ATO2014: How ‘Open’ Changes Products
Next up at All Things Open was Karen Borchert talking about How ‘Open’ Changes Products.
We started by talking about the open product conundrum. There is a thing that happens when we think about creating products in an open world. In order to understand this we must first understand what a product is. A product is a good, idea, method, information or service that we want to distribute. In open source we think differently about this. We think more about tools and toolkits instead of packages products because these things are more conducive to contribution and extension. With ‘open’ products work a bit more like Ikea – you have all the right pieces and instructions but you have to make something out of it – a table or chair or whatever. Ikea products are toolkits to make things. When we’re talking about software most buyers are thinking what they get out of the box so a toolkit is not a product to our consumers.
Open Atrium is a product that Phase2 produces and people say a lot about it like “It’s an intranet in a box” – but in reality it’s a toolkit. People use it a lot of different ways – some do what you’d expect them to do, others make it completely different. This is the great thing about open source – this causes a problem for us though in open source – because in Karen’s example a table != a bike. “The very thing that makes open source awesome is what makes our product hard to define.”
Defining a product in the open arena is simple – “Making an open source product is about doing what’s needed to start solving a customer problem on day 1.” Why are we even going down this road? Why are we creating products? Making something that is useable out of the box is what people are demanding. They also provide a different opportunity for revenue and profit.
This comes down to three things:
Understanding the value
Understanding the market
Understanding your business model
Adding value to open source is having something that someone who knows better than me put together. If you have an apple you have all you need to grow your own apples, but you’re not going to both to do that. You’d rather (or most people would rather) leave that to the expert – the farmer. Just because anyone can take the toolkit and build whatever they want with it that they will.
Markets are hard for us in open source because we have two markets – one that gives the product credibility and one that makes money – and often these aren’t the same market. Most of the time the community isn’t paying you for the product – they are usually other developers or people using it to sell to their clients. You need this market because you do benefit from it even if it’s not financially. You also need to work about the people who will pay you for the product and services. You have to invest in both markets to help your product succeed.
Business models include the ability to have two licenses – two versions of the product. There is a model around paid plugins or themes to enhance a product. And sometimes you see services built around the product. These are not all of the business models, but they are a few of the options. People buy many things in open products: themes, hosting, training, content, etc.
What about services? Services can be really important in any business model. You don’t have to deliver a completely custom set of services every time you deliver. It’s not less of a product because it’s centered around services.
Questions people ask?
Is it going to be expensive to deal with an open source product? Not necessarily but it’s not going to be free. We need to plan and budget properly and invest properly.
Am I going to make money on my product this year? Maybe – but you shouldn’t count on it. Don’t bet the farm on your product business until you’ve tested the market.
Everyone charges $10/mo for this so I’m just going to charge that – is that cool? Nope! You need to charge what the product is worth and what people will pay for it and what you can afford to sell it for. Think about your ROI.
I’m not sure we want to be a products company. It’s very hard to be a product company without buy in. A lot of service companies ask this. Consider instead a pilot program and set a budget to test out this new model. Write a business plan.
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