filtering for expensive customers?

[Federico Lucifredi-2]

Hello All,
   I have recently struck a reflection that I consider interesting:

  Postulate: Market analysts tell us that the #1 competitor to F/OSS
companies is internal expertise at the customer site: in short, if the
local crew is smart and attuned with the state of the software they want
to deploy, possibly even maintaining ties to the relevant part of the
community, they will deploy and support said software themselves.
Vendors might come in (much) later, and only because of a need to
blame-shift in very large/critical deployments (or in the mind of a new
director of IT operations ;-)

  Given the premise above, it looks like more often than not F/OSS
vendors are vying for the business of the customers who do *not* have
sufficient on-site expertise - in other words, it looks like one might
be selecting customers coming from the most clueless part of the pool!

  Why is this an F/OSS concern? Well, we all know that, in general,
engineers like to think that "customers suck", but this thinking pushes
it to a new level: while in the proprietary market, all customers must
purchase support from you, in our brave new world, only the less clueful
  need to. Besides the inherent higher stress this places on the support
crew, this is also expensive from a business perspective - the ideal
support customers are, obviously, the ones who never need it.

  Am I wondering about the obvious?  Perhaps I am being too pessimistic.
But if you accept the postulate, the thesis seems to follow.

  Best-F

--

_________________________________________
-- "'Problem' is a bleak word for challenge" - Richard Fish
(Federico L. Lucifredi) - http://www.lucifredi.com

[Chris Maeda]

You have essentially described the entire consulting business -- rent your expertise to people that don't have it and don't have the time, money, or desire to own it.

Which implication are you raising?  That F/OSS businesses have to cater to customers that don't have F/OSS expertise (not a big surprise), or that lots of companies can use their in-house resources for F/OSS projects and thus won't need outside help (yet another reason why F/OSS is generally a crappy business to be in)?

(And clueless engineers are the only people that think customers suck.)

On 12/21/06, Federico Lucifredi <flucifredi@...> wrote:

Hello All,
   I have recently struck a reflection that I consider interesting:

  Postulate: Market analysts tell us that the #1 competitor to F/OSS
companies is internal expertise at the customer site: in short, if the
local crew is smart and attuned with the state of the software they want
to deploy, possibly even maintaining ties to the relevant part of the
community, they will deploy and support said software themselves.
Vendors might come in (much) later, and only because of a need to
blame-shift in very large/critical deployments (or in the mind of a new
director of IT operations ;-)

  Given the premise above, it looks like more often than not F/OSS
vendors are vying for the business of the customers who do *not* have
sufficient on-site expertise - in other words, it looks like one might
be selecting customers coming from the most clueless part of the pool!

  Why is this an F/OSS concern? Well, we all know that, in general,
engineers like to think that "customers suck", but this thinking pushes
it to a new level: while in the proprietary market, all customers must
purchase support from you, in our brave new world, only the less clueful
  need to. Besides the inherent higher stress this places on the support
crew, this is also expensive from a business perspective - the ideal
support customers are, obviously, the ones who never need it.

  Am I wondering about the obvious?  Perhaps I am being too pessimistic.
But if you accept the postulate, the thesis seems to follow.

  Best-F

--

_________________________________________
-- "'Problem' is a bleak word for challenge" - Richard Fish
(Federico L. Lucifredi) - http://www.lucifredi.com

[La Monte Henry Piggy Yarroll]

Federico Lucifredi wrote:

> Hello All,
>   I have recently struck a reflection that I consider interesting:
>
>  Postulate: Market analysts tell us that the #1 competitor to F/OSS
> companies is internal expertise at the customer site: in short, if the
> local crew is smart and attuned with the state of the software they
> want to deploy, possibly even maintaining ties to the relevant part of
> the community, they will deploy and support said software themselves.
> Vendors might come in (much) later, and only because of a need to
> blame-shift in very large/critical deployments (or in the mind of a
> new director of IT operations ;-)
>
>  Given the premise above, it looks like more often than not F/OSS
> vendors are vying for the business of the customers who do *not* have
> sufficient on-site expertise - in other words, it looks like one might
> be selecting customers coming from the most clueless part of the pool!

I might contest the premise that only the most clueless seek
professional help. I have two anecdotal counter-examples.

Very early in my career I had a consulting client who frequently asked
me questions about his software which were readily answered in the
documentation. When I pointed this out to him, he explained that it was
much more cost-effective for him to pay ME to read the documentation and
then provide him with exactly the information he needed. He was an
extremely literate person. He knew how much effort it was to digest a
whole manual. He chose not to.

