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Commercial open source vendors offer a twist on partner programs

Solution providers interested in partnering with a commercial open source vendor should consider these factors.

Value-added resellers and integrators eying commercial open source software will find an abundance of partner programs.

Interested in partnering? Here are a few things to consider:

  • Enterprise orientation

Channel partner programs typically surround the enterprise version of an open source vendor's software, as opposed to the community edition.

"Most open source vendors … require partners to only distribute or do implementations around their … commercial offerings," noted Matt Asay, vice president of business development at Alfresco Software Inc. in Palo Alto, Calif., which specializes in open source content management software.

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The difference is that vendors distribute enterprise software under a commercial license, while community software is offered under an open source license such as the GPL (General Public License).

  • Subscriptions vs. licenses

The commercial open source enterprise editions lack traditional software products' upfront license fees, but instead sell as subscriptions. Subscriptions cover support and maintenance and may also provide a warranty and indemnification. Customers have source code access with the ability to modify, as they would under an open source license.

From the VAR's perspective, there's an opportunity to gain a slice of the subscription fee.

Compiere Inc., for example, shares customers' subscription revenue with its partners.

"The annual support fees a customer would pay flow in part to our partner and in part to us," said Don Klaiss, CEO of Redwood Shores, Calif.-based Compiere, which provides open source enterprise resource planning (ERP) and customer relationship management (CRM) software.

In exchange, Compiere partners provide first-line support for customers. With Alfresco's program, a partner can receive up to a 30% margin on the yearly subscription fee when providing first-line support and selling the subscription deal. A partner who sells the subscription deal and processes the contract and payment, but doesn't provide support, receives a 15% margin. The reseller gets that cut for the life of the contract.

The margin situation is somewhat different at Digium Inc., the creator and primary developer of the Asterisk open source telephony platform. In this case, a partner can resell both hardware and software, according to Jim Butler, channel account manager at Digium. Products available to channel players include Digium's PBX appliances and Asterisk Business Edition software.

"The margin on the hardware can be quite good," said Dan Pirro, commercial sales manager for Tarrytown, N.Y.-based Westcon Group Inc., which has a distribution arrangement with Digium. Pirro said hardware margins can run in the 25% to 30% range.

  • Lower product revenue, potentially larger services slice

The subscription revenue from a commercial open source deal tends to be less than what a VAR could expect to make on a proprietary vendor's license, executives said. But partners stand to make up for that on the services side.

Some resellers may prefer proprietary software and the sizeable up-front commissions on software sales, noted Bryan Cheung, CEO of Liferay Inc., an open source portal provider. But open source, he added, "shifts the equation to really reduce the budget on the license side of things and frees up more of the implementation side." In short: Dollars saved on software can flow to services.

Liferay encourages partners to pitch customers on the benefit of having the budget to refine and customize the solution.

In addition to implementation and customization, solution providers and integrators can provide training and consulting services. The type and level of service required depends on the customer.

"Some customers will just want a trusted advisor with them, an extra pair of eyes to … guide deployment," Asay said. "Others want the partner to come in and do all the work for them."

Larger organizations have the development resources to do much of the work themselves, but may call on a partner to help oversee the project, Asay said. Customers who lack a large development staff may hire a partner to take on the project, with the customer providing oversight, he added.

  • Partner program requirements, benefits, features

Signing up with a formal commercial open source partner program may involve an annual fee and certification.

In some cases, a partner may see the annual fee reduced or waived as its business with the software provider picks up. Cheung said Liferay cuts its partner fee in half once the partner starts generating subscription revenue and removes the fee when the partner achieves a certain revenue level.

In addition, partners generally pursue a certification track. Compiere, for instance, requires partners to attend training classes. Klaiss said the program includes both functional and technical training so partners learn how the software works, how to implement it and how to develop on the platform.

Liferay, meanwhile, requires companies seeking to participate in the company's premier and preferred partner levels to enroll at least five developers in the Liferay Partner Training Program. A certification exam follows three and a half days of classroom training.

Program benefits and features vary. Alfresco partners get direct access to its engineers. Liferay gives partners discounts on professional services. And Westcon Group recently launched an online configurator for Digium's Asterisk-based solutions. The configurator is available to VARs that have registered with Westcon's CollaborationPoint OpenSource program.

  • Developer participation

Commercial vendors want partners to have a solid understanding of their products, but commercial open source vendors typically look for greater involvement.

"Any kind of participation … is appreciated, if not expected, in the open source community," said Brian Otis, vice president of sales and business development at Optaros Inc., a Boston-based consulting firm that works with open source companies and projects.

Otis said commercial open source companies are "more than happy to have your developers very deeply involved" in their products. The level of involvement varies from vendor to vendor. A vendor may control its code base tightly and in that case the partner may contribute bug fixes or generate test cases for performance testing, he said. In other situations, the partner's involvement may extend to developing modules.

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