Subject: Re: Open Source Developer Exchange (Economics)
From: Rich Bodo <rsb@ostel.com>
Date: Tue, 29 Apr 2003 11:04:23 -0700 (PDT)


> "How to leverage the advantages, culture and experience of Open Source and
> to integrate these with the demands of business customers to such a degree
> that Open Source can become a better provider of business critical
> software - with lasting benefits to both developers and business customers"

I wouldn't say Open Source is a provider.  I would restate that to
say, based on your proposal, that "developers of open-source software
can become better providers."

> 
> We developed an Operating Model and business strategy based on the feedback,
> research and challenges discussed in the summary essay that followed. Many
> existing and past business models were investigated each have their own
> unique characteristics, benefits and advantages. Some of the 13 business
> models that we investigated included; Sourceforge, SourceXchange, Collabnet,
> Elance, sologig, rent-a-coder, experts exchange, free agent, asynchrony,
> etc. Although we are confident about our strategies and the proposed
> business model we are at a stage that we respectfully seek your advice and
> input. I have summarised the basics of the Operating Model at the location
> below and will provide a detail strategy and business solution during the
> latter part of this week, your feedback is critical to finalise some of the
> key aspects of the business solution.
> http://www.devcity.org/opsmodel/
> I look forward to your constructive response, criticism, comments and
> discussion about some/all of the initiatives mentioned in the above essay.
> 

My opinion is that consulting projects will make your life
complicated.  I say this from experience.  As a business, it sucks.

Don't get involved, man.  

Run like hell.  

Start another business doing something else.  You have your whole life
ahead of you.  Think about it.

Well, if you're still here, there are several things to consider when
acting as third party in a consulting deal:

1) Consultants are hard to manage.

2) Customer expectations are hard to set in consulting projects.

3) Contracts have to be done exactly right.

4) Anything lost in communication between the third party, the
consultant, and the customer is a serious problem.

God forbid you have to support joe random's work.  

My rough guess is that the most businesses who have tried to act as
intermediaries for project work suffered 50% death marches and at
least that in lost receivables.  Most businesses will have to charge
double or triple what they pay the consultant to make this work well,
and that's too much.  It's a little different if you are doing the
project work yourself, but it's still risky.  

The thing is, you take on responsibilities to two parties, neither of
which you have much control over.  Most people tend to shirk their
responsibilities if they can get away with it.  There are a million
ways for customers and consultants to creatively do that, and guess
who's expected to pick up the slack.  If you are good at anticipating
these things, then you stand a better chance with project work.

Time and materials are much easier to manage than project work.  I
suggest you take a page from a site like keene.com and broker time.
Charge per minute or per hour or per day for time, not projects.  That
way, consultants will actually get paid for the *time* they put in.

If you don't want to take that advice, then consider charging double
or triple what you pay the consultants.

We sell little low risk chunks of time more often now.  Fewer outside
consultants, less credit offered.  A simple credit card authorization
for five hours on a design or an install is common.  We can all get to
know a little about each other with that work.  We do more design
steps before starting on a big project.  Absorb more indirect labor
costs up front to avoid tradgedies down the road.

I'm still naive.  I have hard lessons every year.  These days, I learn
as much as I can about our customers.  Even if the company has a good
reputation in general, appears to be doing very well, and you know the
contact well, that doesn't mean there is enough organization or will
on their part to allow the project to complete.

Sometimes the responsible people working for the customer will get
fired or lose authority or just the will to get it done partway
through.  Sometimes one or more consultants will have a problem.
Either way, you'll be left with responsibilities you can't meet.

So we have to take on fewer projects, and avoid some customers, but we
will have more successes. 

It would not be too hard to set up a completely free, or advertising
sponsored, moderated bulletin board to tackle the issue of matching
software consultants up with customers.  Even a keene-style
application would not be too hard.  I think such sites would have to
have strong marketing focus to support themselves.  Marketing
"consultants on open source software" doesn't show a lot of focus.
 
The idea of fixing some common consulting problems has a strong appeal
to me, but I have overextended myself timewise already.  Hopefully
I'll be able to comment further someday.  Best of luck.

-Rich

-- 
Rich Bodo | rsb@ostel.com | 650-964-4678