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Converting an Open Source Project into a Business?
Yaztromo asks: "I'm about to try to make the jump and move my jSyncManager Project from being a time-consuming hobby into a full-time business. I'm hoping to follow the model of other successful Open Source businesses by selling integration, development services and support contracts. Has anyone in the Slashdot community attempted to move their Free/Open Source projects from hobby to business? What were the special challenges or obstacles faced?"
What were the special challenges or obstacles faced?
/. responses ... Work *hard* on finding yourself customers, harder than you want to, even ...
Finding customers. NEVER underestimate how important this is to the success of your company.
All other problems, and yes there are many with relation to OSS in general, are insignificant.
So many startup guys get rolling, only to be void of life 4 months later because they weren't daily working on getting clients on board who will pay the bills and provide lifeblood to the rest of the company.
Sounds obvious, but I just wanna point it out before it gets lost in the
; -- the corruption of government starts with its secrets. a truly free people keep no secrets. --
Tax forms from the IRS are free. But many people pay someone (who knows what they're doing) to fill them out for them.
I have been working on this project for the pass two years on allowing independent music website a way of selling individual tracks to their users. But after a year of no real bites i decide to turn it up a notch and make it my own business. Which is now . The transition is a whole lot different and a whole lot more stress. You have to be able to hang on and fight for your dreams. Make sure you look for the most efficient ways of promoting your product. Join Newsgroups and etc.... Starting up a business is very difficult so don't expect a cakewalk. Your competition doesn't nee any more competition so you are going to have to be creative in your product and how you market it. I wish i could find forums and website that help guide you through this process but i can't find any right now but if any one knows of any let me know.
So in a nutshell, good luck. But if you start generating any money on your project, a fellow developer can download the source and make it a policy to undercut your support pricing by 20%. Many customers will stay with you because of additional benefits provided (they like the service better, they like you personally, etc.), but some might switch, too.
Can't be said enough. How many times did we all hear about a dotcom that was gonna do just fine because they had exactly *1* customer who was playing sugar daddy (trans: had a piece of the action) and they swore up and down that they were gonna sign a second customer any day now?
Technical knowledge alone won't get you half what you need. Team with a sales person. Just like there are born geeks in the world, there are born salesman. The sort of guys that see free stuff and just instinctively think "I can sell that 12 different ways, I can sell the service I can sell the support I can license the trademark I can merchandise the logo...." You should be able to at least get out of the starting gate with a good salesman on your team.
Then you'll need somebody with business savvy to start making it look and act like a real company and not just a guy with an idea and a guy selling that idea.
Good luck!
www.HearMySoulSpeak.com
By making your work open source, you let your biggest competitive advantage, the fruits of your intellectual labor, slip through your fingers. Consultants who have offices closer to customers can compete with you to provide support, integration services, and development. Seven guys from India who share a one bedroom apartment and will work for $7/hour can compete with you. If your software is even reasonably well documented, competent software engineers all over the world will be able to add to it, modify it, and support it for their customers.
Your best bet is to come up with a new product, make it closed source, and get paid like the guys who sell WinZIP, WinRAR, UltraEdit, Vedit, FTP Voyager, FTP Serv-U, etc.
For what it is worth, "friction" is economics jargon for anything that prevents markets from allocating resources with the perfect efficiency usually assumed in basic economic theory. Barriers to entry are one source of friction, but anything from information assymmetries, to transaction costs, transportation costs, etc. etc. all contribute to "friction". Part of the hyperbole of the late 90s was that information technology would enable "friction free markets" - but while it did reduce a lot of sources of friction in some markets, it created new forms in the guise of information overload, complexity due to choice proliferation, uncertainty from the speed that products and services became obsolete etc., etc.
I've finally got around to changing my sig
Yes, but most people would be hard pressed to find somebody else to (help them) do thier taxes for free.
But; for any moderatly sized OSS project there is a quantity of people who are are all to happy to help (provide support) to you for free through mailing lists, bulletin boards, IRC etc...
