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posted by LaminatorX on Tuesday October 14 2014, @04:17PM   Printer-friendly
from the C-R-E-A-M dept.

There's a blog posting up on the LocomotiveCMS site on their difficulties in trying make money from an open source product, and some of the problems they're encountered.

LocomotiveCMS, is an open source Content Management System, built on Rails. Originally developed as an open source project in 2010, the developer (Didier Lafforgue) attempted to turn running the project into a full time job with his wife Estelle as a business manager.

In summary, although they have developed a good reputation, and gained some consulting work, in providing hosting they're finding that the Software as a Service (SaaS) model is bringing in much less money than they'd hoped, and the product is still dependent on a single, in house, developer which is causing problems for maintenance and a proposed upgrade.

I found it way more difficult to acquire a $19/month SaaS client than a $1100/day consulting client.

Long story short, we haven’t solved the economic open source equation.

An interesting article, with some real world experiences and hard numbers.

Originally spotted on Hacker News.

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  • (Score: 4, Insightful) by Immerman on Tuesday October 14 2014, @04:34PM

    by Immerman (3985) on Tuesday October 14 2014, @04:34PM (#105991)

    I've yet to meet *anyone* on the consumer end who thinks SaaS is a good idea - the consensus is that it's a bald-faced money grab trying to convert a one-time purchase price to a much higher recurring fee. The only reason anyone accepts the shakedown is if they HAVE to have the software and it's only available as SaaS. I can't tell you how many people I've convinced to finally jump ship from Adobe, Microsoft, etc. as their chosen software gets moved to a racketeer-only model.

    • (Score: 0) by Anonymous Coward on Tuesday October 14 2014, @06:35PM

      by Anonymous Coward on Tuesday October 14 2014, @06:35PM (#106030)

      Yeah. Saas? You're doing it wrong.

    • (Score: 2) by Grishnakh on Wednesday October 15 2014, @09:45PM

      by Grishnakh (2831) on Wednesday October 15 2014, @09:45PM (#106418)

      People jump ship from Adobe and Microsoft? To where?

      Most people (esp. businesses) seem to be happy to take whatever abuse those two companies choose to dole out. At best, they'll delay upgrading to the next release for a while.

      • (Score: 2) by Immerman on Thursday October 16 2014, @05:44AM

        by Immerman (3985) on Thursday October 16 2014, @05:44AM (#106544)

        LibreOffice, GIMP, Inkscape, etc. Basically the Free alternatives I introduce them to when they express frustration. Lots of people that have delayed upgrades for multiple versions because why spend more money when the old version is still good enough? Then they start feeling the need for an upgrade and get disgusted by the shift to only being able to rent the latest version. It's actually prime target for conversion - OSS stuff does tend to lag behind proprietary software on the user-friendliness front, but when you're comparing today's OSS to proprietary stuff from several years ago it typically looks pretty good, and people know they're going to have to relearn things anyway. Plus you're talking to people who've already decided they like not spending money more than having the latest and greatest software, so the free aspect carries more weight. Throw in the usual feel-good talk about collaborative development and how it can align both generosity and good business sense and it's often a pretty easy sell.

        It also doesn't hurt that an awful lot of people have heard about Linux these days - even if they're not always entirely clear on what it is, they know it as something related to businesses and/or the internet, so a brief explanation can go a long way towards building confidence in OSS.

    • (Score: 2) by urza9814 on Thursday October 16 2014, @01:19PM

      by urza9814 (3954) on Thursday October 16 2014, @01:19PM (#106608) Journal

      I disagree with you there in *certain, limited use-cases* -- which it just so happens that this LocomotiveCMS seems to fit perfectly.

      It's a CMS. A website building tool. So pretty much anyone using it is already paying a monthly fee for web hosting. Plenty of people pay for Wordpress.com accounts even though they could install Wordpress on their own hosting. Plenty of people prefer Facebook over Diaspora not just because their friends are there, but because they wouldn't have a clue how to set up a Diaspora pod to begin with. Plenty of people don't want to deal with the sysadmin tasks, and using a SaaS platform lets them ignore all of that. It's nice to not play the game of 'Talk to the hosting provider' 'No, talk to the CMS developers' going back and forth -- if both are provided by the same company, there's nobody else they can try to blame if something isn't working. So yeah, for web-based tools, there are a lot of very solid benefits to bundling the software with the hosting and selling it all as a service.

      The problem is that he's trying to charge $19/month for something that appears to be just another CMS. You can get Wordpress or Drupal or something, installed and ready to use, for a quarter of that price. And they're a safer bet -- big install base, big community with lots of plugins, lots of documentation both official and not. Anyone who know what they're doing, knows they can do it with one of those -- and it'll be cheaper. Anyone who DOESN'T know what they're doing won't know the advantage of LocomotiveCMS and will pick a cheaper option. Granted, an extra $14/month is worth it if it saves even one hour per month in developer time...but how do you know it will? Just from their website I can't tell what this CMS's particular advantage is. If I was choosing a CMS for a client, I'd probably go with Drupal -- I'm already somewhat familiar with it, and there's probably a plugin already for whatever they want.

