During the opening day SpringOne keynote Interface21 explained how they plan on using the funding they recently secured. Later in the day, I spent a few minutes with Neelan Choksi, COO at Interface21.

Neelan explained that for Interface21, the use of an open source license (Apache License 2.0), an open development model and a free product with paid support business model is about one thing, developing software. Yes, Spring is open source software, but that was a pragmatic choice. A choice born out of the market landscape at the time, not from an ideological love of all things open source.

Keeping this in mind, it shouldn’t surprise you that Interface21 announced they’d use their funding to, amongst other things:
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Another tidbit that David Skok (JBoss VC) gave at OSBC was that the JBoss support renewal rate was 85% (likely at the time that JBoss was sold to Red Hat).

It seems strange that a customer would buy support in year 1 and then decide not to renew the support agreement in year 2. Remember, 15% isn’t chump change. An 85% renewal rate means that you have to “grow” 15% just to stay flat with your previous year’s # of customers, or potentially, revenue. In most software markets, 15% is about 1.5x or more of the market growth rate.

Why didn’t the 15% renew?
1] The OSS product is no longer being used, in favour of a different (OSS?) product

2] The application running on the OSS product is no longer required

3] The level of support that a paid subscription/license provides didn’t meet the customer need (either because of under utilization of support or under-delivery of the support experience)

4] Something else?

You can’t do much about #1 or #2, although you’d hope that growing use of OSS, and in particular, your OSS product, would ensure a near 100% renewal rate with customers you already had.

But #3 appears to be a much larger concern. What happens when 15% of your current paying customers decide they can use your OSS product without paying you a dollar. Worse still, these are users you convinced to buy support/license from the mass of non-paying users.

Customers surely realize that their support/license payments enable the OSS vendor to continue developing the product in question.

Sure, you get some free development from the community, but 95%+ is still done by the vendor’s employees. What happens when more and more customers pass the “pay for continued development” buck and simply become users???

Traditional software renewals rates aren’t 100%. But you’d expect higher than 85% from OSS, since conventional wisdom tells us OSS tracks closer to customer needs and does away with the ‘pitfalls’ of the traditional software business model.

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