Category: software

The generosity strategy

I’ve wondered for a long time why WordPress doesn’t get the dotcom homage some of the other perhaps less interesting organizations are showered with.

There are many reasons to pay attention to them, but there’s one primary aspect of what they do that’s worth spending some time thinking about – what they give to the market in order to fuel a network that they benefit from in the end.

As Andy Weissman wrote about TED, sometimes giving away the core assets of your business is exactly what will create success for you.

“With the content, processes and brand more freely available, the community and the set of values can instead drive the business. And those are not as easily replicable.”

This attitude is what won them the war with their first rival in the blogging world, Movable Type.  It turns out that generosity is a very competitive strategy in a globally connected world.

Except it’s not my impression that was what they were intending the strategy to be used for. I think they used that strategy because it resonated with what type of company they wanted to have first and foremost.

It’s also true that ‘free’ can destroy established markets in order to create advantage for alternative models.  Bill Gurley has written before about how Google is intentionally using a scorched earth policy with Android, in particular, in order to build an unapproachable moat around their core business.

The WordPress approach has similar effects in the content management market, but they’ve built the core business itself on the open strategy.  They have made themselves dependent on the success of their customers.

I had the good fortune of inteviewing Matt Mullenweg on stage at The Guardian’s Activate Summit event last week where we spent most of our time talking about how the WordPress team operates. This is not a man chasing wealth for the sake of wealth, though wealth may in fact be chasing him. This is a person who understands the DNA of the Internet and knows intuitively how to craft a movement optimized to use the most powerful aspects of the network.

In case you’re unaware, WordPress is a publishing platform. They sell access to the WordPress tools, and they also give away the software.  The whole thing. They put it out there to download for free with an open license. They even make it super easy to install. No tricks. It’s genuine. They want you to use their software even if they don’t see a shred of direct value coming back to them as a result.

Their software is their core asset. Without it they have nothing. Why would they give it away?

What they are building is not your traditional enterprise software business. What they are building is at the very least a partner network if not something even bigger, something that looks more like a movement.

Looking at their business through the enterprise sofware lens is easy to do and certainly worth more consideration. They are leaving a lot of money on the table. They know this, and they’ve made impressive progress recapturing that lost opportunity with their VIP business.

But the founder’s philosophies lead the commercial strategy, not the other way around. WordPress wants to be a platform for free speech. Everything else comes after that.

As Matt said at Activate, “We are a neutral force. We participated in the SOPA blackout because we felt it posed a threat to our ability to stay that way.”

Operating the business strategy at that level creates a framework for all their decision-making.

They can open source their core assets because it strengthens the collective power of the WordPress toolset as a platform for free speech. In addition, it gives them a sensible model for working with developers who want to contribute code to the platform. They can operate with a small staff, prioritize product over profit, and play fast-follower to the break-neck pace of innovation that most of the rest of the top players in the business may be forced to play.

What’s the result of the generous nature of their business?

75M blogs, about half of which are hosted by them, and many of those pay them a monthly hosting fee. 341M monthly users across the network. 20,000 software plugins built by a huge network of developers working on the platform…many of whom make money being professional service providers and premium template designers for WordPress.

Now, they have a lot of powerful forces challenging their existence. Not least of which is the atomization of everything and challenges to the idea of blogs and even articles.

But by embracing a strategy of giving and a deep-seated commitment to enabling others to speak their minds on the global stage, WordPress has something more valuable than robust revenue streams. They have a network of customers who need them to succeed in the world.

That network of people is more valuable than any software or hardware distribution platform.

Open source software as a customer capture tool

I just started messing around with a product called SugarCRM which is an open source sales contact management tool much like Salesforce.com.

SugarCRMThey’ve done a really clever thing which is to build a revenue model around the added services rather than try to charge for the core software. You can download the same app that everyone else uses and install it yourself for free. But if you’re not up to the installation challenge, you can let them host it for you and get started in about 5 minutes for a $40/month usage fee. They charge more for additional services that larger groups may require.

I simultaneously started playing with the Salesforce.com free 30 day trial so that I could compare products. But I quickly realized that my learning curve for operationalizing any CRM system as part of my business was much more than 30 days. I also realized that I wanted the ability to do some major customizations which most likely need to happen at the code level. And I figured a Salesforce.com rep was going to call me and start selling to me which seemed like a fair price to pay but one I could actually do without. In fact, I got a call within 24 hours.

I wouldn’t have considered any of these issues as requirements except for the fact that they are available to me. I downloaded the SugarCRM software, installed it, configured it and uploaded a bunch of data in one afternoon. I now have a view into my customer pipeline that is going to simplify both strategic decisions as well as synthesize the variety of conversations happening across the business.

Now, I’m sure that Salesforce.com is more robust and that they have a lot of services and data integration methods I can’t get with SugarCRM. It must work better for larger organizations. I’m sure that Salesforce.com is more reliable, has fewer bugs, has more 3rd party developer tools, etc. At InfoWorld I learned that the cost of open source software becomes time and customization work which is sometimes more expensive than paying service fees (Aug. 2002, April 2006).

The San Francisco Chronicle noted this week that Salesforce.com is in a strong position with its model:

“A growing number of small businesses already realize that, despite recent problems, on-demand software makes more sense than setting up your own computer network.”

A sales manager at Salesforce.com informed me that he has never personally had to sell against SugarCRM in any of his calls. The market for it is probably pretty small.

However I just can’t help but I wonder if SugarCRM is in a position to do to Salesforce.com what Salesforce.com once did to Siebel, undercutting on price and extending efficiencies further out to the edge. The edge used to be self-serve style software as a service. SugarCRM went further and took the edge all the way out to the open source community.

A CRM app isn’t core to running my business. I can do what I need with spreadsheets. But if this tool makes my life easier or allows me to spread intelligence further or faster or if I’m able to make decisions I couldn’t otherwise visualize in my head, and I suspect it might, then I will definitely invest more heavily in it. At that point I may be calling on SugarCRM for additional services.

This software model also has the nice effect of helping me drive myself through the customer marketing funnel at my own pace. At the end of it, I won’t mind paying them for their services, and, in fact, I might be asking to pay for them. What sales person wouldn’t rather receive calls than make them?

Of course, the moment I need services that are worth paying for, I may need to switch to Salesforce.com. SugarCRM is banking on the possibility that I’ll reach user lock in before I get to that point. If I have to make that decision, then it means things are going well. And for that, SugarCRM will already have “loyalty” checked off in their column of my product comparison chart.