      I bet he'd do a bit better if he stopped selling it as "This is a CMS, it lets you do X, Y and Z" and started selling it as "This is what LocomotiveCMS does that competitors X, Y and Z can't."

  • (Score: 2) by Tramii on Tuesday October 14 2014, @04:48PM

    by Tramii (920) on Tuesday October 14 2014, @04:48PM (#105998)

    It's funny how they complain that they can't get anyone to sign up for their SaaS, and yet they freely admit they only have one (extremely overworked) developer. Why can't you get anyone to sign up for a $19/month service? I think the question kind of answers itself!

    My company is in a similar situation. We are looking to move to a new CMS and we are getting the hard sale of "let us host everything for you". IN THEORY it sounds great, but frankly we already have a good hosting solution and we don't see any reason to keep our CMS in an external network. If we need to change/fix something, we have to trust yet another outside company. Yes, I'm sure you will get to it eventually, but I've dealt with far too many companies that either screw things up or take far too long to make simple changes. The more variables we can remove from the equation, they better off we are.

    I see a lot of excuses in the Locomotive blog about things taking longer than expected. That's the LAST thing I want to see when in a SaaS. I need to see near 100% reliability to get stuff done and keep things up and running. I don't care about excuses, even if they are beyond your control. My business depends on everything running perfectly.

    • (Score: 4, Insightful) by frojack on Tuesday October 14 2014, @05:09PM

      by frojack (1554) on Tuesday October 14 2014, @05:09PM (#106010) Journal

      On the other hand I've seen SaaS work in the some very complex places.

      Doctor's offices are notoriously adverse to dealing with computer problems, hardware, backups, servers. Its not just the long standing "doctors don't touch computers" bias, (which is STILL not a cliche, even in this day and age), but also the staff. They will do the records data entry and scheduling, because they have to, but they would just as soon have nothing in house to deal with.
      No software, no servers, no backups.

      Of course, in reference to your title, there is nothing cheap about these saas solutions in the medical world. Which is how it should be, given the demands: These services must have 24/7 support, strict confidentiality, rigorous fail, near continuous backup, they wade neck deep in the regulatory swamp, and and are subject to having major rewrites thrust upon them at any instant by legislation.

      Saas is still alive and well, its on all of our smartphones. Just not on our office computers.

      --
      No, you are mistaken. I've always had this sig.
      • (Score: 2) by Tramii on Tuesday October 14 2014, @05:20PM

        by Tramii (920) on Tuesday October 14 2014, @05:20PM (#106014)

        Yes, it's really about the right tool for the right job. I have no desire to replace our current recruitment SaaS solution with something homegrown. It would take too long and cost too much, for no real benefit.

  • (Score: 3, Insightful) by VLM on Tuesday October 14 2014, @04:50PM

    by VLM (445) Subscriber Badge on Tuesday October 14 2014, @04:50PM (#106000)

    From the top rated HN post

    "it's operating in a very crowded space"

    I don't suppose anyone really needs to say anything else.

  • (Score: 3, Interesting) by VLM on Tuesday October 14 2014, @05:03PM

    by VLM (445) Subscriber Badge on Tuesday October 14 2014, @05:03PM (#106008)

    They have a financial model problem in that their total revenue "forever" could be generated by working full time on consulting for about 24 days using their stats and some reasonably conservative investment strategies.

    So if they want more users to monetize later, perhaps by selling out to a bigger CMS provider, just work one month to stack up cash to run the project "forever" then cut the price to $0 and collect users until someone buys you out, or you have enough users that the somewhat more achievable $1/month generates that daydream of $10K/mo revenue. I hope they scale well to handle that influx of customers.

    And competitors are already running that strategy so they have to also, or go out of business.

    All businesses are financial models in a way once you get past the details and the industry doesn't seem to be operating under his model so he can either join them or go out of business.

    Also I can't figure out their secret sauce. What differentiates them from their competitors who also work hard and have plenty of motivation and all that. Well... I donno. I'm sure its something, or at least I hope they got something. My free business advice is find a sub-genre of CMS purchasers and make your CMS ideal for them, both in technical ability and marketing and support. I donno... car dealers. Or churches. Or ice cream stands. Whatever.

