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Why Only Two?

By John | April 25, 2008

A few people have asked my why only two for my “Mighty Two”. I have been specifically asked why not OpenNMS and Nagios The simple answer is that Hyperic and Zenoss are software companies and OpenNMS and Nagios are projects. Both Hyperic and Zenoss both have software company infrastructures. This means they have full time developers, sales, and marketing teams. They both have senior board advisory teams. They both have second round venture capital funding. OpenNMS does not have full time developers and their principal developers spend a significant time providing professional services to fund their organization. Don’t get me wrong, being a service guy myself, I think a developer having direct customer face time is a great thing, However, having key developers on the road and providing services detracts from a bottom-line aggressive development schedule As impressive as OpenNMS, and Nagios have been bootstrapping themselves it is extremely difficult for them to compete at the enterprise level without the same kind of funding that Hyperic and Zenoss have.

The key question is will “Enterprise” customers make an investment in companies like OpenNMS and Nagios with out the warm and fuzzy that “Software Companies” provide.  In my opinion no, thus “The Mighty Two.” With all this said, there are some underlying questions that OpenNMS and Nagios can ask the Mighty Two. That is, can Hyperic and Zenoss have it both ways. At the end of the day are you a software company or an open source project?. In my humble opinion it is very hard to be both.

Topics: hyperic, nagios, puppet, zenoss | 15 Comments »

15 Responses to “Why Only Two?”

  1. Tarus Says:
    April 25th, 2008 at 7:01 am

    While it is true that the OpenNMS project (http://www.opennms.org) is both purely open source and community driven, that doesn’t mean that the commercial services company behind it, The OpenNMS Group (http://www.opennms.com) isn’t a *real* company, with a board, full time developers, etc. The difference is we choose to spend our money on our customers and not on marketing and sales, and since we are not driven by the demands of VCs we can also choose our rate of growth.

    You dismissed Groundwork out of hand, but they have raised as much money as Zenoss and Hyperic combined, and they have a several year head start on both of those companies. While I think both Zenoss and Hyperic are better positioned than Groundwork for a number of reasons, having “full time developers, sales, and marketing teams” as well as “senior board advisory teams” did little to help them.

    You do point out that it is hard to be open source on one hand and to sell proprietary software under the same name on the other. This is the dichotomy that will tear at both Zenoss and Hyperic, which the OpenNMS Group avoids by only selling services. Enterprise customers have gotten tired of paying “per node” licensing fees to IBM and HP, and it is doubtful that they will be happy in the long run paying them to Zenoss and Hyperic. It will be fun to revisit this in a couple of years, when those two companies get to the point where Groundwork is now.

  2. Benjamin Reed Says:
    April 25th, 2008 at 7:31 am

    Well, we usually have at least one person always working on code, and I’m usually working directly on the open-source project stuff as well, plus, unlike the “software companies” we have an actual community that contributes code as well, so I don’t really see how they’re directly comparable.

    Over time, OpenNMS gets stronger, it’s done it for 8 years and it will continue to do so. Over time, “software companies” manage to keep up with the need to find new things to sell their customers every couple of years, or they implode.

    I’ve worked the startup model before — great coders, great software, and a failure to deliver it fast enough to the satisfaction of the VCs. I’ll take OpenNMS being a “project” over being a “software company” any day.

  3. RE: Why Only Two? Says:
    April 25th, 2008 at 10:00 am

    [...] Willis over at IT Management and Cloud Blog posted an interesting post I’d like to reply to. The key question is will “Enterprise” customers make an investment [...]

  4. Gokulnath B Says:
    April 26th, 2008 at 1:02 pm

    Hi,

    Why is that know one is speaking about groundwork??? Only Zenoss and hyperic is been spoken. Groundwork is also a company on its own and has all features equivalent and more than Zenoss and hyperic. Groundwork provides a agent to get deployed on the all the client system and doesnt depend on snmp traps alone. Can anyone discuss about this?

  5. John Says:
    April 27th, 2008 at 7:04 am

    As for Groundwork see…

    http://www.johnmwillis.com/opensource/groundwork-man-up/

  6. John Says:
    April 27th, 2008 at 7:12 am

    Tarus,

    I didn’t say you weren’t a real company. I said you were not a software company. The bottom line is unless you grow services by about 10x over the next year you are not going to allocate the kind of resources that Hyperic and Zenoss can afford.

  7. John Says:
    April 27th, 2008 at 7:15 am

    Benajmin,

    “I’ve worked the startup model before — great coders, great software, and a failure to deliver it fast enough to the satisfaction of the VCs. I’ll take OpenNMS being a “project” over being a “software company” any day.”

