JBoss And The Impact Of An 85% OSS Renewal Rate
By: Savio Rodrigues
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.