The other example is very recent.

Until recently I worked for a small company that provides services for
building custom Linux distros. The vast majority of our customers were
people who HAD built their own distros and were now ready to build more.
They KNEW what a pain it was. It was worth it to them to pay for access
to our automation infrastructure and distribution engineers.

The best salesman for open source service businesses is in-house expertise.
>
>  Why is this an F/OSS concern? Well, we all know that, in general,
> engineers like to think that "customers suck", but this thinking
> pushes it to a new level: while in the proprietary market, all
> customers must purchase support from you, in our brave new world, only
> the less clueful  need to. Besides the inherent higher stress this
> places on the support crew, this is also expensive from a business
> perspective - the ideal support customers are, obviously, the ones who
> never need it.
Customers who never need your support don't generally renew. The ideal
customer from a business perspective puts less load on your support
staff than their subscription covers.

In an open source market, the customer is often looking at the same
source you are looking at. I can't tell you how fabulous this is from
the perspective of the support crew.
>  Am I wondering about the obvious?  Perhaps I am being too
> pessimistic. But if you accept the postulate, the thesis seems to follow.
My empirical experience is that the most clueful customers I've ever had
were those paying for open source support. This suggests that there is
some defect in either the postulate or the thesis...

[Sergio Montoro Ten]

It is my personal belief that it works just the opposite way: the more
in-house know-how that a customer has, the more likely is that he favors
F/OSS.

This is because the highly experienced customers like the added control
that they can have over software when they use F/OSS, whilst customers
that do not have anysoftware development skills of their own do not care
of whether the software is open or not, as they cannot take advantadge
of the Open Source nature of whet their are using.

I think that this point of view can be supported by a couple of articles.
One from Andrew Conry-Murray in Information Week stating the SMEs fear
Open Source because they do not have the IT manpower neccesary to
install and run Free Software.

http://www.informationweek.com/windows/showArticle.jhtml?articleID=192300168&subSection=Open%20Source

And another study from Simula Labs that reveals that 33% of customers
choose F/OSS because of the extra feeling of control that it gives.

http://home.businesswire.com/portal/site/home/?epi_menuItemID=989a6827590d7dda9cdf6023a0908a0c&epi_menuID=c791260db682611740b28e347a808a0c&epi_baseMenuID=384979e8cc48c441ef0130f5c6908a0c&ndmViewId=news_view&newsLang=en&div=-762569457&newsId=20060816005229

So my conclusion is that the more developers a customer has, the more it
favors F/OSS over closed source software, as developers tend to preffer
F/OSS and influence the decision makers when the time to buy comes.

Sergio Montoro Ten.
hipergate.org

> Hello All,
>   I have recently struck a reflection that I consider interesting:
>
>  Postulate: Market analysts tell us that the #1 competitor to F/OSS
> companies is internal expertise at the customer site: in short, if the
> local crew is smart and attuned with the state of the software they
> want to deploy, possibly even maintaining ties to the relevant part of
> the community, they will deploy and support said software themselves.
> Vendors might come in (much) later, and only because of a need to
> blame-shift in very large/critical deployments (or in the mind of a
> new director of IT operations ;-)
>
>  Given the premise above, it looks like more often than not F/OSS
> vendors are vying for the business of the customers who do *not* have
> sufficient on-site expertise - in other words, it looks like one might
> be selecting customers coming from the most clueless part of the pool!
>
>  Why is this an F/OSS concern? Well, we all know that, in general,
> engineers like to think that "customers suck", but this thinking
> pushes it to a new level: while in the proprietary market, all
> customers must purchase support from you, in our brave new world, only
> the less clueful  need to. Besides the inherent higher stress this
> places on the support crew, this is also expensive from a business
> perspective - the ideal support customers are, obviously, the ones who
> never need it.
>
>  Am I wondering about the obvious?  Perhaps I am being too
> pessimistic. But if you accept the postulate, the thesis seems to follow.
>
>  Best-F
>

[Federico Lucifredi-2]

La Monte Henry Piggy Yarroll wrote:
> I might contest the premise that only the most clueless seek
> professional help. I have two anecdotal counter-examples.

If the postulate does not hold, then the thesis does not either. But the
market research I am reading tells me is that the postulate is true.

>[..]
>
> The best salesman for open source service businesses is in-house expertise.

