Business & Technology Nexus

I’ve been out there on the Coupa beat talking Open Source and Procurement since our July 27th launch of the Preview Release. It’s been both fun and entertaining.

Several interesting viewpoints (myths?) have come up as blockers to open source adoption that I thought I’d share.

1) Open source won’t ever work for Enterprise Applications, it only works for infrastructure layers.

Please see my prior post on “First We Made Games..” – I find it fascinating how folks can continually resist extrapolation even when a large data set of precedents exists. Games but not operating systems. Operating systems but not web servers. Web servers but not databases. Databases but not Apps. Hmm. I’ve heard that before.

2) Open source infrastructure (operating system, database, web server) is a “a bag of junk” being hoisted on unsuspecting customers against their will, where support costs are astronomical and frustration high.

This one actually made me laugh a little. Obviously the gentleman who made the comment has never looked at Microsoft Windows code (or Oracle Database code for that matter). I think Linus Torvalds once said “all bugs are superficial with enough eyes looking at them” – hence the customer experience I hear is that open source products tend to be more robust and customers more confident in their reliability. Now that’s certainly not always. But the stuff that stays and grows faces a crucible of critical attention that closed source products just never see.

3) For open source to work well there has to be viral adoption – i.e. people need to begin using the system “under the radar” and possibly without their management’s consent.

Now, there’s not enough data to debunk this assertion entirely. The story goes “it works well in CRM because sales teams do whatever they want and then momentum builds and so the head of the business says “ok it’s sugar”. But even Compiere’s numbers tend to suggest a wider appetite for open source solutions in the enterprise.

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Amid these 3 “blockers” from a loud minority I’ve heard a TON of praise for the movement. Many Procurement & IT folks I’ve heard from are looking to open source to finally bring innovation to a stagnate enterprise applications market. The optimism is exhilirating.

You see, open source success may not always be viral, but it sure is infectious. :)

-Dave

Using Sourceforge as a proxy for activity in the open source movement, it’s interesting to see where the projects are today. And with over 100,000 active projects on Sourceforge alone, that can take quite a while.

There is a handy “map” (directory) of projects here. The top-level categories are Clustering, Database, Development, Enterprise, Financial, Games, Hardware, Multimedia, Networking, Security, SysAdmin, and VoIP. I tend to watch Database, Enterprise, and Financial categories the most.

Now stats seem to be up everywhere, and certainly Enterprise projects seem no different. Sometimes it’s sustained interested, like with Compiere (take a look at the 5+ year download history here). And sometimes particular projects look to be gaining good interest over time, like with Salesforce.com (take a look at their download history here).

But wait a minute, you say, Salesforce.com isn’t an open source firm. Doesn’t matter. Closed source firms and service providers (Google & Microsoft included) are beginning to open up around the edges and use the movement where it makes sense for them.

And as for-profit open source firms continue to tweak their business models seeking out more revenue (See Matt Asay’s video interview – the “network” is the “new shrinkwrap”), it seems to me there’s the potential for a more head-on collision with closed source than I had previously considered.

What I mean is that the open source advocate’s view is that open source solutions eat away or chip away at their closed competitors, shrinking the overall market size (in $) by bringing down prices and improving TCO, and perhaps offsetting this shrinkage by increasing the overall size of the market. But this traditional view, if I can call it that, assumes closed competitors stand still. What if instead they adapt and provide “me too” open-ness, and essentially engage in the battle in a more headlong fashion.

SugarCRM vs. Salesforce.com will prove a very, very interesting battlefield to watch.

The 8th annual open source convention wraps up today in Portland. I hope to make it there next year. On the open source startup advice front, Matt Asay had an interesting blog post summarizing his presentation. Good stuff Matt and thanks for sharing!

If you go looking for a traditional requisition line category in the Coupa eProcurement Preview Release you will come up empty-handed. It’s not there. Of course, it’s MIA on purpose.

While I was at Oracle I kept trying to figure out how to solve the categorization riddle. On the one hand, classifying spend is a reporting/accounting problem. But on the other, it’s how employees find things. And customers struggle with best practices on how to balance between the two.

