Open Sourcing Software in a Large Corporation?

code-libre asks: "I work for a small R&D group in a large corporation. We've spent the past few years developing a small but unique piece of software that was originally meant for internal use only. A VP recently approached us and asked if we could 'package and sell' the software so as to get a direct return on investment - at prices as much as $500k. Within our group, we worry about the costs associated with long term support and maintenance. We are also sure that a price over $10k is ludicrous, let alone $500k. I think it would be an excellent move to open source the software, but I need some advice..." "Even at a price of $10k, we don't expect to sell more than maybe 20-50 licenses. Costs associated with producing this software thus far are approaching $2mil, so we doubt our costs would be recouped. It is thus relatively easy to make the case that we _shouldn't_ sell the software.

On the other hand, it is software that will be vitally useful to those in the right markets. I would like to present the idea that releasing the software for free (and open source) will have two effects: one, branding the software turns it into a free piece of advertisement for our company in emerging markets. Two, open sourcing it will allow for others to help improve the software, which we in turn can use to our advantage - an indirect ROI.

Will points like this fly at a large corporation with little to no policy on giving stuff out for free? How can I convince an older generation of business leaders that FOSS is the way of the future? Ideally, I would like to help the company setup a internal group that could expedite small internal projects to the market place via FOSS routes. Any one have any experience with this?"

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Dream on.

[Electroly]

From what I can deduce from your post, you've got basically zero chance of convincing the higher-ups. And frankly, I'm not even sure that open sourcing it is a good idea, anyway. If your target market is 20-50 customers and it's a niche piece of software, you're dreaming if you think anyone is going to do any work on it, much less submit patches back. You're essentially giving your $2 million of R&D away for free with no gain for the company. No corporation is gonna go for that.

Re:Dream on.

[Yaztromo]

If your target market is 20-50 customers and it's a niche piece of software, you're dreaming if you think anyone is going to do any work on it, much less submit patches back.

Even the smallest projects can form a community if they are sufficiently unique, and meet a need that isn't met elsewhere.

It's hard to say anything about the target market of a piece of software without knowing more about the software in question. Those 20 - 50 customers may be those who are willing (and able) to pay $10k USD for a software package. But who knows -- maybe if it is effectively free it is something that will find use, in whole or in part, by a larger number of users, for quite some time to come. It all depends on what it does.

Yaz.

While I support Open Source...

[rogabean]

I would prolly caution you to be careful with this. You say this software is reaching close to 2mil in development costs. That's quite hefty for an internal piece of software. Open sourcing the software could be of great benefit... but make sure that you don't open source you or anyone you work with out of a job if it turned out that less devs were needed. (I don't know enough about your current situation)

As to how to approach the VP and other PHB's... You're going to have to go the only route that will make sense to them... Show how it will help their bottom line. That is why he came to you to begin with, and it's what he wants to hear. Giving away software he is looking to sell isn't going to recoup the costs of developing said software.

Sell support perhaps?
Maintain two versions? An open source version that feeds into closed version perhaps?

This is a tough one if your VP's mindset is dollars.

I had zero luck with it at with one of my previous employers where I was in a similiar situation (although with less 0's in the figures) I just couldn't find a way to appeal to what they wanted to see... money.

Re:While I support Open Source...

[ameoba]

Exactly - even if sharing the program wouldn't result in a competitors gaining a significant advantage over your company, 'open source' implies a much larger scale of colaboration. What you might suggest would be more along the lines of a 'strategic partnership' or something along those lines - an agreement to share the burden of development of the code. With $2M in development costs, flat-out giving it away to the world sounds like an iffy case, at best, to make even if, as you say, supporting it as a commercial product doesn't make business sense either. What you might propose is, instead of selling it as a product would be to get some 'buy in' fee to become a partner in the project - a financial and contractual obligation to shoulder part of the continued development costs.

Granted, the OP was too vague about what the project is, what kinds of effects it might have on the market and what use it would be to other groups, it's hard to say anything absolutely. A collaborative effort such as this might've been easier to sell to the suits at an earlier stage, before $2M had been sunk into the project.

You are right when you talk about support issues - nobody's going to drop $500k on a piece of software, even if they get source, without expecting some sort of support or continued development and, if the market's as small as you believe it to be, that probably won't be cost effective.

