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?"

Comments

Special challenges.

[torpor]

What were the special challenges or obstacles faced?

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 /. responses ... Work *hard* on finding yourself customers, harder than you want to, even ...

OpenSource to Business

[bensin]

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.

I am going to do that too

[prostoalex]

The support model for open source is somewhat interesting. It's pushed quite frequently as panacea for open-source businesses, but I was reading Chris Pratley's blog yesterday (he works for Microsoft), and he was pointing out some interesting and obvious problems:

You can grow a business to the extent that there is "friction" in the marketplace that makes it not worthwhile to clone your product and business (say, to $100,000). But if your business grew to a significant size (say, $1 million) then someone else will come along, covet that money, and use your source to kick start a clone of your business. This is true in hardware as we all know (all the cheap knockoffs you see of original products), and the friction costs are higher in most cases for hardware. If for example you make an open source accounting app that starts to do well, I can take that source, study it, and start selling and supporting it for less than you offer it, and we can have a price war until we're both paupers, or one quits. Even better, as you make improvements, I get to incorporate them in my product as well, so you can't really stay ahead of me for any length of time.

The full post is here.

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.

Worth Repeating (Re:Special challenges.

[dmorin]

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.

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!

You're facing an uphill battle.

[fmaxwell]

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.

market friction

[rm007]

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.