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Aaron Strout

Aaron Strout
Vice President of Social Media
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Aaron Strout : Citizen Marketer
W20: Open Source Business Models
Session: Open Source Business Models for Web 2.0
Speakers: John Roberts, CEO, Co-Founder SugarCRM Inc.
Mårten Mickos, CEO MySQL

Unlike the Google session, this panel is much more informative. Both CEOs were willing to "open up the hood" and provide detailed insights into their respective businesses. Below are the detailed notes I took during this session:

Key question: Is it possible for the best ideas to win over sales and marketing? John believes that the answer is "yes." (I think the answer is "maybe.")

SugarCRM is a commercial "Open Source" company. This means that they give 75% of their code away from free. They generate a majority of their revenues from services.

SugarCRM use a "distributed development cycle"
  1. new beta/release downloaded
  2. massively parallel testing and debugging
  3. community driven modules, features and extensions
SugarCRM has created SugarForge.org. This offering is similar to SalesForce.com's App Exchange. No contracts, 3M downloads, 8,600 developers. Everything is COMPLETELY free.

SugarCRM doesn't pay any money to Google AdWords (expensive key word to buy). They have organically broken into the first page of "CRM" returns by making their services organic and leveraging developer community.

Companies are starting off differently:
  • SugarCRM didn't start with "Series A" (they ultimately did take funding)
  • started with ideas & code
  • recruited users
  • embraced the developer community
Success factors for Web 2.0 companies:
  • offer services over software as revenue model
  • trust users as co-developers
  • harness collective intelligence
  • leverage the long tail
  • lightweight user interfaces
  • 1,200 users spanning 30 countries

Marten Mickos, CEO MySQL had a great quote.

"Amateurs built Noah's Ark. Professionals built the Titanic." The point? Sometimes amateurs build better structures (or in this case, apps) then the pros.

Another important point that Marten made was companies must continue to move "up the stack" in terms of the value that they provide.
  • Companies at the bottom fo the stack are hardware providers - these companies trade at approximately 1x revenues
  • Companies in the middle of the stack provide software - they trade at 5x revenues
  • Services (and/or community companies) are at the top of the stack -- they trade at as much as 10x revenues

Mon, Apr 16 2007

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