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!)

A great first year!

Dear friends,
This last year at Openbravo has been an extremely exciting and at the same time a very encouraging experience.
It seems like only yesterday that we were releasing our code on SourceForge and hoping that there would be a receptive audience of people interested in helping us to build the world’s best open source ERP solution. Just one year later, the sheer volume of interest, support and success we’ve enjoyed has been amazing.
After publishing our source code in April 2006, Openbravo rapidly became one of the key open source ERP reference solutions, with consistent top rankings in every major metric of activity compared to all other software projects published on SourceForge. Since Openbravo passed the 100,000 downloads mark on New Year’s Eve 2006, download rates have continued to grow. We are now opening our second office, in Barcelona and have continued to expand our team with excellent professionals experienced in handling the growing international demand and opportunities that exist for Openbravo.
In September 2006 we officially launched our Partner Support Unit by unveiling our Friendly Partner Program. Distinguishing Openbravo from other start-ups in the space, this program allowed us to build a network of 20 partners with whom we have been expanding our services while fine tuning support processes and acquiring further partners to help scale up our offering. The confidence that Openbravo gained through working with our first partners and the constant help and feedback we received was crucial in guiding the design of our latest program and we very much appreciate every effort and continued support.
In April 2007, having successfully closed our initial friendly partner phase, we launched an unprecedented, breakthrough Partner Program. This new program, which I invite you all to review, incorporates some extremely innovative services that contribute in creating a secure and powerful network of international partners. Today, thanks to this program, we are able to attract best-in-class partners from all over the world. They rely on our expertise to extend our successes to a large array of end customers of all different sizes and from a variety of sectors.
These successes have not gone unnoticed. We’ve been discussed in magazines such as Fortune, CIO Magazine, and Enterprise Open Source Magazine. We were also invited to join the Open Solutions Alliance (OSA) as a founding member alongside companies we very much respect, including JasperSoft, CentricCRM, Talend, SpikeSource and Hyperic. We are extremely positive about the work being developed there to foster interoperability among different open solutions, and proud that our COO Josep Mitjà has now been invited to act as OSA Board Member. Other leading open source gurus and companies have also helped us in our plans, and it would be unfair not to mention the help we have received from them (you know who you are ;-) ). Thank you so much!
We’ve been fortunate enough to work with some fantastic developers and be assisted by a wonderful group of employees and friends. The success of the Openbravo project on SourceForge has been built upon through the creation of the Openbravo Wiki, while the demand to use and develop Openbravo worldwide has led to localisation projects for over 20 different countries. As requests have come in for features like PostgreSQL support and a web services interface, the incredible talents of the developers and supporters of Openbravo have continued to meet and exceed our goals.
While we are proud of our successes, we’re even more excited about the future. Forthcoming developments including a thrilling new web interface, revised focused ERP functionalities and interfaces to the other leading open source projects are being created right now and will be released over the next few months. In addition we are working on the next generation platform architecture of Openbravo, code-named Openbravo Green. You can see our progress and goals for Openbravo Green on our publicly-available roadmap. Making our roadmap public is just one of the ways that we aim to show how transparent and shared our vision is. We truly believe in open source development, and that a web-based open source ERP solution can not only match the proprietary solutions available, but surpass them and create a solution that redefines ERP software in the process. The only way to make our goals happen is through the continued hard work of many, many people. For those who have helped us with that hard work and invested their trust, time and effort in us, please accept our sincerest thanks.
For those of you now joining our broad community, we wish you a warm welcome and thank you for joining and opening ERP’s future!

The boring bits are a SAP's strength

Last week, while still in Cannes, I read an article about SAP’s point of view on the impact of open source in ERPs. Henning Kagermann, SAP’s current CEO, declared in Computer Business Review that “Open Source is an option for operating systems and databases but not at the business application level”. This point of view does not surprise me since it is not a new statement coming from a top software executive. In the past, important executives such as Bill Gates and Steve Ballmer also disregarded the Open Source opportunity/ threat in the operating system world. But … you know … what really strikes me is the main rationale that Henning was using to support his point of view. He argumented that Open Source successful projects are those where developers like to work for “fun” and literally said “I have never seen anyone who likes doing that (referring to altering applications to cater for legal or regulatory changes such as Sarbanes-Oxley or Basel II). That is not fun. There is no choice. The boring bits are a strength of SAP” .
I am really astonished … Can we imply that SAP’s strengths against open source competitors are only built upon boring pieces?. Does Henning see open source competitors failing on their purpose because there is no fun on building ERPs?. If that was the name of the game … and you are working at SAP … please tell your boss that our growing community encompassing now more than 50 employees and more than hundreds of individuals working for IT companies around the world is really having “fun”!!!!. But please tell him that we are not having fun for the sake of fun. And here it comes the true reason why open source will make it in the world of ERPs: Fun for the sake of building Openbravo, the leading open source ERP Company in the space. At the end experience tells us that everything that can be built on open source, is finally built on open source (see other similar projects that are building business applications successfully with open source @ the Open Solutions Alliance )".

Anyway … I am convinced that we will see Henning in the future adapting its pitch as many others (read Gates and Ballmer) have done it. Don’t you think?

Red Herring Top 100 Europe

Next Sunday I will be travelling to France on behalf of Openbravo to accept the “Top 100” award, presented by Red Herring. I am extremely satisfied with the award since it not only recognizes the work and results achieved so far; but also it points out to what I truly believe is one of the most differential elements that we have as a Company: the capacity to innovate! Opening ERP’s future and becoming the leading ERP in the space is a huge project requiring innovation toward building a solid and thorough business approach. And guess what … Openbravo guarantees this continuous innovation with one of the most professional teams that I have ever had. Allow me to celebrate with a big open applause or better yet, a big open bravo for our team. Guys … let’s make it happen!!!

Back in April 2006

I think it is time to start my own blog and share with all of you the experiences, thoughts and ideas that I have as the CEO of Openbravo. It has been already more than a year since I joined this fantastic company and had the idea to start my own blog from that day onwards.

The idea was so strong that I was about to launch the blog the night we published our code in SourceForge. We had such a heavy workload that I judged at that time that the blog could wait. Today, almost 10 months after, we can not wait anymore and I would like to open this blog with the article I prepared at that time. The title of the post was obviously “Openbravo has gone live” and I continue to believe and feel strong on the reasons why Openbravo will make it happen!. The post prepared said the following:

Today is a great day for all of us, employees and community, since very early in the morning at 02:00 a.m. www.openbravo.com went live!. This website is the corporate website of a company that is committed to change the world of ERPs for small and medium enterprises (SMEs). But how come?. The answer is quite easy: combine a great product with open source and a great professional services company and you will get it … the future of open source ERPs opened!.

We know that this will not be as easy and simple as it is to say it but we know that 1) the arguments for change are too powerful to fail and 2) we are ready to make it happen!.

1. Arguments in favour of a management system really adapted to the needs of SMEs, in favour of not charging for functionalities that aren’t really used, in favour of recognising the critical role of IT services companies (often named as distributors by proprietary software firms), …
2. Our company background with more than five years of history, our vision and plans for the future and our people combining the right set of skills and excitement make us believe that we are ready!.
   

To finish this first article in our blog, I want to once again share our excitement with all of you; opening-up our ERP to the world; making it available to the community; building-up a professional services company; and directly delivering value to IT integrators and indirectly SMEs really thrills us up!. At this stage, we hope that you share our excitement and YOU JOIN OUR COMMUNITY!