the capacity of the start-ups behind the product to serve it. A well thought offering helps you grow your company without compromising quality service levels.

3. Unclear/ unfair policies that confuse your community on what is for free and what is offered at a fee

• I love Marten Mickos presentation @ OSBC this year which said “Success in open source requires you to serve: 1) Those who spend time to save money and 2) Those who spend money to save time”. This is only achieved by being very clear, fair and open with your company policies.
  

People I have tagged to continue the challenge (I exclude the ones that have already been tagged by others such as Marten, Matt, Javier,…):

• Fabrizio Capobianco (Funambol's CEO, open source guru, great entrepreneur and another European in the Valley)
  
• Peter Fenton (One of the most experience Venture Capitalists in the space from Benchmark Capital, who has a very distinct opinion about the real drivers behind Open Source businesses)
• And last but not least … Josep Mitjà (Openbravo’s COO and Open Solutions Alliance Board member … sorry Josep but lately you are not posting messages in your blog and the world needs food for thought!)