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a16z Podcast | Selling to Developers & Open Source Business Models
17 segments available
Developers are more than just influencers inside the enterprise -- they're now buyers, too. That's a huge shift from before, when only IT and other departments had that kind of purchasing power. (It's not just a Silicon Valley thing, either, as every company becomes a software company.) So what's different then about selling and marketing to developers? One key is open source. But offering products and services built on top of open source brings up a whole slew of other questions: What are viable business models, how do you monetize? Especially since (as Peter Levine has argued before) there will never be another Red Hat a.k.a. a successful "open core" business model. a16z partners Levine and Martin Casado offer their observations and advice about selling to developers and open source business models in this episode of the podcast. The answers affect everything from sales -- yes, you still need sales even when selling to developers! -- to product management (what features to withhold, who builds them) and go to market plan.
Segments Timeline
The Rise of Developers as Buyers
In this segment, the hosts introduce the podcast and discuss the significant shift in the role of developers within organizations. They highlight how developers have transitioned from being mere code writers without purchasing power to becoming influential buyers in the enterprise landscape. This change is attributed to the rise of collaborative platforms like GitHub and the increasing integration of software across all industries.
"hi everyone welcome to the a 6nc podcast I am sonal and I'm here today with two general partners who are focused on all things infrastructure and enterprise and we have our newest general partner Mart..."
Developers: The New Buying Center
The conversation delves deeper into the transformation of developers into a buying center within companies. The hosts reflect on their experiences as developers in the past, emphasizing the lack of budget and purchasing power. They discuss how this dynamic has changed, with developers now being recognized as key decision-makers in purchasing technology, influencing the direction of software development across various industries.
"of the developer as a buying center within a company I used to be a developer and when I was a developer I had no budget and I couldn't buy a pencil like when pencils were popular you know what but li..."
Software Development: A Universal Phenomenon
The hosts argue that the trend of developers gaining influence is not limited to Silicon Valley but is a global phenomenon. They assert that every organization, regardless of industry, now has software development at its core. This segment highlights the importance of recognizing developers as innovators and key players in driving business transformation across all sectors.
"and what we see are many of our startup companies now deliberately selling to developers as the first wedge point into an organization so 30 plus million developers and they all very much have opinion..."
Budget Dynamics: Developers vs. IT
This segment explores the budget dynamics within organizations, focusing on how developers align with profit centers compared to IT departments, which are often seen as cost centers. The hosts discuss how this shift in budget allocation reflects the growing importance of developers in driving business value and the ease with which they can now access tools and infrastructure.
"innovative products in those organizations to move any industry into a next generation company so we are seeing across the board the proliferation and the opinion leadership of the development organiz..."
The Evolution of Infrastructure Consumption
The discussion shifts to how developers are now consuming infrastructure and programming tools, particularly through open source. The hosts illustrate this evolution with the example of containers, which provide developers with the flexibility and portability they need. They emphasize the reduced resistance to adopting new technologies, as developers can now easily try and integrate tools into their workflows.
"business will very naturally align you know behind the cost center the other part of that is the ease by which developers can consume infrastructure programming tools open source is so much easier now..."
Selling to Developers: A New Challenge
The hosts address the challenges of selling to developers, noting that increased choice and flexibility can complicate the sales process. They discuss the importance of understanding the developer's perspective and the need for companies to adapt their sales strategies to effectively reach this audience, contrasting it with traditional IT sales approaches.
"rights to so now there's you know somehow a bleeding between developers and what's typically been in IT budgets there's no resistance anymore to really trying and embracing the best tools and once the..."
The Role of Open Source in Sales Strategy
In this segment, the hosts discuss how open source and SaaS models serve as effective marketing tools for building a pipeline and gaining traction within organizations. They explain the inverted sales approach where developers are the initial users, leading to enterprise-wide adoption, and emphasize the need for a strong sales organization to capitalize on this grassroots movement.
"know any anytime users have more choice and more flexibility it benefits everyone and there was a time where IT would go make a decision and many of us have heard or have used the word shelf where man..."