Support contracts work best (IMHO) targetted at corporate entities who have a hard enough time convincing themselves to use OSS, let alone accept help from the 'unwashed masses' of the community. Coporates like to pay for things, they don't understand free.
I don't know what this software the poster has written does, or if it does it well. But if corporates are not using it, or likely to use it, then i dn't think I'd bother with support contracts - the 'unwashed masses' don't need or want them (generalising, but true).
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Yes but remember MOST of those people paying to have their taxes done do NOT have itemized deductions or the complexity of corporate accounting to worry about.
MOST of them could actually spend 30mins and do them themselves with no prior experience and only the information that accompanies the form.
I don't know this guy's product in detail, but I quickly looked at the website, and it seems that he shouldn't be aiming for street-customers - I think he should be pitching to hardware vendors who want to bundle the software in with their hardware, but don't want to develop/manage it in house.
Nope.
Unless you're making plenty enough money to either do or have your taxes done, these guys will prepare your tax return for free.
And if you're low-income and have problems with English, these guys will do your taxes for free.
Heck, go to your closest walk-in IRS office during tax season and an IRS employee will do your taxes for you, for free. Of course, if you've no real need for help (either because you made enough money to easily afford someone to prepare them for you or you are easily able to do your short form yourself) they'll decline to prepare your return. But people with a genuine need and the foresight to make an appointment get helped.
It seems to me the real barrier is going to be that this is functionality people expect their *hardware vendor* to provide; so to turn it into a profitable business you need to do OEM licensing instead of GPL and target manufacturers of PalmOS devices.
SJW: a person who perceives an injustice, and while correcting it, commits a greater injustice.
But; for any moderatly sized OSS project there is a quantity of people who are are all to happy to help (provide support) to you for free through mailing lists, bulletin boards, IRC etc...
That support isn't good enough for most businesses. If you ran a corporate website on open source software and had a problem, you probably couldn't post it on a mailing list and hope for a response. Businesses buy support contracts for priority. That's why they'll pay IBM to support a server, with a 4 hour response time, that is under warranty. Service contracts are a simple expense, a cost of doing business at a set cost. Just like software licensing. A system outage is an unknown, and the 'free' part is an insignificant part of the total loss.
Managers feel more comfortable having a phone number they can call when there is a problem, even when, as is often the case, the response is that the support people don't have a clue what the problem is, much less how to fix it. That's just the way people are; we want to know someone is listening when we have a problem.
And it's not that corporations don't understand free. They understand that you get what you pay for. Is it practical for me to learn how to build and configure a firewall, or pay a consultant to do it (and maintain it) for me?
But you are correct that most non-business users wouldn't buy support contracts. The time they spend working on a problem isn't lost revenue. For example, I've been tinkering with MythTV for months. I even bought new hardware. But my time is less valuable than getting something that works exactly like I want it to. As a business decision, I would have just bought a Tivo.
It is amazing what you can accomplish if you do not care who gets the credit. -- Harry Truman
The jSyncManager core software may be free (as in both beer and speech), but it's really just an enabler technology. Sure it has the necessary protocol stack and such for performing data synchronizations, but the real value is in being able to connect it to your applications, databases, networks, and overall dataflow.
That part isn't free. Current users typically have to develop such plug-in connectors (we call them "jConduits") themselves.
My idea is to sell these integration services. Stand-alone, you can run the jSyncManager, but other than for the backup/restoration of data, and some basic functionality (installing PRC's and PDB's, syncing e-mail with a POP/SMTP server pair, dumping standard application records as text, and downloading photographs) the free part doesn't do a whole lot on its own.
As with many Open Source projects, the idea isn't to make money offf the core software, but off the necessary dupport and servicess required to actually make use of it.
Brad BARCLAY
Lead Developer & Project Amdinistrator,
The jSyncManager Project
You keep doing what you do best: programming/enhancing your product.
Get a friend from high school (a big mouth usually) as a partner who will be in charge of just promoting and selling your products and services.
Contract an accounting person to show up a couple days a month to do your books, and a lawyer to help you with patents in the future.
