Written by
Dorina Anton
, Marketing Specialist
On June 29 we held in Iași an open-source event in which our colleagues, Ștefana Nazare, and Ludovic Dubost, discussed how to build an open-source software business and what international fundings are available for tech entrepreneurs. During the event, Ludovic also discussed the case of XWiki and CryptPad and how he managed to stabilize these two businesses and make them financially sustainable.
About our speakers
Ștefana Nazare: For the past 6 years, Ștefana has been an Account Manager at XWiki, working on both standard and custom projects. While most customers might know her after successfully liaising with her as a direct point of contact, she is also in charge of the XWiki Pro Applications and Confluence migrations. Her work as a Pro Apps Product Owner and expertise in migrations from other software solutions to XWiki, alongside her speaker experience at FOSDEM, prove her extensive experience with open-source software in all aspects: from the journey of developing a dedicated product to actually translating the client's needs into a fully functional use case.
Ludovic Dubost: Founder and CEO of XWiki SAS and CryptPad, with over 10 years of experience in accessing international fundings. After 10 years in the Internet business as an Architect and later as a CTO, Ludovic decided to build XWiki as open-source software, and shortly after founded the company XWiki SAS to support the development of the software. Nowadays, XWiki is used worldwide by 5000 organizations and is led by XWiki SAS, a 44 people-independent company. Together with his team, Ludovic has also attracted funding for the CryptPad open-source software and cryptpad.fr cloud service, the first privacy by-default end-to-end encrypted real-time collaboration tool.
Takeaways from Ștefana Nazare's presentation
The presentation kicked off with a dialogue between our speaker and the audience on the question of what Open Source code is. By using the 10 principles of open source as described by OSI and the 4 freedoms by the Free Software Foundation, we covered the fundamentals of our modus operandi as a community, as a company that sponsors an OS product, and, last but not least, as users.
The reasons why open-source software works are strong pillars translated into values and justify the quality of delivered work:
- Collaboration
- Transparency (trust & security)
- Flexibility
- Sovereignty & control
- Open standards
The dialogue with the public continued on the topic of day-to-day usage of open-source software we may or may not be aware of.
The key differences between open source and proprietary software are not limited to the visibility of the source code alone.
As entrepreneurs, when considering the technical & business point of view, it's important to understand that OSS comes with advantages such as the agility and innovation conferred by fast development and community aid, the cost efficiency as a consequence of reusing existing OSS libraries, alongside feedback and free marketing provided by the community, as well as enhanced security through the help of contributors. The ethical dimension of OSS not only serves as a principle of freedom and digital sovereignty but also becomes a great argument on your customers' side from the transparency and no vendor lock-in perspectives.
How does OSS work as a business?
- The first business model is subscriptions. By providing technical & development support or even security patches to your customers, you can build a business and further fund your product.
- The second business model is providing services. Be it consulting, custom development on top of a core product, user training sessions, or installation services, this way your customers benefit from an enhanced experience with your product.
- The third business model is Software as a Service (SaaS). Offering cloud hosting, flavors, or packaging a product as a cloud-based software editor is another great method to advance a business.
- Another business model is Dual licensing which works by providing a free license and the option to enrich the client's experience through a commercial license that provides access to other features or support.
- Referrals & advertisements are quite an obvious solution, but encouraging users to access software this way is a great illustration of the collaboration principle.
- Donations and sponsorships, either through crowdfunding or setting up a recurring donation solution are also good ways to fund an OSS product.
- Research projects are often overlooked as viable funding solutions and a great example is Cryptpad, another XWiki project that has successfully accessed research grants.
- The last covered business model is investments. Receiving investments from external sources and the discussion on potential ownership issues was definitely a hot topic.
Want to find out how software solutions like AWS, GitLab, Mozilla, or NextCloud work? Make sure to watch the full presentation video below to understand their business model based on the information above.
What if you're not ready to start a business just yet?