No doubt. But when the in-house experts decide to do it by themselves,
you are not getting revenue from them (until perhaps later, when they or
their bosses want to dump responsibility as I mentioned, or they learn
how hard it is and want someone else to, as you did mention.

Best-F

>>
>>  Why is this an F/OSS concern? Well, we all know that, in general,
>> engineers like to think that "customers suck", but this thinking
>> pushes it to a new level: while in the proprietary market, all
>> customers must purchase support from you, in our brave new world, only
>> the less clueful  need to. Besides the inherent higher stress this
>> places on the support crew, this is also expensive from a business
>> perspective - the ideal support customers are, obviously, the ones who
>> never need it.
> Customers who never need your support don't generally renew. The ideal
> customer from a business perspective puts less load on your support
> staff than their subscription covers.
>
> In an open source market, the customer is often looking at the same
> source you are looking at. I can't tell you how fabulous this is from
> the perspective of the support crew.
>>  Am I wondering about the obvious?  Perhaps I am being too
>> pessimistic. But if you accept the postulate, the thesis seems to follow.
> My empirical experience is that the most clueful customers I've ever had
> were those paying for open source support. This suggests that there is
> some defect in either the postulate or the thesis...
>
>

--

_________________________________________
-- "'Problem' is a bleak word for challenge" - Richard Fish
(Federico L. Lucifredi) - http://www.lucifredi.com

[simo-2]

On Thu, 2006-12-21 at 12:10 -0500, Federico Lucifredi wrote:

> Hello All,
>    I have recently struck a reflection that I consider interesting:
>
>   Postulate: Market analysts tell us that the #1 competitor to F/OSS
> companies is internal expertise at the customer site: in short, if the
> local crew is smart and attuned with the state of the software they want
> to deploy, possibly even maintaining ties to the relevant part of the
> community, they will deploy and support said software themselves.
> Vendors might come in (much) later, and only because of a need to
> blame-shift in very large/critical deployments (or in the mind of a new
> director of IT operations ;-)
>
>   Given the premise above, it looks like more often than not F/OSS
> vendors are vying for the business of the customers who do *not* have
> sufficient on-site expertise - in other words, it looks like one might
> be selecting customers coming from the most clueless part of the pool!
>
>   Why is this an F/OSS concern? Well, we all know that, in general,
> engineers like to think that "customers suck", but this thinking pushes
> it to a new level: while in the proprietary market, all customers must
> purchase support from you, in our brave new world, only the less clueful
>   need to. Besides the inherent higher stress this places on the support
> crew, this is also expensive from a business perspective - the ideal
> support customers are, obviously, the ones who never need it.
>
>   Am I wondering about the obvious?  Perhaps I am being too pessimistic.
> But if you accept the postulate, the thesis seems to follow.

I think I see 2 problems in this analysis.
One is that you assume that un-expert customers are also stupid/annoying
and will cause you problems. The other is that you assume in house
maintenance will cost less then "mass-maintenance". I think outsourcing
has a reason in many cases, even when inside people is technically
capable, proprietary software is nothing more then outsourced
development if you look at it.

I met very bad clueless customers in my career, but I also met
incredibly brilliant ones completely conscious of their own limits and
they were fantastic customers. It was a true pleasure in those cases to
solve problems for them as they were real problems, and your work was
duly appreciated (and paid for :)

That said it is obvious that if you concentrate on support only, support
itself is going to cost more. I think the worst negative effect of
relying on support only is that you tend to not enhance the usability of
a product to capture even more support. This is a shortsighted but
completely understandable behavior.

I believe that a good FOSS vendor is one that shows quality in all the
aspects of customer relationship and above all distributes superior
engineered packages, a well as support. This is all about competition,
the better company, with the best policies, and people, prevail.

Simo.

[Federico Lucifredi-2]

I fully agree with you Sergio -- my point was on monetization, not on
adoption.

In terms of adoption (and even in terms of making a sale), in-house
expertise is the greatest enabler. in terms of returns, however, the
point stands.