So when Oracle introduced it’s eProcurement solution back in the late 90′s, classification was split into 2. You had your findability taxonomy and your reporting/accounting taxonomy. This solved a ton of problems, most notably an upgrade challenge for long-time Purchasing customers. But the maintenance of these two schemes was too much for brand new customers to bear. For R12 (an imminent new release of Oracle Applications), if I’m remembering right, our design was to collapse them back down. But that wasn’t what I really wanted or thought customers needed.

I wanted customers to be able to classify and categorize an item as many times and with as many different “systems” as they felt necessary. But I couldn’t articulate the idea into a comprehensible design. I just kept thinking about changing the data model to say “Reporting Category 1″, “Reporting Category 2″, etc, which was silly.

Now, Noah Eisner deserves the credit for adapting the consumer-centric tags concept to eProcurement – but as we began to dig into how they would work as a replacement for “purchasing category”, I realized I had the functionality I wanted.. And in a Preview release! Who would have thought. The big advance, technically speaking, is dis-associating the category from content & creating an intermediary table to support a many-to-many relationship.

So by all means, think of taggings as classifications of a catalog item (or more generally, content). They can be authored by the Procurement department or by employees in a true decentralized fashion. Or both. The concept is very, very flexible.

Now you’ve probably used tags on YouTube or Flickr. One beef I had was the limit to a single word. I don’t know if people will like our implementation, but it does support use of “double quotes” to encapsulate a phrase.

Tags turn the classification problem over to the user. But leave it in the hands of the Procurement department. And the truth is, it belongs both places.

Now tags don’t just apply to content. So there’s more to cover on this thread another time…

I’m pleased to announce we’ve issued our preview release of Coupa eProcurement. Our corporate website is refreshed, and we are live on Sourceforge. There are still a bunch of things to do to dress up our presence at both places, but it’s a good start.

I want to strongly express my gratitude to Noah Eisner, David Williams, and Seggy Umboh for their impressive dedication, work ethic, and achievement over the last few months. You guys rock. Big time.

Thanks also to Kevin Miller for his early and continuing guidance on the Coupa project. I learned the Procurement space under Kevin’s leadership for many moons at Oracle. He was always a great boss and proved a tough act to follow.

I also want to thank Ron Wohl for his time, his advice, and his continuing encouragement.

Before I go and set the bar too high, please remember Coupa’s preview release is an initial body of work. There are many additional capabilities we plan to add. I’m also looking forward to more detailed feedback from contributors, ISV’s, SI’s, and prospects so we can fine tune and enhance what we’ve done. Still, I think we’ve got some pretty great stuff in there too.

Coupa has now planted its flagpole in the dirt. We’re the Open Source Procurement company.

Say you’re a senior strategic buyer, in charge of software. You’ve worked with the business to nail the requirements & now you’re ready to issue an RFP. You’ve found 3 vendors who seem like great candidates – but 2 are traditional firms and 1 is, gasp, an open source outfit.

You issue a 50-page document with 275 questions to the 3 parties – but only the traditional firms respond. Sound familiar? Or how about this? You call up the 3 vendors and try to set up dates for them to come visit. The traditional, closed source firms with their large direct sales force say “no problem,” while the open source firm says “no thank you.” You are left in a fog about how to proceed.

The plain truth is Open Source is proving to be just as disruptive to the enterprise buying process as it is to enterprise software markets. And understanding how to adapt procurement processes to fully evaluate open source options has become a “hot topic.”

The simple reason behind the disruption is that open source firms make up for their low-to-no license fees by dramatically reducing sales & marketing expenditures. See p21 of this Larry Augustin presentation for a wild guess of an income statement comparison between closed an open source firms.

So, let me offer some practical advice… Here are a few suggestions for how to include open source in your next evaluation:

1) Try, try, try before you buy

Open source firms typically expect you will have used their online service or downloaded and installed the application & kicked the tires before you contact them. They expect buyers to qualify themselves. Naturally, when the open source vendor is receiving nothing in upfront license, sales costs need to be zero too! And don’t just try the open source software early, try all of them. If some prove too costly to even install, well, that’s a good early indicator that TCO will be a problem. And SaaS vendors will love the bake-off, their whole premise of existence is how easy they are to use.

