Thoughts on Xeround and Free! by Mike Hogan
Everybody loves free. It is the best marketing term one could use. Once you say “FREE” the people come running. Free makes you very popular. Whether you are a politician offering something for free, or a company providing free stuff, you gain instant popularity.
Xeround is shutting down their MySQL Database as a Service (DBaaS) because their free instances, while popular, simply did not convert into sufficient paid instances to support the company. While I am sad to see them fail, because I appreciate the hard work required to deliver database technology, this announcement was not unexpected.
My company was at Percona Live, the MySQL conference, and I had some additional conversations along these same lines. One previously closed source company announced that they were open sourcing their code, it was a very popular announcement. A keynote speaker mentioned it and the crowd clapped excitedly. Was it because they couldn’t wait to edit the code? Probably not. Was it because now the code would evolve faster? Probably not, since it is very low-level and niche oriented, and there will be few committers. No, I think it was the excitement of “free”. The company was excited about a 49X increase in web traffic, but had no idea what the impact would be on actual revenues.
I spoke with another company, also a low-level and niche product, and they have been open source from the start. I asked about their revenues, they are essentially non-existent. Bottom line is that the plan was for them to make money on services…well Percona, Pythian, SkySQL and others have the customer relationships and they scoop up all of the consulting and support revenue while this company makes bupkis. I feel for them.
I had a friend tell me that ScaleDB should open source our code to get more customers. Yes open source gets you a lot of free users…not customers. It is a hard path to sell your first 10…25…50…etc. customers, but the revenue from those customers fuels additional development and makes you a fountain of technology. Open source and free are great for getting big quickly and getting acquired, but it seems that if the acquisition doesn’t happen, then you can quickly run out of money using this model (see Xeround).
I realize that this is an unpopular position. I realize that everybody loves free. I realize that open source has additional advantages (no lock-in, rapid development, etc.), but in my opinion, open source works in only two scenarios: (1) where the absolute volume is huge, creating a funnel for conversion (e.g. Linux); (2) where you need to unseat an entrenched competitor and you have other sources of revenue (e.g. OpenStack).
I look forward to your comments. We also look forward to working with Xeround customers who are looking for another solution.