In the end, these sorts of decisions really should've been made -far- earlier in the development process. Waiting until you've got a final build in hand is entirely too late to think about making it a commercial product. If nothing else, you've designed the entire product without seeking any input from potential customers - it may not even properly meet any of needs.

Business impact analysis

[abulafia]

What you need to do is write up a business impact analysis for the various options.

You're already thinking in the right ways - C/B of selling at a certain price.

Don't forget support commitments, opportunity cost of turning your R&D lab into a customer facing "profit" center, etc.

Also, don't be surprised if, as you go through the process, you find that a certain price-point, set of behaviours, or various possible changes would make it profitable.

Re:Business impact analysis

[alienw]

Well, the problem is that he is dead-sure that open source is the way to go. Here's a quote:

How can I convince an older generation of business leaders that FOSS is the way of the future? Ideally, I would like to help the company setup a internal group that could expedite small internal projects to the market place via FOSS routes.

It doesn't seem like he wants to just give the management information. It seems like he is dead sure that open source is the way to go and assumes the "older generation" of business leaders don't know what they are doing. I'd say he is trying to make the decision instead of simply providing objective information.

Who Owns it?

[guard952]

You built the software for the company, meaning they contracted you to build it for them.
That means it's their software doesn't it?

Take the money

[abradsn]

A piece of software that is worth that much should be taken full advantage of. This is what R&D is meant to do for a company. If you are in R&D this is supposed to be your job, and it is supposed to pay off for your employer someday. Don't complain when this actually ends up successfull.
Open source should not be a consideration for this unless there is some other mitigating concern? Such as the company needs open source, or the software is stagnant because the company doesn't have the resources to apply towards development.
You can always Open source it later.

No need to worry about support effort required

[Curmudgeonlyoldbloke]

If they try and charge $500k and don't sell any, you won't have a problem (at least not that problem, anyway).

"We" who?

[DerekLyons]

Even at a price of $10k, we don't expect to sell more than maybe 20-50 licenses.

And of course 'we' (the R&D group) have done a complete market survey, yes?

We are also sure that a price over $10k is ludicrous, let alone $500k.

Ah, no 'we' haven't done any marketing work - 'we' are just guessing and assuming 'we' know more than the folks who are paid to do such things.

On the other hand, it is software that will be vitally useful to those in the right markets.

Unlike your average Slashgeek, companies who are serious about making money don't quail at spending money to make more. That's why the company you are working for funds and R&D group in the first place!

A terrible idea -- probably

[Malor]

Your business obviously thought this software was valuable enough to spend two million bucks making it. It's a competitive advantage; you have it, and the other people in your industry don't.

If you open source your software, then your competitors get it too. But instead of spending two million bucks, they get it for free, so they have money to spend on OTHER stuff that YOUR company doesn't have. You are weakening yourselves considerably, hoping to get a payoff of equal or greater value.

So you'd need outside code contributed that would be worth at least another couple million. The chances of that happening are laughably small. Unless your software addresses a very broad horizontal market (at least tens and probably hundreds of thousands of possible installations), there's no way you'd ever get two million bucks' worth of patches.

The LAMP programs, Linux, Apache, mysql, and Perl, have probably gotten that level of free time donated. But there are very few others, and you most likely don't have 'the new Apache' on your hands. Let's charitably put that chance at 'tiny'.

Not all code should be or needs to be free. You would definitely be doing your customers a favor if you included the source code with the product, with strong restrictions on what they can do with it. But just releasing it into the wild directly and immediately harms you a great deal, and has only a small chance of paying off.

From the very rudimentary data provided, it looks like open sourcing your product is almost exactly the worst thing you could do.

Re:I hope you don't work for the same company as I

[damsa]

I would be concerned if I was a manager at your company for not thinking creatively.

Software development is a sunk cost. Any other use of it is a win unless support costs outweigh the amount of licensing. If they sell 30 software licenses at 10k each then that is 300,000. Also that is 30 companies they will have to support. This may mean hiring more people. If the software usefulfness lasts 5 years, then hiring an extra programmer at 60k a year to do support will nullify the gain of selling the software for cheap.

What this guy is saying. The software is useful but opensource it, so other companies will use it, maintenance needs to be done can be done elsewhere thus saving the company potentially hundreds of thousands of dollars.

In return the company gets free advertising, and goodwill with other companies. And since, he is going after emerging markets, may introduce a way of entering lesser developed countries via a trojan horse.

