When it comes to enterprise software, most partnerships established between vendors tend to be asymmetrical: a large vendor would embed some piece of technology developed by a much smaller one, or a small System Integrator (SI) or Value Added Reseller (VAR) would distribute the products of a larger, well established vendor. Commercial Open Source business models are slowly but surely changing the parameters of the equation, and giving birth to more equalitarian and fruitful relationships. Here is why.

Creating a mutually-beneficial partnership is a difficult exercise. In order to make it work, each party must get something from the relationship that it could not get on its own, otherwise it is clearly leaving something on the table. Also, it must ensure that the lure of a short term gain does not come at the expense of a long term loss. For these reasons, most partnerships established between enterprise software companies tend to be asymmetrical, for symmetrical ones tend to create unbearable competitive situations or unbalanced risk/reward ratios that would undermine the partnership over time.

Enterprise software is all about customer ownership, and two large vendors usually find it difficult to share customer relationships on the long term. As a result, it’s a lot easier for a large vendor to source missing pieces of technology from a smaller vendor that does not have a significant direct sales force, and could easily be acquired down the road.

Similarly, System Integrators and Value Added Resellers adding a new technology to their portfolio make a risky bet, investing significant resources in terms of business development and training, without much assurance that customers will necessarily have a need for the technology, or will be comfortable dealing with its provider. For this reason, SIs and VARs tend to focus their efforts on mature technologies backed by established players, which is one of the reasons why vendors like IBM and Microsoft have so many SI and VAR partners.

The emergence of Commercial Open Source vendors like Alfresco, MySQL, or SugarCRM is helping break the status quo. These vendors tend to have complementary solutions that customers like to integrate within larger stacks, therefore relieving some competitive pressure. Also, Commercial Open Source business models rely heavily on user adoption and customer conversion rates. As a result, the more users get to adopt your product, and the faster they convert into paying customers for your subscription services, the better. And if they happen to subscribe to the services of four or five vendors providing bits and pieces of the Open Source stack they are building, everybody wins.

Another dynamic is helping turn this stack centric partnership process into a virtuous circle: when a customer has gone through the process of evaluating and adopting a piece of Commercial Open Source technology, while developing detailed Return on Investment models that strongly will support its selection of an Open Source vendor over any closed-source alternative, it is much more likely to seriously consider another Commercial Open Source provider for any new need that might emerge down the road.

The benefits of such a process have certainly not escaped the new crop of Commercial Open Source vendors, and some interesting stacks are starting to emerge, adopting a very simple business model that customers seem to be comfortable with. According to this model, one vendor embeds the Open Source versions of the products offered by several other Commercial Open Source vendors, while establishing reselling or OEM agreements with them for their commercial offerings — usually refered to as Enterprise Editions, giving customers the ability to upgrade on a component per component basis. Such a model offers the benefit of significantly reducing the long term risk for the vendor responsible for the integration of a complete stack, for the reason that all the pieces that are integrated are available under the terms of an Open Source license. At the same time, it creates additional distribution channels for the vendors that are part of the stack, in exchange for very minimal investments.

An example of such a stack is the one currently developed by Intalio around our Business Process Management System (BPMS). Over time, we realized that our customers needed more than just a process design tool, a process execution engine, and a workflow framework. Some wanted integration with a modern Enterprise Content Management (ECM) system in order to support scenarios where BPM and ECM intersect, others wanted to get the functionality offered by a complete Enterprise Service Bus (ESB) as a way to build their own SOA puzzle.

At present time, Intalio is working with the following vendors to build a process-centric stack: MuleSource for the ESB, OpenLexicon for business rules, Liferay for the portal, Orbeon for dynamic forms, Alfresco for ECM, and Hyperic for system management. Interestingly enough, larger vendors are starting to adopt this model as well, and we recently signed a partnership with IBM for WebSphere Application Server Community Edition (WAS CE), following a very similar model. Down the road, we expect more partnerships of this nature to be established, and our relationships with these vendors to become even closer, with reselling agreements turning into OEM agreements when integration points have demonstrated to bring value to customers that can be converted into additional subscription services.

Here is yet another benefit offered by a Commercial Open Source model.