For Profit Businesses

Back to the panel now. First of all it is important to point out that both these organizations operate with the intention of making money. This obviously isn't true for every one of the over 140,000 open source projects listed on Source Forge. Both companies have more than a hundred people contributing to the product as paid employees and clearly are oriented towards generating value for their shareholders. In fact, John attributed being a 'commercial open source business' as one of the keys to SugarCRM's early success.

What is interesting is that they have been able to build these businesses with so much less capital than previous closed source applications in their space. John estimated that SugarCRM has achieved the same market traction at this point that Salesforce.com did in the first 3 years, but with about 20% of the costs.

Creating an Architecture of Participation

They have done this by creating what both panelists called an architecture of participation, which they built into their business strategies. John covered six components to that 'architecture' that made participation straight forward with SugarCRM:

• Extensible Project - SugarForge: a site developers can go to and create their own complementary projects (currently over 8,000 developers have participated)
• Easy for anyone to participate (easy to download, share ideas, etc...)
• Others Can Profit - Sugar Exchange: a site for people to create extensions to sell their wares
• Transparency: for example the support forums are completely public, whether you use the software or are just interested in it
• Access to the code (it is open source after all)
• Easy to purchase the PRO edition

SugarCRM has had 3 million downloads of their application and it has been translated into 50 different languages, so they are obviously doing something right.

MySQL has an even larger audience receiving approximately 50,000 downloads a day of their application. Marten framed the significance of this in an interesting way. He pointed out that their closest (closed source) competitor has fifty-six thousand paid employees. However, every day he has fifty thousand passionate new users. He quipped that while it is easy to disregard these as mere amateurs, "Noah's Ark was built by amateurs, Titanic by professionals."

Still Have Sales People, but ...

While this model certainly has led to some interesting distribution and keeps the cost of sales low, it is important to point out that both organizations have executives responsible for sales. In fact, MySQL has over 70 sales professionals. The difference is they are focused on selling consulting services and support, instead of proprietary software. While MySQL doesn't disclose their revenue, it is about equally divided between services, support and revenue from OEM partners.

Conclusion

The Web 2.0 conference has been organized under the theme 'web 2.0 is _____' - with everyone contributing something different in the blank space. In fact, the conference organizers provided conference t-shirts with 'web 2.0 is ____' and gave all of the attendees markers to fill in our answers. Many of the answers filled in centered around collaboration with users and efficient distribution.

What I found interesting after listening to the above presentation is that not only can web 2.0 entrepreneurs build sites on top of open source projects (like MySQL - L.A.M.P.), but they can actually learn a lot about promoting their services from these products. So the next time you're in a marketing meeting trying to figure out 'distribution', an interesting brainstorming question is -- what did mySQL or SugarCRM do?