Hire some buddies, hire part-time accountants, and get a lawyer...": That sounds like the formula that lead to the failure of so many dot-coms and is a likely way to dig yourself a financial hole into which all of your savings will go.
The first thing that you need is a real business plan. It needs to be based on sound financial analysis which take into account the potential market, marketing costs, labor costs, competition, office space costs, etc. If you can't get a bank or venture capitalist to finance your company, then take advantage of their wisdom and ask for specifics as to where they saw unacceptable risks. Most of them have seen many businesses start and fail and will have a lot of insight. Don't quit your day job just because someone on the Internet told you that you would get rich selling support services for your open source project.
Before you start talking about partnerships, you need to consult an attorney and an accountant. You need to determine what kind of legal protections and tax protections are offered by various corporate arrangements. Do you want to organize as a Sub-Chapter S, Sub-Chapter C, LLC, sole proprietorship, etc? I don't know the answers, but you need to know them before diving into such a venture.
Finally, you need to try to remain objective. This software is your baby. You've invested countless hours in its creation. But you still need to step back and be realistic when evaluating its future and the competition. Looking at your product, it seems to be appeal to a rather limited audience: PalmOS users who wish to sync their handhelds with Java-enabled PCs AND who cannot use, or are dissatisfied with, the free app provided by Palm for that purpose. Sony has just announced that it is dropping out of the U.S. Palm market, leaving Palm as the only significant supplier of PalmOS handhelds. That should be a serious concern to you. What's your plan if Palm goes out of business or stops supplying handhelds to the mass market?
Heck, go to your closest walk-in IRS office during tax season and an IRS employee will do your taxes for you, for free.
:-)
I have an idea! Let's go up to everybody who wants to take our money, and ask them how much we should pay them! Bloody brilliant!
I agree doing the 1040EZ or 1040A is pretty darn easy; why people get so intimidated by them is beyond me. Maybe it's the crappy arithmetic education in our public schools. But you'd be a fool to go to the IRS and ask them how much you owe them... Let's not have foxes guard henhouses, k?
Is Capitalism Good for the Poor?
The Zesiger License is a license that addresses this. It allows an open source project to be commercialized for 2 years before being required to release the source openly. This provides a healthy lead over competitors that simply want to tweak and repackage someone else's commercial products, without doing any R&D, or other risky investment of their own.
During that two years, a business could package their source for their clients under another license, such as the GPL, which will prevent the code from being used by competitors while allowing legitimate customers to hack the code.
There need not be such a huge gap between commerce and open source. I'm not sure why no one seems to think about this much. It's not necessarily an all or nothing kind of thing.
Before I get flamed, this license can't be used on GPL source, so don't panic and think that someone's going to be commercializing your GPL software. The Zesiger License is only compatible with either fresh, new projects, or BSD-style projects.You jest, I know, but just in case anyone thinks this is a serious point I should point out that the people who prepare your returns at the IRS don't care one whit how much you owe. They won't dig for deductions but they won't throw any away, either, assuming you've got your paperwork in order and they can identify said deductions without spending hours digging. The preparing folks aren't the same as the auditing folks or the collecting folks. The preparing folks want to do a good job and prepare a good return for you. Their performance is graded not only on accuracy but on the customers perception of the service provided, so IRS return preparers have no motivation whatsoever to prepare a return any way except accurately and with the best interest of the taxpayer in mind.
Skepticism is a good thing, usually, but in this case it's misplaced.
Start by reading this book cover to cover.
Take a class on how to run a small business.
Start part-time, and hire people to help you as you grow (refer to the book a lot).
Provide exceptional service.
Good luck!
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You jest, I know, but just in case anyone thinks this is a serious point I should point out that the people who prepare your returns at the IRS don't care one whit how much you owe.
:-)
That's a half-truth.
Would you be saying the same if a privately-owned tax firm were doing the tax prep? I doubt it. Private firms have an interest in doing 2 things:
1) finding as many loopholes as are available to you
2) charging you for the time it takes to find those loopholes, to the extent that it doesn't cost you so much that you go to a competitor offering faster/better service
But the IRS agents don't make any explicit profit off of doing your taxes. So there are 2 possible arguments, hence the "half-truth" nature of your claim:
1) if they *don't* care what you owe, then they're not going to care much whether you get the loopholes available to you
2) if they *do* care what you owe, then the question is "why? Aren't they working for free?" The answer to that question is "no, they don't work for free - our taxes pay for their service."
