Companies deploy open source software on the grounds of quality and flexibility, not only because it is cheaper than proprietary products. As Sramana Mitra wrote in her Forbes article “Open Source Means Business”, open source entrepreneurs have found ways to build companies on a shoestring using open source software, and they have figured out how to make money off something generally considered free. While Open source products enjoy a widespread adoption in important corporate deployments, many executives still foster notions about the lack of sustainability of open source businesses.
However, there is a middle way, reconciling community activists with hard-core capitalists. Jahia presents such a middle ground. Jahia is the first Web Content Integration software that manages all types of content, whatever the source, within one simple user interface, including business, collaborative and social application portlets, as well as widgets, gadgets, pictures, Microsoft Office files and RSS feeds. While Jahia’s software is based on Java open source code that is constantly innovated, supported and broadened by the community, the Jahia product manages proprietary and open source content alike. Moreover Jahia found a way to bridge the needs of the community with the needs of its large enterprise clients. While some companies claim they are open source businesses, simply sucking dry freely available open source R&D efforts, Jahia created a 'pay or contribute' open-source model, giving significant discounts on commercial subscriptions in exchange for significant contributions to the Jahia community code base.
As Matt Asay wrote in this CNet article “A look inside Jahia's 'pay or contribute' open-source model,” Jahia is trying to reward customers and contributors, ensuring that they only have to pay once--in cash or in kind--for the value they contribute to Jahia. Proprietary software tends to triple charge: once to include a new feature, next to obtain the new release that includes it, and then for maintaining it. While triple charging is a typical business practice for proprietary software, Jahia’s contributors only pay when they purchase or renew their support subscription, which already includes Jahia software at no additional cost.
Emmanuel Garcin, Vice President and General Manager, explains. “We didn’t choose the Open Source route just to be software philanthropists: Our goal from our inception was to put together a business model that is sustainable, efficient and profitable for our ecosystem (i.e our customers, our partners and ourselves).. Jahia has been around for over seven years and was making considerable profits already in its third year of operation. However, while we are taking advantage of the lower customer acquisition costs, our clients are very sensitive to the fairness and predictability of our business model. Given the current recession, open source software offers organizations an alternate path to technological innovation that doesn’t compromise their strategic IT. Our sustainable and efficient business model allows business users to leverage the most recent, robust and sophisticated standard frameworks without technical skills. This is one of the drivers behind our profitability“
This position is easy to defend when considering financial results by competitors such as Vignette. Some key differentiators are unique to open source and define the success of this model:
Lower customer acquisition costs versus proprietary “legacy” vendors. There is a natural virality associated to open source: a typical sales cycle usually involves prospects downloading the product, installing it, looking at the code, the community and coming back to us fully aware of what the product can or cannot do and ready to buy. It costs less money (and fewer resources) for Open Source companies to acquire new customers.
Open source software has a higher customer loyalty. Customers who "play the game" of open source are trained on the product and get to understand it fully, sometimes contributing or suggesting new developments. They are therefore more involved than if they were just using a traditional product. Lower development costs: leveraging open source cuts development cost and builds fully-fledged application by leveraging and contributing back to the community.
A frequently asked question remains, is Open Source, free, cheaper or more expensive? Proprietary software vendors charge a big upfront license fee as it helps to defray the high initial cost of supporting a customer's deployment of the software. Open-source vendors chop off the license fee and only charge for maintenance and support, so how do they assume the risk/cost in the first year of a contract? For Jahia, the answer to this was subscriptions. The annual subscription cost for open source software is likely to be higher than the annual maintenance cost for traditionally licensed software. In the first year, a subscription is dramatically cheaper. However, over the span of five years, the subscription model becomes profitable and sustainable both for the customer and the software vendor.
Databases, rather than operating systems, are now leading open source into the enterprise, paving the way for more open source. Companies are increasingly talking about open-source 'stacks', giving a full open-source infrastructure to run applications on. This is why today, standards based, open source Enterprise applications fit perfectly into CIO’s roadmaps.
Open source is often unjustly portrayed as a low-cost commodity, with its emphasis on standardization. Proprietary companies such as Microsoft, with expensive R&D efforts, have argued that open source development replicates existing ideas rather than innovating. However, an IDC survey found that the industries perceiving software as the most important to their ability to compete and innovate- such as telcos, which rely on software to provide their core services - also had the highest rate of open-source adoption. Other industries with high open-source adoption and needs for modern technology included financial services and business services.
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