Open Source and Profitability

Open Source and Profitability seem contradicting on first thought. Actually they are not.

 · 3 min read

Open Source, affordablility and profit seemed like conflicting ideas for a business when I first started working on ERPNext. I was fresh out of a large software corporation and was unknown to the way startups thrived. Gradually, I repudiated this view. By next year my apprehensions will be proved wrong. I can recall a discussion we were having last May about this when we were planning to shift our business model. We had a bad year commercially and were thinking of what to do next.

Business Models

Most of the profitable, open source products involved something proprietory - dual licensing, properietory extensions or support of complementary proprietory products. That did not seem right though and felt like users were being mis-lead into something that claimed to be open but was not. Non-profits were in a different league. However, Red Hat and WordPress stood out. Red Hat sells support subscriptions for open source Red Hat Enterprise Linux, while WordPress offers hosting (WordPress.com) of their open source product (WordPress.org).

Annual Plans

Combining the two, we changed our pricing plans from $7/user/month to yearly hosting plans ($99, $299, $599) and a commercial support plan ($599) at the onset of May 2012.  We realized that the per user per month plan was too complicated for the user and for us. Investing in an ERP is an all out effort for a small business, one requiring a champion to push through the initial setup. Once the users start using the system, the company is unlikely to shift to another product for a year. A yearly plan removed much of the complexity and effort of managing subscriptions, provided us with upfront revenue and the commitment motivated the user to complete the implementation - a win-win situation for all parties involved.

Turn Around

We were apprehensive what our existing customers would think. But we need not have worried. More than 90% of our customers agreed on the annual plans and it was invigorating. We fixed a lot of bugs, rewrote many parts of the legacy code, released an installer, improved on the website feature, perked up the user interface, architectured a new reporting engine, added internationalization and are closing in on two of the most awaited features - Auto Inventory Integration and Customer/Vendor Logins.

Our forums thrived and were inundated with feature requests. We also recevied a surprising number of developmental queries. A few developers appreciated our responses and donated us for our efforts. It is an amazing feeling to get something when you expect nothing more than thanks. It opened our eyes to the benevolent side of the open source community. We felt honoured.

Way Forward

We wish we had more donations. It would highlight our efforts which a “Like” or “+1” never could. We could display the total amount donated to us in a financial year. However, even an entity as well known as the Wikimedia Foundation needs to have fund raisers to survive another year. Why do so few donate on their own volition? I cannot think of an answer. I am no different.

The rational side wants more paying customers and the irrational side, more open source users and survival on donations. Not so practical when the company isn’t profitable yet. Maybe donations can be incorporated into the model. Something like Kickstarter, where users contribute for the features they will benefit from.

There are a lot of ideas now and the year has been pivotal for us. We realize that Open Source can not only be a good thing for the community as a whole but also for business. It helps us creating a brand and attracts followers in a way commercial software never can. Open Source and Profitability no longer seem like enemies but like long lost brothers who are destined to meet one day.


Anand Doshi

Anand is the Chief Technology Officer at ERPNext. He reads fiction, dabbles in photography and is always on the watch for the best ToDo app.

3 comments
neel September 12, 2013

nice one :)

Darshak March 30, 2013

good one :)

neel May 4, 2012

nice one :)

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