  Best-F

Sergio Montoro Ten wrote:

> It is my personal belief that it works just the opposite way: the more
> in-house know-how that a customer has, the more likely is that he favors
> F/OSS.
>
> This is because the highly experienced customers like the added control
> that they can have over software when they use F/OSS, whilst customers
> that do not have anysoftware development skills of their own do not care
> of whether the software is open or not, as they cannot take advantadge
> of the Open Source nature of whet their are using.
>
> I think that this point of view can be supported by a couple of articles.
> One from Andrew Conry-Murray in Information Week stating the SMEs fear
> Open Source because they do not have the IT manpower neccesary to
> install and run Free Software.
>
> http://www.informationweek.com/windows/showArticle.jhtml?articleID=192300168&subSection=Open%20Source 
>
>
> And another study from Simula Labs that reveals that 33% of customers
> choose F/OSS because of the extra feeling of control that it gives.
>
> http://home.businesswire.com/portal/site/home/?epi_menuItemID=989a6827590d7dda9cdf6023a0908a0c&epi_menuID=c791260db682611740b28e347a808a0c&epi_baseMenuID=384979e8cc48c441ef0130f5c6908a0c&ndmViewId=news_view&newsLang=en&div=-762569457&newsId=20060816005229 
>
>
> So my conclusion is that the more developers a customer has, the more it
> favors F/OSS over closed source software, as developers tend to preffer
> F/OSS and influence the decision makers when the time to buy comes.
>
> Sergio Montoro Ten.
> hipergate.org
>
>> Hello All,
>>   I have recently struck a reflection that I consider interesting:
>>
>>  Postulate: Market analysts tell us that the #1 competitor to F/OSS
>> companies is internal expertise at the customer site: in short, if the
>> local crew is smart and attuned with the state of the software they
>> want to deploy, possibly even maintaining ties to the relevant part of
>> the community, they will deploy and support said software themselves.
>> Vendors might come in (much) later, and only because of a need to
>> blame-shift in very large/critical deployments (or in the mind of a
>> new director of IT operations ;-)
>>
>>  Given the premise above, it looks like more often than not F/OSS
>> vendors are vying for the business of the customers who do *not* have
>> sufficient on-site expertise - in other words, it looks like one might
>> be selecting customers coming from the most clueless part of the pool!
>>
>>  Why is this an F/OSS concern? Well, we all know that, in general,
>> engineers like to think that "customers suck", but this thinking
>> pushes it to a new level: while in the proprietary market, all
>> customers must purchase support from you, in our brave new world, only
>> the less clueful  need to. Besides the inherent higher stress this
>> places on the support crew, this is also expensive from a business
>> perspective - the ideal support customers are, obviously, the ones who
>> never need it.
>>
>>  Am I wondering about the obvious?  Perhaps I am being too
>> pessimistic. But if you accept the postulate, the thesis seems to follow.
>>
>>  Best-F
>>
>

--

_________________________________________
-- "'Problem' is a bleak word for challenge" - Richard Fish
(Federico L. Lucifredi) - http://www.lucifredi.com

[Thomas Lord]

Whether the premium support business is moribund because it doesn't exist or because it is already crowded by big players doesn't matter since we all agree that, regardless, there is a huge amount of economic activity in that market.   Maybe you aren't getting those budget line-items because they are going to in-house or to a big provider but that money is being spent.

What can you provide upstream or downstream of that economic activity, where you might yet claim your premium?

For example, some people make downstream plays of which various Web 2.0 startups may be the best example.  If "in-house FOSS support" is such a valuable property, how much of such property can you manufacture for yourself?   I.e., how much sweat can you spend being your own, business-focused in-house FOSS support team?   If the amount is enough, then maybe you can turn around and sell FOSS-based value add directly to consumers.

Other people make upstream plays.   These days, there is muttering in the halls of academia and professional societies about the shared problem of identifying relevant FOSS software and qualifying FOSS software: objectively ranking its suitability for tasks of varying degrees of mission criticality.   Those in-house teams have trouble doing all of that themselves: perhaps you can find a premium-price service which helps them identify and qualify FOSS solutions.

-t


Federico Lucifredi wrote:

I fully agree with you Sergio -- my point was on monetization, not on adoption.

In terms of adoption (and even in terms of making a sale), in-house expertise is the greatest enabler. in terms of returns, however, the point stands.

 Best-F

Sergio Montoro Ten wrote:

It is my personal belief that it works just the opposite way: the more in-house know-how that a customer has, the more likely is that he favors F/OSS.

This is because the highly experienced customers like the added control that they can have over software when they use F/OSS, whilst customers that do not have anysoftware development skills of their own do not care of whether the software is open or not, as they cannot take advantadge of the Open Source nature of whet their are using.