    The question is which will the enterprise customer choose. My guess is software company every time…

  8. Jack @ The Tech Teapot Says:
    April 28th, 2008 at 3:49 am

    >The question is which will the enterprise customer choose. My guess is software company every time…

    There are software companies out there that dwarf both Hyperic & Zenoss is size…if a software company is preferable, why choose a tiny one when you could choose a bloomin’ big one instead like HP & IBM and the rest of the “Big 4″.

    So, if the enterprise customer is choosing Hyperic/Zenoss it isn’t because they are a software company, because compared to their larger cousins, they are pretty weak software companies. It must be something else…

  9. John Says:
    April 28th, 2008 at 4:29 am

    “why choose a tiny one when you could choose a bloomin’ big one instead like HP & IBM and the rest of the “Big 4″.”

    Price and agility.

    So, if the enterprise customer is choosing Hyperic/Zenoss it isn’t because they are a software company, because compared to their larger cousins, they are pretty weak software companies. It must be something else…

    I totally disagree!!! Size is not a factor. Quest software is 1 billion BMC is 6 billion IBM is 170 and Microsoft is 277 billion. Enterprise customers choose equally from all four companies. Someone has suggested that Solarwinds is doing about 70 million a year in sales. What is their size? I once owned a software company that was four guys working out of my basement and we sold our product to Sears and the Federal Reserve and size was never a question they asked. All they cared about was that we were a software company.

    I am not sure “yet” if the mainstay enterprise companies are going to adopt Hyperic and Zenoss. However, at least they have a shot due to their infrastructure positioning.

    my .2 cents

  10. Tarus Says:
    April 29th, 2008 at 3:04 pm

    I am confused. You say that the reason to go with proprietary software from Hyperic/Zenoss versus proprietary software from the Big Four is “price and agility”.

    From what I’ve been able to gather, the “per node” pricing is pretty similar between these options. Of course, the smaller/younger companies need customers, so someone with decent negotiation skills can get a better deal from them now. Once that solution in entrenched, you can bet the support price will go up.

    With free and open source software (FOSS) the price is zero. Advantage? FOSS.

    As for agility, certainly a smaller company can be more agile than a larger one. The software is newer, for one thing, and has a lot less legacy baggage. Apple OS X vs. Microsoft Windows, for example.

    But by your logic these companies with VC investment are trying to become larger companies. In fact, they hope that within 1-3 years to be purchased by a larger company. Where does that leave the enterprise? Back where they started.

    I also believe that there is nothing as agile as an active open source community. Check out the recent commits into OpenNMS, especially the work done by Alejandro Galue from Venezuela. Amazing stuff.

    Advantage? FOSS.

    Trying to run an open source company as a software company is, in the long run, doomed. Either run it as a software company with great APIs or run it as a services company with free and open software.

  11. John Says:
    April 29th, 2008 at 8:25 pm

    I am confused. You say that the reason to go with proprietary software from Hyperic/Zenoss versus proprietary software from the Big Four is “price and agility”.

    You know as well as I that they are not pure proprietary software companies. They are what we would both call hybrid open source. They are far more agile than IBM and HP… that is a fact. As far as price I agree they are moving up and the big 4 are moving down. Today IBM on the wrong day is about 2k per seat and Zenoss on a good day is about 300 per seat.

    Trying to run an open source company as a software company is, in the long run, doomed. Either run it as a software company with great APIs or run it as a services company with free and open software.

    Time will tell. However is the indsutry (i.e., enterprises) ready for pure service offering as replacements for their software??? Today, IMHO, the answer is a hard NO. In the future… maybe.

    Net-net-net … This is all my opinion and we can agree to disagree. However, the cold hard facts are, that it is going to be very difficult for you to get VC money with a services model and without funding it is going to be very difficult for you to compete w/funded companies.

    I am not sure if you believe this but I am rooting for you and I really do hope I am wrong.

    John

  12. Benjamin Reed Says:
    April 30th, 2008 at 8:51 am

    I don’t disagree that it’s harder for a pure services company to get VC money, but I think the point is: VC money does not automatically equate success, *especially* for the end-customer. Additionally, VC companies start with the huge problem that they’re in the red, and will be for a long time, even if successful. That creates pressure to do risky things in the hopes they pay off; it gives plenty of time for all of the parties involved to get cold feet, which is what has happened to almost all of the interesting VC-funded companies in this space so far. Money’s not coming in fast enough, the VCs pull out, and the customer is stuck with something that’s no longer supported, or stuck with being passed around to a succession of companies that buy out the IP and fail to deliver on it as well.

