Hello everyone and welcome back to our course on commercial open source software startups

and how to spin off such a startup from university.

Today's topic is assorted commercial open source strategies in particular because this

is most important these days cloud service strategies.

We are with this lecture at the end of the middle part about open source and commercial

open source and after this lecture with the next lecture we will turn towards startup

life, how startups work, how to spin one off from university.

But today it is still commercial open source strategies.

We will first have to discuss the idea of feature differentiation to solve the problem

of converting users to paying customers which will involve a lot of different fine grain

strategies.

Then we will look at how it all moved into the cloud over the last 10 years and what

that means.

And finally we will look at some established techniques and review them in light of the

cloud and recent developments.

So let's talk about feature differentiation which is the solution to the core challenge

product management challenge or commercial open source challenge that I previously introduced.

That challenge is for the product manager mostly to solve and it asks how do you structure

your product and services so that you maximize that conversion of freeloading user to paying

customer while doing a couple of other things right as well.

Here now we will look at the incentives first of why someone should pay you money if that

open source software that you are providing is already that good.

Why would anyone pay?

And that is a question of as I said feature differentiation.

So again here you have the basic setup of commercial open source.

You have the core software as open source that is the community edition and then you

have a company the commercial open source firm which creates at least a commercial edition

of that same software but then extended and enhanced with all the features all the bells

and whistles that we've talked about in the past that turn some basic piece of software

into a basic product and a whole product.

When I say feature here it's synonymous with piece of functionality that creates value

for customers basically.

Features the general term you can call it requirements or functionality or whatever.

So how do you drive this conversion?

To understand the answers to this question you need to look at the value of features

and I use this the following differentiation of three categories of features.

So there are the non differentiating features.

This is functionality that everyone has that's readily available with anything in that domain

you're talking about that really may be needed so it's a necessary feature but really doesn't

distinct your product at all from other products.

For example if it was a word processor being able to save your work.

So that's just obviously necessary and it's not competitively differentiating your software

from from any competitors one.

Then you have reason to use as I call them features.

These are the features why users come to your software rather than a competing one.

That feature may exist elsewhere but it's probably not ubiquitous.

So the combination of reason to use features and the quality with which you've been providing

it in your open source software in your open source software is why users choose your open

source software over any competing open or closed product.

Here is where the first part of value creation is happening.