I think that this point of view can be supported by a couple of articles.
One from Andrew Conry-Murray in Information Week stating the SMEs fear Open Source because they do not have the IT manpower neccesary to install and run Free Software.

http://www.informationweek.com/windows/showArticle.jhtml?articleID=192300168&subSection=Open%20Source

And another study from Simula Labs that reveals that 33% of customers choose F/OSS because of the extra feeling of control that it gives.

http://home.businesswire.com/portal/site/home/?epi_menuItemID=989a6827590d7dda9cdf6023a0908a0c&epi_menuID=c791260db682611740b28e347a808a0c&epi_baseMenuID=384979e8cc48c441ef0130f5c6908a0c&ndmViewId=news_view&newsLang=en&div=-762569457&newsId=20060816005229

So my conclusion is that the more developers a customer has, the more it favors F/OSS over closed source software, as developers tend to preffer F/OSS and influence the decision makers when the time to buy comes.

Sergio Montoro Ten.
hipergate.org

Hello All,
  I have recently struck a reflection that I consider interesting:

 Postulate: Market analysts tell us that the #1 competitor to F/OSS companies is internal expertise at the customer site: in short, if the local crew is smart and attuned with the state of the software they want to deploy, possibly even maintaining ties to the relevant part of the community, they will deploy and support said software themselves. Vendors might come in (much) later, and only because of a need to blame-shift in very large/critical deployments (or in the mind of a new director of IT operations ;-)

 Given the premise above, it looks like more often than not F/OSS vendors are vying for the business of the customers who do *not* have sufficient on-site expertise - in other words, it looks like one might be selecting customers coming from the most clueless part of the pool!

 Why is this an F/OSS concern? Well, we all know that, in general, engineers like to think that "customers suck", but this thinking pushes it to a new level: while in the proprietary market, all customers must purchase support from you, in our brave new world, only the less clueful  need to. Besides the inherent higher stress this places on the support crew, this is also expensive from a business perspective - the ideal support customers are, obviously, the ones who never need it.

 Am I wondering about the obvious?  Perhaps I am being too pessimistic. But if you accept the postulate, the thesis seems to follow.

 Best-F

[Stephen J. Turnbull]

Federico Lucifredi writes:

 >   Postulate: Market analysts tell us that the #1 competitor to F/OSS
 > companies is internal expertise at the customer site:

This is true of all b2b services.  Consider the business of management
consulting.  If you know how to run your business, why call in Boston
Consulting Group?  And it's often true of proprietary software firms,
too!

But having competition just means you have to be better than the
competition to make a profit.  It doesn't mean you can't get those
customers and make a profit, too.

 > in short, if the local crew is smart and attuned with the state of
 > the software they want to deploy, possibly even maintaining ties to
 > the relevant part of the community, they will deploy and support
 > said software themselves.

Not necessarily.  It depends on what kind of business and what kind of
smart local crew.  If the software is not mission-critical to what the
business is going to do *next* but the smart crew is critical to the
new task, it may make a lot of sense to outsource the basic software.
The trick is recognizing such a business and selling to them---they
may not have recognized that you can do what they need for the launch
platform while the "smart crew" gets to work on the rocket itself.

 >   Given the premise above, it looks like more often than not F/OSS
 > vendors are vying for the business of the customers who do *not*
 > have sufficient on-site expertise - in other words, it looks like
 > one might be selecting customers coming from the most clueless part
 > of the pool!

Small consultancies of whatever kind have this problem.  It's endemic,
and an important factor in the very high bankruptcy rate for such
businesses.  However, "might" != "must", and the successful consultant
has learned to recognize customers lacking both general business and
specialty clue, and charge them accordingly.

 >   Why is this an F/OSS concern? Well, [...] while in the
 > proprietary market, all customers must purchase support from you,
 > in our brave new world, only the less clueful need to.

Well, if you truly have a monopoly on your product, it's true that all
customers must purchase support from you.  However, the smart
customers can, and often do, drive a very hard bargain in return for
that lock-in in terms of up-front concessions---even from monopolies.
And if the proprietary product is one of several, it's theoretically
possible that competition for locked-in customers will drive excess
profit to zero.[1]

So the FLOSS services vendor must emphasize the advantages of the
freedom to change partners, and then make sure the customer wants a
long-term relationship at a fee you can grow rich on.  A tall order,
but it can be done.

I'd like to emphasize a point that several other posters have already
made: there's a difference between business clue and technical clue,
and the sweet spot is a customer with lots of the former and not much
of the latter.

Footnotes:
[1]  I'm not sure I believe this myself, but judges and juries in
antitrust cases claiming monopolization by such vendors have been
convinced to find for the defendent.