Navigating the Buying Center
The conversation highlights the complexities of the buying center in organizations, where developers influence purchasing decisions but are not always the final decision-makers. The hosts stress the importance of appealing to both developers and higher-level executives to successfully navigate the sales process and secure buy-in for new technologies.
"also a way to influence innovation in your company and then layer up an inside sales or a sales organization that then can sell value into that company to expand the footprint that's what we see happe..."
The Importance of Enterprise Engagement
The hosts discuss the necessity of having a disciplined enterprise engagement strategy to turn organic growth into a predictable business model. They emphasize the need for a dedicated sales force to drive adoption and highlight the importance of understanding the value proposition of products across different organizational silos.
"the technology is being sold across a cut across silos for example when you look at cloud as a general thing it touches many traditional aspects compute networking storage and security so you either h..."
Marketing to Developers vs. IT Buyers
This segment contrasts the marketing approaches for developers and traditional IT buyers. The hosts explain that while IT buyers often prefer structured training and certifications, developers seek engagement and hands-on experience. They argue that open source serves as an effective marketing tool to attract developers while posing challenges for monetization.
"organization on top of this what I'll call the freemium model I totally agree and from a predictable business driver standpoint organic growth is very difficult to control and if you're building a bus..."
Innovating Business Models in Open Source
The hosts explore the challenges of monetizing open source and the need for innovative business models. They discuss the limitations of the traditional open core model and suggest that successful companies will need to find new ways to leverage open source while ensuring profitability through service offerings or proprietary products.
"pricing and packaging and so forth well let's answer those questions well I believe that the most successful open source companies not only will innovate on technology but they're going to innovate on..."
Market Dynamics and Open Source
In this segment, the hosts analyze how open source often enters existing markets, creating challenges for new entrants. They emphasize the importance of understanding market dynamics and the need for startups to differentiate themselves in a crowded landscape while leveraging open source as a foundation for innovation.
"think one more level of nuance to add which I find often gets lost is that if you look at these examples of quote unquote successful open source companies in almost every case they were going after an..."
Building on Open Source: Opportunities Ahead
The hosts discuss the potential for startups to build innovative products on top of existing open source technologies. They highlight the importance of focusing on higher-level applications and services that leverage open source infrastructure, suggesting that this approach can unlock new business opportunities.
"as a start-up you can put all your would behind a single arrow it's very complicated as a start-up to do all things ie manage an open source project and build all these applications on top so I think ..."
Navigating Open Source Challenges
This segment addresses the pitfalls startups face when engaging with open source. The hosts emphasize the need to understand the impact of open source on product value and the importance of maintaining a clear business model to avoid becoming overly reliant on services.
"but what are these are the pitfalls or obstacles that they have to they should think about as they try to build these businesses and how can they overcome them so the first one is if you're doing open..."
Community Management and Developer Engagement
The hosts highlight the critical role of community managers in engaging developers and fostering adoption of products. They discuss the importance of having strong developer support and the need for companies to prioritize community engagement as a foundational business function.
"organization in this new ecosystem the notion of viral spread plus an enterprise sales organization I think is the winning formula so then to operationalize a little bit more what does that mean for h..."
Balancing Open Source and Revenue Goals
In this segment, the hosts discuss the tension between developing open source products and maintaining revenue-generating features. They stress the importance of having a clear go-to-market strategy and understanding the trade-offs involved in adding features to open source offerings.
"core I also think along these lines you have to navigate the roadmap of what goes into open source on how you think about your business model exactly because you could you know now you put your best d..."
Structuring Teams for Open Source Success
The final segment focuses on the organizational structure needed for successful open source initiatives. The hosts share their experiences with different models and emphasize the importance of clear reporting lines and the need for dedicated teams to manage the complexities of open source and proprietary products.
"when you release open sources make it easier and more functional and I will adopt it so let's say we now take that back to our developers and they say great we're gonna add let's take all of these fea..."