The best thing to do if you're only just starting out in the OSS universe is to contribute. Even better, it doesn't necessarily have to be by writing code, but you can also help with translations, documentation, or suggestions. Word-of-mouth is also a great way to raise awareness about the benefits that OSS brings to businesses and our digital lives and, perhaps the coolest thing, you can choose to work for a company that does open source.
Takeaways from Ludovic Dubost's presentation
Ludovic's presentation started with how he learned about open-source which was by being a user and contributor himself. He also observed the development of Linux, Red Hat, and JBoss. Therefore, when he decided to leave Netscape and analyzed his experience, he concluded that the software of choice from that moment would almost all be open source. He noticed how the open-source software industry grew in 5 years and it struck him that open source is better than proprietary software. Furthermore, making the wiki open source made sense from the start because:
- Wikis come from open source;
- To make the software known to the community;
- To get collaboration and improvement;
- To fight US companies you need different rules and strategies.
Through open source, as a tech entrepreneur, you can validate ideas from real users, receive invaluable feedback and contributions from users and developers, you gain credibility and awareness of your product. But there is much more to open source than these aspects and open source in the way we see it at XWiki protects the privacy and data sovereignty of countries and individuals.
The challenges of building an open-source business and how XWiki did it
Like in the famous drawing about the whole Internet that works on some libraries only very few people know how they work (and they are not paid), open source has some specific funding challenges, especially the maintenance part. There is also the challenge of keeping a balance between funding the development work but also keeping the open-source spirit alive.
How XWiki managed to be a successful business:
- Started with service business for customers that were interested in improving their wiki;
- Proposing for selling support subscriptions;
- Selling extensions;
- Selling SaaS (XWiki Cloud, cryptpad.fr);
- Research funding and customer-paid R&D.
Finally, Ludovic shared some insights into how XWiki and Cryptpad evolved financially and how revenue streams are split, with product sales growing more and more over time, over services. You can watch the recording of the event below for more details.
How to sell something that is free?
Ludovic addressed one of the questions and challenges that often cross an entrepreneur's mind and that is how to sell something supposedly free. There is not a single recipe that fits all businesses. In XWiki's case, there has been a mix of:
- Educating customers on different touchpoints;
- Having a different price for customers that have support contracts versus customers that don't purchase that;
- 3-year deals for longer-term engagements;
- Open-source paying extensions are included in the support subscription.
Furthermore, today there are many opportunities and reasons for building open-source software starting with the EU investments, a stringent need for data sovereignty and control, and various programs that fund open source.
Q&A session
Q1: What types of funding you didn't take into consideration?
A: One of these types is investment. The biggest reason to not go with investments is that it makes you lose your independence and from my point of view, it increases the chances of losing your open-source spirit. While investors like the beginning of open-source where you grow the community and user base, they don't like later that the software stays free and then not being able to set the price they want and increase it. This is something that I don't like about the IT industry: get users and then make them pay. You give them a lot in the beginning and when you have the users and dependant on you, you change the financial conditions.
Q2: What would you do differently if you started developing XWiki today?
A: The differences that we notice today we actually apply them on CryptPad. The first thing is trying to do service not as long as we used to, but that is not something that you can necessarily control at all times. In the case of CryptPad, since XWiki can sustain CryptPad, this gives it a certain security. Another difference is that cloud and SaaS are much more prevalent today which means that you need to have a SaaS offer and a sort of free offer on SaaS. You can get known more by your SaaS offering than your deployment of cloud offering. Another thing would be to go faster to the decision we made about paying extensions for example and having the current offers. It's also very important to understand that you first need to have a large user base in software. Sometimes you might mistake that you don't manage to transform customers into revenue and think that the transformation is the problem instead of the number of people interested in the software. We had such difficulty in 2015 and what allowed us to accelerate was improving the software, not trying to monetize more, but increasing the interest in our software by making better software, that interests people. You need to make sure your software is unique and brings value.
Q3: The service business doesn't allow you to get rich and other models can still potentially allow you to get rich why did I choose the one that doesn't allow get you rich?
