Tuesday, 17 June 2008

On Open Source and Business Ventures

A question was posted recently to the TTLUG mailing list expressing the opinion that venture capitalists locally would never invest in a business which focused on utilising Free and Open Source Software, more commonly known in TTLUG circles as FOSS, because it was such a risky venture (in the writer's eyes). The following is my response to that post, which I thought I'd share with fellow bloggers.

Sell it as risky and no one will buy.
The focus of any new business should never be "to be FOSS based" or even alternatively "to be closed source based". If one wants to focus on the promotion of FOSS in a business venture, then it should be a business venture for which FOSS is the business-sensible solution.

Building a business just to use FOSS would be the equivalent of selling doubles (a cheap, tasty and popular Trinidian food) just because there happened to be a free corner spot in Curepe (a local densely populated town in Trinidad where doubles is popularly sold). It is doomed to failure unless there are other credible business factors to justify it.

In the case of my "doubles scenario", one of these food vendors I know who successfully made a move from the popular location in Curepe where doubles is sold to a less popular location got it to work because there also existed a bar in his new location to serve as a population centre for attracting new customers. The reputation of the vendor lended itself to helping his move succeed as once word got around as to his new location, loyal customers sought him out still dispite the less convenient location.

Similarly, new "FOSS-based" business ventures need other credible business factors to justify their coming into existence. Support from a major market sector/niche to satisfy a need not being met currently by alternate software vendors/solution providers could be a strong mitigating factor. When I started my first small business several years ago, not only could I not afford it, but my target market, the small business in Trinidad looking to now implement IT solutions, could also not afford the "costly-to-license" Microsoft software. This is why I chose to implement solutions based around the use of Open Office instead of Microsoft Office for solutions requiring no custom software to be built and building customised solutions using LAMP (Linux, Apache, MySQL, PHP) or FOSS built on LAMP.

The co-branding of a new venture with the "good name" of a well known vendor, such as IBM or HP or another major vendor who is known to proport open-source solutions could also help significantly. In the case of my first small business it was this, among other reasons, I believe that was a contributing factor to its failing, since the "branding" I had as a small business working only for other small businesses did not grow sufficiently for a sustainable new business pipeline (and thus income) to be maintained.

It is an excellent idea to want to promote FOSS through a business venture. But it is a terrible idea to simply start a "FOSS-based" business for want of having one. There must be, at the end of the day, strong, correlating business reasons to do so as well, if one is to make such a venture sustainable and profitable.

2 comments:

Jonas Florendo said...

Great article! I'm a fledgling entrepreneur, and I'm looking for all the advice I can get. I want to buy a business (home base or not) but I'm not sure where to look for the right one. I've searched, but I keep coming up short on that right business. This is an investment that I want to make, so I want to make one I won't regret. Any suggestions? thanks~

Jane Neas said...

Jonas -- Check out BizTrader.com. It's on online global marketplace where you can buy, sell, and invest in a small business. There's a wide selection, and it's a great place to find a small business on the Internet. Check it out and good luck!