I'm not saying its a good idea or not, but I think this person is a lot more intelligent and useful than you give him/her credit for.

Re:Sales

[gl4ss]

what he doesn't GET is that the software they've made is unlikely probably to sell 1000 pieces AT ANY PRICE.

there's big chances that it's only usable for use in similar big corporations to their own - and they can afford to pay 500 000$ if the software cost 2 mil to develope(but there probalby is under 100 companies that would be candidates to be customers anyway).

basically... what would be the point of open sourcing it? for fun? if the vp wanted you to package it for selling(at half a mil a pop) then there's practically no chance that he would be willing to give it away for free.

make it seem financially a good thing to open source it - like, sell the support at 500 000$ per company per month or whatever.

Pay attention to what RMS actually *says*

[sickofthisshit]

Somebody wasn't paying attention to RMS's actual ideas.

1) FREE AS IN SPEECH, NOT FREE AS IN BEER.

If you feel so strongly, the customer can be given the source along with supporting documentation, a one year contract for support, customization, or whatever, and your company still gets money. Speech can be private, and can be compensated for.
The *real* point of Open Source is no secrets between developer and user. Nothing says Bob on the street corner needs to know.

Nobody says you have to put it on SourceForge. I suspect 99% of projects on SourceForge don't belong there anyway, and that about 5% of downloaders from SourceForge do something to change the source code, and less than 1% actually do any useful development to support the project. Basically, I see SourceForge as a vanity press: anyone can upload their new Java-based MP3 jukebox alpha-quality software, and feel like they are part of some cool movement, striking a blow against the man. But that's another topic.

2) Quick career hint: a company pays your salary because it thinks it is getting something *more* valuable in return, not to send you on some ego trip as an OSS missionary. Save that for when it is *your* company.

If you are known to higher-ups in the company as someone who was absolutely essential in a multi-million dollar revenue stream, and is likely to do similar things in the *future,* they might not outsource your job to India. (Unless you are already working there, in which case, they won't outsource it to China.)

And if you are tired of working for your company, that kind of dollar figure next to "head developer" will get you hired a lot more quickly than "code monkey."

Re:I hope you don't work for the same company as I

[sickofthisshit]

What is it about open source that makes it equal pixie dust in the imagination of Slashdot posters?

Open Source != others magically do free "code maintenance."

That's like saying giving a teenager the keys to your car means they'll get you that oil change and take it to the car wash and return the tank full of gas. Not likely.

99% of people who see code should NOT be doing maintenance on it. They didn't spend the time to understand the design, they don't have the training to code, and they are as likely to break something as to actually do useful maintenance. MOREOVER, with a license like GPL, they *don't* have to give you back the changes unless the distribute the binary *with changes* to *YOU*.

Open Source == customer can do focussed customization if they wish. Or port it to their new Linux server. Or can get support from somebody else (like *YOU* as a contractor) if your company keels over. But giving people a .tar.gz file doesn't make them developers.

Re:stop thinking logically

[orasio]

GPL is your friend here.
If you are in a proprietary software market, your competitors wouldn't be allowed to used GPLed source.
But you get the advantages of giving your software freely to anyone who wants to play with it. Your company would be a nice company.
Of course, free support from the "community" could or could not happen, you shouldn't count on it.
You should only GPL your software, from a bussiness sense, if you want to make your software more used, or if you want to undermine your proprietary software competitor's software dominance (a nice blow). If you want free PR, it's good too, if your target audience is the kind of people that likes that kind of thing.
If you want to sell services, and think you can, it's good too. When the code is free, there is such a thing as a free market for support, so you can get a way with charging as you want for support (at least enough to make it worthwile), without being a bad guy ripping off locked-in customers.

But one important bit, from the bussiness sense, is GPL, don't BSD. That way, if your software is worth 500k to company that can afford it, you can re-license it under a proprietary license and charge them as much as you want. It's not a new thing. Mysql does something like that.

Re:stop thinking logically

[Egregius]

You're missing the fact that not releasing this software means the competitors will need to develop the software themselves..at a 2 mill setback.

So the choice is..keep competitive advantage within the company, or make 200-500k.

Considering this, and the small market, I don't see ANY advantage to open sourcing it. It's not like open sourcing it will mean hordes of programmers improving your software for free. It means giving up your competitive advantage.