2) Replace fly-in’s with Webex

Don’t expect open source vendors to fly to your main government office or corporate headquarters to meet you & do a sales pitch. It’s so rare it might as well never happen. Instead, ask for virtual meetings and get together remotely. Viva la webex! (or Glance, etc)

3) Evaluate solutions on TCO, not upfront costs

Just because open source might offer you a “free pass” on license does not guarantee it offers the lowest TCO for your business. Evaluate projected TCO at the 1-year and 3-year mark. Is the open source vendor on an expensive technology stack? Is the software so complex to install and manage that a closed source SaaS vendor is a better value? Choose the solution that fits best and keeps costs down.

There’s a lot more ground to cover here, but hopefully these 3 suggestions will get you pointed in the right direction. And good luck!

Had a great lunch with Scott Kveton yesterday. As I have mentioned, Scott is the new CEO of JanRain, a controlling force around the nascent OpenID technology movement. Previously Scott was Director of OSU’s Open Source Labs (OSL). Jason McKerr, who has worked a long time with Scott at the OSL, has moved to JanRain as well.

I had a lot of questions to ask Scott, but I won’t bore you with them. They generally centered around making sure Coupa does open source in a way that’s both sustainable as a business and friendly to open source advocates and evangelists.

The more interesting part of the discussion was learning more about OpenID. In short, it is a distributed model for identity. As Scott talked through all the consumer examples – blogs, wikis, e-commerce sites – I kept thinking about the awful state of technology for B2B, both server-to-server communications and employee-to-server communications. Together, we talked through a few different scenarios including traditional supplier punchout.

Could there be a way to adapt distributed authentication to B2B problems and lower costs? I think so. I’m looking forward to exploring a few ideas with the Coupa community and seeing if people are ready to toss old and increasingly arcane standards like cXML overboard. It’s by no means a slam dunk – the ROI associated with replacing methods that are still operational is muddy. Why replace your stove until it breaks, even if it’s from the 1950′s?

In other open source news, Scott confirmed something I had heard down in the Bay Area a few weeks ago – that Compiere is moving from Portland to Silicon Valley. Of course when you are a 2-person company there’s not too much to box up! They are a really interesting firm – it just goes to show you what releasing unrestricted intellectual property can do for your install base. Now that they are awash with cash from NEA it will be neat to see if they can turn their brand awareness and install base into a bigger business.

David Bush, my good friend who helped found the e-Sourcing outfit Iasta, invited me to write a guest post on e-Sourcing Forum. The topic was procurement & innovation, and I wasn’t quite sure what I was going to talk about until I started typing. Right away, my mind struck upon how open source is emerging as a crucible for innovation in software. I also perceived invention and innovation seem to be concentrating into smaller businesses as their larger counterparts scale back research to boost margins. The smartest companies will figure out how to ride on the back of small-company or co-operative innovation and adapt their supply chains to match this new world. Hope you enjoy the post on e-Sourcing Forum, and thanks again to David Bush for the invitation to join the discussion.

This July 4th I’m traveling to Portland, Oregon. Portland, for those that don’t know, is arguably the US capital of open source. I was surprised to find it a hotbed of open source thought leadership and activity, and I’m told it’s been that way for some time. It’s wonderful to sit in a Starbucks and hear conversations about networked innovation and the darwinism behind the success of Linux. It’s great stuff.

Here in Silicon Valley, most of the coffee conversations sound more like the guy in this short and funny video by StoryStream courtesy of YouTube. No offense Palo Alto!

I’m hoping to catch up with a new friend of mine, Scott Kveton, while I’m up there. Scott was Director of OSU’s Open Source Labs, and I first got to know him in that capacity. He’s a firehose to talk to – lots of experience and insightful commentary on the community.

He’s just now taking on the CEO role for JanRain, a firm that has some really cool technology for individual authentication for users applicable to both the business and consumer spaces. Identity management is a pain most of us wish we had to deal with a lot less, certainly in our everyday web experience but also within the enterprise. I’m hopeful Scott will hit a homerun with JanRain & wish him the best. Who knows, maybe Coupa’s products will be able to take advantage of OpenID someday.

For me, one person & one presentation seemed to capture the arc of progress of the open source movement better than any other.

The person's name is Larry Augustin, and the presentation was at the Open Source Business Conference held April 5th, 2005 in San Francisco. Here's a link straight to the pdf. Enjoy!