A: To not have investors and to be there in the long term. I'm more interested in building the software, sustaining it in the long run, and keeping our independence than making a lot of money out of it. We also preferred this model in the beginning because it was an easy way to start when you have no money. All the other models require prior investment in yourself or it takes more time to build the software to a level of quality that interests the users.
Q4: How do you maintain the competitiveness of open-source software-facing companies that have way more money?
A: The only way to do it is collaboratively. That means collaborating with other people that use the software. There is one aspect of proprietary software and that is the fact that having more money doesn't necessarily make the software better. They tend to also bloat the software because they keep adding things that are in their interest and not necessarily in the interest of the customer. Sometimes they don't actually make the software better. With open source you potentially end up making the software better if you listen more to your customers and your open-source community because they talk to you, bring you money, and tell you what they need. Also, proprietary software is more expensive and customers might move to you. In the end, because of the volume you might have enough to do very good quality software. The question in the end is who has more money? I think at some point you have enough money and don't need more. Sometimes money doesn't go to the successful software that is today but to the next software. Plus money is going to marketing and sales while in open source the customers come to you.
Q5: What is the marketing approach?
A: We do marketing and also sales. But the sales we do is by managing the incoming demands. For marketing, we invest light budgets compared to other companies. Our biggest marketing is actually the community. We spend some on the website, articles, and a bit on advertisement. We go to conferences, but most of these conferences that we attend are to also meet other partners as much as customers. We also try to go to developers and open-source conferences, but not only for business reasons; potential hiring is an interesting aspect but we want to also participate in the ecosystem and help others build their own open-source company. We met for example the Passbolt team that we met at FOSDEM, we discussed business models, they launched their software, and now their software is very successful.
Q6: How did you get to Romania?
A: It's an open-source story of how we got to Romania. In 2006 XWiki was very small as a company. We had one intern in Paris that was helping with the development of the software. The intern saw the announcement from Google about Google Summer of Code. The program was launched in 2006 and Google announced they will give 2 million euro to students that worked on open-source projects during the summer holidays. Our intern saw the announcement and proposed XWiki as a mentoring organization, and that's how we were selected to mentor students during the program. One of the said students recruited in GSoC was from Iași University. He was a student doing his Master's degree and a teacher at the same time for the Bachelor's degree. He worked on this project and the next year he did another one. He was really good and at the same time hiring him full-time wasn't doable budget-wise. So I proposed to him to hire some people in Romania and open a subsidiary. He agreed, found three students from the University, and created a subsidiary in the country. The first three students that we hired in Iasi in 2007 are still here today: Anca, Marius, and Raluca.
Q7: Are there some strings attached to European money?
A: There are some strings attached meaning that it's very rare that you get money and do whatever you want with the money. There are usually some goals that need to be achieved and some programs are heavier than others. Collaboration projects have a significant load of collaboration with the partners and depend on how those partners are. But, in general, European money is good money, at least in my experience. If your goal is to develop the software, they are here to help you, not bring you down. NLNet has good projects, quite light in terms of administration work. Now, the difficulty with large European projects is to get them. It can be a significant investment so you need to choose the partners well so that the chances to win are good. It also depends on what you are proposing. In our case, we had a good story. CryptPad is an end-to-end-encrypted document editing platform that doesn't exist in the world and it's quite unique. The European organizations said they need that and they are ready to fund it. It's a good story and there are programs that are about privacy, about security and you need to match the subject well.
Q8: CryptPad has competitors such as Google Docs and Microsoft Office. What about Collabora online?
A: If we would have been able to use technically Collabora Online to put it in CryptPad, we would have done that. We use OnlyOffice which is another open-source software that's similar to Collabora Online. The thing is Collabora Online doesn't do end-to-end encryption and cannot do it. That's the differentiation between CryptPad and Collabora Online but also CryptPad and Google Docs and Microsoft.
Closing thoughts
We were glad to meet students that learned for the first time about open-source software, but also people very passionate about the subject of building an open-source business. We also certainly enjoyed the interactions with the participants, especially during the informal networking session.
If you'd like to stay in touch and be part of an open-source community in Iași, you can join this LinkedIn group. See you at the next open-source meetup!