  • (Score: 3, Interesting) by bzipitidoo on Wednesday October 15 2014, @04:05AM

    by bzipitidoo (4388) on Wednesday October 15 2014, @04:05AM (#106160) Journal

    Software engineering needs a different business model. An industrial production model, as if software is equivalent to a physical object, is so broken in so many ways. Many businesses have tried to run with that model anyway, aided by overly strong copyright and patent law, and have enjoyed some success. But its based on that basic confusion about software being produced same as widgets are produced. They've skillfully exploited the confusion. It's why Microsoft became so incredibly rich. They collected the difference between fees based on the idea that production of physical copies involved considerable effort and resources, and the actual cost to them of near zero to create copies of their software. Sadly, the world bought into this. What has the world received in exchange for those massive sums? A mediocre operating system full of secrets which could have been produced far, far less expensively and at the same time totally openly. And maybe a malaria vaccine. Today MS is struggling to hang on to this too sweet deal, and is slowly losing their grip as customers wise up.

    SaaS is not the right business model either. That's in many ways even worse. Customers have to be really naive about software to go for a bad deal like that. I'm not surprised to hear that one of the few kinds of customers who go for SaaS are members of the medical community.

    All that the software rental model did was unintentionally clear up some of the confusion. It was so extreme that customers rejected it, and got to thinking about whether their other deals should be renegotiated.

    Ultimately, software will have to be funded through various forms of patronage. If MS wants to regain leadership, they must do this. But they won't. It's against their religion.

    • (Score: 2) by Grishnakh on Wednesday October 15 2014, @09:50PM

      by Grishnakh (2831) on Wednesday October 15 2014, @09:50PM (#106421)

      What has the world received in exchange for those massive sums? A mediocre operating system ... And maybe a malaria vaccine.

      (I'm not criticizing or addressing you here) I really hate it when apologists defend Microsoft with the whole malaria vaccine bullshit. If we wanted to develop a malaria vaccine, we could have done so, as a society, for a tiny, tiny fraction of the money wasted on Microsoft products and enriching that company, simply by having public (taxpayer-funded) funding of research facilities to do so. Their whole argument seems to be: "let's open our wallets and buy something from this guy for 10x what it's really worth, because then he'll give 0.01% of that money to a good charity!". If you want to fund a charity, then give money to them directly; don't overpay for some crap product so they can give money on your behalf.

  • (Score: 4, Insightful) by TheRaven on Wednesday October 15 2014, @07:48AM

    by TheRaven (270) on Wednesday October 15 2014, @07:48AM (#106194) Journal

    First, if you want to make money from open source and you think that the open source thing that you want to make money from is a product, then you've already failed. You can't charge money for something that people can get for free without some (at least perceived) value added. For a lot of companies, the fact that it's open source provides some value because (at least in theory) it means that they have a second source for support if anything happens to your company. If you're a small shop with a single developer (or even a small team) then that's a big selling point - there are other consulting firms who will happily take your customers' money if you can't meet their needs.

    So what's the value that they're adding? SaaS? Well, not really. They're competing with turn-key VM appliances for this kind of thing and $19/month buys you quite a lot of hosting for them. Not very attractive.

    Open source economics relies on realising one important thing: copying software is cheap, running software is cheap, writing software is expensive. If you're trying to charge money for anything other than the last one on that list, then unless you have massive economies of scale then you're on to a losing proposition. The successful companies behind open source CMS projects don't sell a CMS, they sell a complex web site that meets their customers' needs. The open source project just contains all of the stuff that's been factored out as being common to most of their customers. They're not trying to sell that bit, they're using it to lower their costs - they don't have to rewrite it for each customer and they have a codebase that they're familiar with and (if they're successful) new hires will also be familiar with. It also makes their customers more comfortable, because if anything happens to the company then there's a good chance that they'll be able to find someone else who can maintain their web site.

    --
    sudo mod me up
  • (Score: 1) by lizardloop on Wednesday October 15 2014, @12:35PM

    by lizardloop (4716) on Wednesday October 15 2014, @12:35PM (#106226) Journal

    I started and still run a SaaS business. Most of our revenue is made from providing custom extensions to the original SaaS platform. Everyone wins in the end. Customers get a reduced price on our hourly development rate because we know we can resell chunks of the code to some of our other customers. We also get a degree of guaranteed monthly revenue from the hosting charges. It isn't particularly much but it does help keep us going when there isn't a lot of work on.

    As others have pointed out. CMS is an extremely crowded market. When you can grab any number of completely free CMS projects and stick them in some cheap hosting it makes it very difficult to sell your own CMS and hosting. I know if one of my customers wanted CMS I'd just grab Wordpress or Joomla, stick it on one of my existing servers and charge them the $20 a month. If they needed it customizing I know enough PHP to do that and can make a good hourly rate for the work (in fact that is what I'm doing today). There is almost no incentive for me to involve the original creators or maintainers of Joomla/Wordpress because I'd be doing myself out of a job.