In David vs. Goliath vs. Goliath, Paul Festa interviews David Temkin, CTO of Laszlo Systems about the recent opensourcing of their Laszlo content delivery platform as OpenLaszlo. The normal set of questions is of course asked, but interestingly, Laszlo Systems seems to have found yet-another-business model. In addition to the normal support and training aspect, Laszlo Systems is positioning themselves, naturally, as the best source for getting applications written using Laszlo.
Q: The obvious question is that with your flagship software now available open source and free of charge, how are you going to make money?
A: For those who have downloaded the open-source client, we offer support and training. Second, we're going to do custom application development. Customers will come to us and say, "I love those apps. I want your design talent applied to my problem." Third, we will offer commercial applications on top of this open-source platform. We will have a shopping cart, for example, or a Web e-mail application built on top of this. That's over the course of 2005.
The support and training efforts obviously are the normal way of doing things. The company already has these operations in place. The second path, of writing custom applications, represents a new way of approaching opensource-related business. In the short-term, this seems to be an ideal solution to creating revenue. Few organizations (relatively speaking) have expertise in developing applications for the Laszlo platform. If a firm decides to build upon the platform, turning to Laszlo Systems seems to be a natural choice.
But... doing a complete cost-analysis of the proposed solution might reduce their revenue in the short-term. By using Laszlo Systems to create custom applications, client firms are ostensibly outsourcing their development to a third-party. Laszlo Systems is then competing not just with Macromedia's own Flash/Flex platform, but now with offshore firms such as InfoSys and others. Clients will look at the cost of not just the platform, but the entire development process. There exists many other free/cheap platforms (Java, for example), so the development costs themselves may become the deciding factor.
Additionally, as OpenLaszlo becomes more popular, more competitors will enter the application-development arena, including possibly the low-cost offshore firms. Laszlo Systems would benefit greatly by initially forming partnerships with offshore development shops in order to be ultra-competitive with Java development in both the short- and long-term.
The third prong of their strategy will probably prove to be a non-starter as far providing direct revenue. Shopping carts, web-mail, etc, if sold commercially, will soon find direct competition from the community they enabled. These are exactly the types of things that opensource community members excel at building. Laszlo Systems should look at these bits as simply platform-enhancement tools. While platforms/languages are cool, it's ultimately the tools and libraries that sell developers on them. The JDK standard libraries provide excellent value for free. The .NET libraries provide even more value, built-in, at no extra charge. Perl's CPAN gives developers an even richer set of tools from which to assemble applications. While the ActiveX marketplace has supported commercial bits in the past, this trend will not continue on open platforms. Laszlo can bolster their reputation and increase the value of the platform by creating their shopping carts, web-mail, and other horizontal tools within the OpenLaszlo community, instead of attempting to productize them into revenue-generating assets.
One last caveat for Laszlo Systems regards jumping the gun. While the marketing speaks of it being not just Flash, the current reality reflects that yes, it is only Flash. Few potential clients like to hinge their development against future promises (Microsoft shops excluded, I guess). And now that OpenLaszlo exists and is open to outside developers, having exactly 1 delivery platform makes it easy to paint themselves into a corner. Their website discusses not adding features that can't be supported in Swing or .NET applications, but the lack of concrete implementations of these platforms makes it easy to break the rules. Laszlo Systems should have waited until they had at least a good bit of a second platform completed in order to keep contributors honest with new features. They stand to lose their multiple-delivery-platform edge if development of the OpenLaszlo platform goes awry.