    Not to say it can’t be a successful model, but still existing in 5 years is the exception, not the norm. The VCs are only playing the statistics that *one* of the things they’re investing in will pay off big-time, and the odds are it’s not you. =)

    As far as competing goes, it depends on how you define “compete.” If you mean becoming the biggest market share then sure, it may be difficult to “win” that race, but if you mean having fanatical users, being profitable, and growing the company sanely without an explosion of cash that forces you into an all-or-nothing strategy, then we’re competing better than fine. We’re growing year-over-year at an explosive rate, and all without a board of VC folks telling us how to do it.

    I think in the end the disagreement is a matter of definitions; I don’t believe you have to be a big VC-funded company to be successful. Success is making customers happy, and making more money than you spend so that you can keep doing so. That is not to say we couldn’t benefit from some funding, but it would be a strategic thing to accomplish a specific goal, not “Here’s 25 million dollars, sink or swim. Time to act like a big company now. We’ve bet that at least one of you 10 companies we’re funding will pay for the other 9 failing.”

  13. Chronicles of a Wandering Mind » Business models for open source it management companies Says:
    April 30th, 2008 at 9:26 pm

    [...] Not everyone agrees with the above statement.  There is a discussion that started with cote naming the open source IT management companies “little 4″ as contrast to the proprietary “big 4″ (IBM,CA,HP,BMC), and heated up again with QClusters exit from the openQRM project, hence little 4 becoming “Little 3″ . [...]

  14. John Says:
    May 1st, 2008 at 12:54 am

    Benjamin,

    Are you guys tag-teaming me… :)

    VC money does not automatically equate success,

    I totally agree!. However, vc money puts you on second base as opposed to home plate. You are correct a lot of funded companies don’t meet vc’s expectations and the VC’s bail. If you read some of my earlier postings I am nooo… fan of VC’s. The fact is that very few companies succeed in general funded or not. That is the nature of business. Customers always take a risk when they go with a startup because a majority of startup companies go under or get bought out. This is where that “warm-and-fuzzy” factor comes into play. I have been on both sides of the fence (customer and startup vendor) and it is a thin line between a company signing off on a relatively unknown software vendor.

    Also in selling software there is this unwritten law of what I call the “Cadillac” syndrome. A product can’t be priced to low as to look like its not worth anything and at the same time it needs to have price-value that is competitive with other vendors. A VC funded company forces the Cadillac syndrome pricing. Althogh more VC funded companies fail than succeed, this should not discount VC software companies that have made it (Tivoli, Micromuse, …) to name a few. My only point on this discussion is that, IMHO, “today” enterprise customers seem to be sticking to their guns on buying from “software” companies and w/o VC funding it is very hard to look like a software company (I have tried a few times). Can it be done, yes, however it it is at least 10x as hard.

    As far as competing goes, it depends on how you define “compete.” If you mean becoming the biggest market share then sure

    There is no grey area here… Competing means more sales people, more marketing, more offices, more PR, more resources to throw at during a bake-off, more consultants, more training, more …

    I think in the end the disagreement is a matter of definitions; I don’t believe you have to be a big VC-funded company to be successful. Success is making customers happy

    Here again I agree. Success is really judged by only one person – the person involved in the venture. I once worked for a Peoplesoft services company (Crestone International) that did about 70 million a year in revenue. They had 300 consultants and every consultant was making 180 to 200k per year plus bonuses. The owner was only a little more successful that the lowest guy in the company. Once a quarter they took everyone to Calloway for a golf weekend (all paid). Were they as successful as Peoplesoft? On paper of course not. Was I very very happy working for them for about 1.5 years… absolutely.

    Think of my “Mighty Two Reference” as the other kind of success (i.e., not Crestone). It sounds very much that you guys at OpenNMS are very successful and probably have a model that will sustain you for many years. Unfortunately, in the software company game, IMHO, that ain’t gonna get it done. Companies like Hyperic and Zenoss want to be 100+ million companies in 5 years or less. Unless I am completely off the wall, I can’t see anyway OpenNMS w/o VC funding can do something like that.

    Thanks
    John

  15. Doug’s Jaw Drops at 30K - TL-1 Support in OpenNMS | IT Management and Cloud Blog Says:
    October 25th, 2008 at 7:10 am

    [...] know Tarus is still made at me for not including him in my “Mighty Two“, however, he must be doing something correct to make Doug McClure’s, (of BSM, Netcool [...]

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