The problem then is that if we pay IRS agents based on performance, then they wind up demanding more money as their performance increases, which winds up costing more to the taxpaying public.
The preparing folks want to do a good job and prepare a good return for you. Their performance is graded not only on accuracy but on the customers perception of the service provided,
I suppose these 500,000 people who went to the free IRS help got quality service? Or maybe the 19 out of 23 IRS preparers (also mentioned at that URL) were wrongfully-accused of making mistakes?
If they're graded on performance, then I suspect they're not getting A's (maybe with grade-inflation though). I mean, I know people who have had IRS agents call up and say they made a mistake on their return, only to eventually discover that the IRS agent made mistakes in analyzing the return - and in some cases, find that the person was owed a bigger refund than was originally thought!
You get what you pay for, and that goes for tax help as well... (I do my own taxes. Basic arithmetic doesn't exactly scare me...)
so IRS return preparers have no motivation whatsoever to prepare a return any way except accurately and with the best interest of the taxpayer in mind.
...except to take in more revenue for the government, thereby being able to help ensure the govn't gets more money, and then later have their agency leader press Congress for increased salaries for the "poor, overworked and underpaid" IRS employees.
Don't laugh, public school teachers do it (I know, because I know a family of public school teachers).
And no, the IRS is not immune to corruption and political manipulation...
Ultimately, the problem with your argument comes back to the classic problem of "following the money." No matter how you slice it, either the IRS agents have no incentive to care about the work they're doing for "free" (and remember, "there ain't no such thing as a free lunch"), or else their pay increases based on performance (at dealing with an insanely-complex tax code) will start to cost the taxpayers more. Sadly, it's a lose-lose situation.
Is Capitalism Good for the Poor?
No, I wouldn't say the same thing about private preparers. They're in it for profit. The folks at the IRS are in it for a paycheck and, organizationally, to serve the public.
Bingo. You hit the nail on the head. In fact, I think that's basically what I said when I originally stated that they didn't really dig for deductions. CPAs would call the returns they prepare "extremely conservative." Lots of people with simple returns are quite happy to have them prepared in an extremely conservative fashion. People who don't like that are happy to pay the money to CPAs to dig for deductions.
Wow. There are so many misperceptions in that sentence it's tough to parse 'em all out.
First, they aren't agents. Their job tatle is usually "Tax Specialist" and they are informally referred to as "Assistors."
Second, they aren't paid on performance. (Neither are Agents, Special Agents, or Officers.) They're paid a flat hourly wage. Their performance is recorded and has a great bearing on promotions and even the occasional pitifully small bonus, but in the sense that most people would use the language, they aren't paid based on performance.
Third, in general and in this case, government employees don't demand more money when they perform highly. They use their good evaluations to get better jobs, but there's no such thing, in practical terms, as asking for a raise because you do a better job than your co-workers. There used to be something called a Sustained Superior Performance award that was, basically, a raise. Recent changes in our work contract have essentially killed the SSP.
So, basically, pretty much all of the assumptions underpinning your arguments are wrong.
They got pretty good service.
No, not exactly. But if you've ever stood behind the counter and listened to people ask questions, like I have, you'd get a different impression of the whole situation. Taxpayers don't get wrong answers so much as they ask the wrong questions. Yes, technical mistakes get made but the often total disconnect between the words that come out of a taxpayers mouth and the information he actually needs is often mind-boggling. I'm the first one to scream that the tax code is over-complex and those error rates are proof I'm right.
I don't know how to say this any more clearly. The assistors at the front counter of your local IRS office don't give two shits about increasing government revenue or helping the Commissioner testify before Congress. To the assistor, their job is helping the poor sod in front of them make sense of complex rules, thereby making life a little easier for everyone. All that other stuff is so far removed from their existence it does