Savio asserts "The OSS business model is great to grow from $0-$50M, but very difficult if you're trying to get to $100M.".
In my inimitable Philly style, my response is: Dude, that same statement can be made of most software companies, open source or not.
Let me use Princeton Softech (non open source) as an example. I was there before JBoss, and my focus was to help them grow to $50M and beyond. So I helped build and launch their database archiving solutions for Oracle E-Business, PeopleSoft, Siebel, and JD Edwards. In order to scale the business, we expanded our footprint beyond the generic archiving solution, to application-specific solutions. This scaled the business and increased valuation enough to entice your Big Blue to buy them recently...so be sure to treat my friends well! ;-)
So let me now use JBoss and Red Hat as examples.
To establish and build the business, you've got to start with great technology and A players. You then need to focus your business model on selling the right stuff. In the case of JBoss, we sold 75% subscriptions, 15% training, 10% consulting. Why? Because subscriptions have higher margins than training and consulting.
Once you've got momentum going on one product, you scale the business by:
- Expanding your footprint (new products, product lines, solutions, etc.)
- Expanding your reach (channel business, partners, geographies, etc.)
On top of that, Red Hat has a pretty cool strategy for the RHEL business, has a solid Channel focus that includes JBoss, and offers a global reach.
All of that adds up to a multi-product line company with decent reach. You take that into customer conversations and you're able to drive strategic decisions rather than single product discussions.
[Added on Dec 1]
To those who think “The support-only OSS business model does not scale.”. Uhhh…I disagree. It may take a while to build up a base, but once you do and you can keep renewals at a good level, it’s a very scalable model. It's actually quite similar to the maintence revenues traditional software companies treasure. The subscription model is the gift that gives day in/day out.
IBM is famous for its 10 year strategies, so I encourage you to visualize this over the long term and let me know if you're still having problems seeing the model scale.