Open source business models – OpenCall Case Study
Many businesses consider using open source software as a means of keeping software license fees low. The selection of Drupal instead of Adobe CQ or Sitecore makes eminent sense if you’re primary intention is to keep the cost base low. Traditionally, the downside of open source was lack of commercial protection, professional support and a lack of roadmap. How things are changing.
In the past few years there has been an emergence of companies building commercial businesses around an open source technology platform. Drupal has found a commercial home in Acquia and Commerce Guys (among many others) who offer a range of professional services, support and hosting options. WordPress creator Matt Mullenweg founded Automattic offering commercial bolt ons to WordPress such as Akismet and JetPack.
When we examine the business model of these open source businesses there are two main activities that require attention:
Firstly the development of the core open source product offering. For some organisations this isn’t a case of actually developing the product, but is a community management role.
Secondly, these organisations are investing in and delivering professional services that support the core product. This may include solution hosting, development services or the sale of add-on products that enhance the core product.
Opencall case study
Former colleague and good friend, Scott Bowler recently transformed his software company, OpenCall, in this way.
OpenCall provides international call tracking services for marketing and sales professionals. Essentially a different phone number can be applied to each campaign or piece of marketing collateral allowing you to track which posters, flyers, website searches or events are generating calls. An important metric in multichannel marketing.
Originally Scott launched OpenCall as a paid for product. However he soon realised the power of the platform and decided to give away the business’ core asset for free. Users are now free to select how they customise and host the software. Of course Scott can then offer a range of professional services and hosting options around OpenCall to take the strain out of the customisation and hosting for end users.
Scott and I had the opportunity to discuss his reasons for transforming the business into an open source model:
Scott Bowler: “I was the first mover in Hong Kong to offer call tracking services, and as it was a new concept I had to first educate potential clients that the product existed and then convince them they needed to pay for it.
This was an uphill struggle, and when a major competitor entered the market I decided it was either time to adapt or shut the doors as my startup funds were dwindling.
“I couldn’t compete on features with the new competitor (who have been going for 18 years) so the only thing left was to compete on price.
“This is when the light bulb went off in head. The beauty of call tracking software is that it can work in any country – all you need are phone numbers and a local carrier. I had been using Plivo to supply my Hong Kong numbers, and they currently offer numbers in 200+ countries.
“I figured that if I could compete on price with a local company, I could compete globally. By going opensource, I effectively moved the price point to 0 and when you combine that with Plivo’s wholesale pricing I knew that nobody in the entire world would be able to compete with me on price.
“In addition, by going open source (and being the only open source call tracking platform out there) I could build a community which would develop features rapidly, allowing the system to quickly catch up on features of the big players.
“I saw I had an opportunity to disrupt an entire industry, and I decided to take it.
“The new business model is now centred around hosting and support.”
D: What are the risks and opportunities associated with open sourcing the platform?
SB: “In this instance, I didn’t see any business risk by going open source. Either my business would be unable to compete and close, or I could pivot and give it one last shot. The benefits are potentially huge – I’m disrupting an entire industry’s pricing model, I’m building a team of passionate programmers and opening myself to a global market. I’m also levelling the playing field, making it possible for a company of any size to realise the benefits of tracking calls.”
D: What has been the reaction so far?
SB: “The reason has been fantastic – on the day I launched the website received over 15,000 unique visitors. We’ve had 6 people from 5 different countries add code to the project and the number of leads went through the roof. I’m confident Opencall will succeed and that I did the right thing by pivoting my business model.
“Only time will tell whether this turns out to be fact.”
Conclusion
As Scott admits, time will tell how successful this approach will be when compared to OpenCall’s enterprise competitors.
Ultimately the success of open source as a strategy is going to rely on OpenCall’s ability to attract free users, build a community and then experience a viral spread of influence. Scott then needs to transform this influence into paid for add ons and services.
For many organisations the most disruptive thing they can start to do is give away the core asset. Certainly when the price is free, risk is reduced for the person selecting your product. The buyer’s challenge then shifts to optimisation and running of the product – problems that your business is available to support (for a reasonable fee of course).
David Sealey is a trusted adviser to senior executives on getting the most from their investment in digital and data. David created Storm81 as a place to share his passion for business, digital technologies, multichannel marketing and everything else around these topics.