On Sourceforge, there are nearly 23,000 software projects implemented in PHP. Not all of them will be commercially successful. However there are many successful organizations that haven’t registered their software with Sourceforge at all. They earn their money in the PHP commercial market in many different ways. The fact that Microsoft worked in cooperation with Zend to make Windows Server 2008 PHP-compatible at launch shows the commercial importance of PHP.

Business Model

Even if the actual number of PHP-based businesses and PHP software programmers is hard to determine, it is still clear that in recent years the market for PHP applications has grown rapidly. A business serving this market can be managed in different ways. This article concentrates on the following business models:

• Software vendors offering a PHP-based product.
• System integrators that adapt PHP software from one or more vendors or communities, to implement specific customer solutions.

It is important to differentiate between vendors and communities in this context: eZ Systems, for example, is the vendor of the Open Source CMS eZ Publish. The Norwegian vendor is in charge of developing the CMS programmed in PHP, realizing customer projects in cooperation with partner organizations, offering further commercial extensions of its product, and operates worldwide branches in order to accomplish these tasks. On the other hand, TYPO3 is developed by a developer community and different agencies worldwide use it for their customer projects. Therefore commercially successful PHP projects can thrive with or without a commercially successful vendor.

The goal of Open Source products like eZ Publish, initialized and promoted by vendors, is to create a business environment where the vendor stands in the middle of the Open Source community they have established. In reference to the famous essay The Cathedral and the Bazaar by Eric S. Raymond, Mårten Mickos from MySQL constructed The Picture of the Cathedral in the Bazaar for this business model.

Figure 1: The Cathedral in the Bazaar

The analogy of a bazaar surrounded by several cathedrals fits when speaking of an Open Source project like TYPO3, brought into life by a single person and further developed by a developer community. The bazaar is the community of programmers involved in the core implementation, while system integrators that use TYPO3 for their customer projects represent the cathedrals.

Figure 2: The Bazaar surrounded by Cathedrals

These two models can also be combined with each other. For example, a system integrator could use TYPO3 as the basis for a product that contains additional functionality for end users and is also available as Open Source. In this scenario, the system integrator itself would become a product vendor and could build its own business environment as a cathedral within a bazaar.

License Mix

Every business model that accounts for developing or using Open Source software is based on software licenses. A thorough discussion of all possible license models would go far beyond the scope of this article, which is why we will only list the quintessential options for vendors or system integrators.

Generally, value creation within an Open Source business model can be achieved in the following two ways:

• Support and Services: The product is available only with an Open Source license. Revenue is generated through services around the product.
• License revenue: in addition to the Open Source core product, proprietary add-ons that need to be purchased are offered.

For example, the eZ Publish software from the CMS vendor eZ Systems is openly available under the GNU General Public License (GPL). The GPL is an Open Source license that can be described as "viral", because it leaps onto source code that it comes into contact with like a virus. Source code for extensions must also be made available under the GPL, just like the source code added to an existing GPL program. The eZ Publish community has developed several hundred extensions for the PHP CMS and put them online under a GPL-compatible Open Source license.

Figure 3: Licensing matrix

Organizations that obtain their revenue from proprietary extensions that they offer for eZ Publish do exist in the eZ Publish environment. Some of these extensions have been certified by eZ Systems. Since these proprietary extensions aren’t compatible with the GPL, eZ Systems also offers its eZ Publish product under proprietary licenses that cost money. Until 2006, eZ Systems itself still sold proprietary add-ons for eZ Publish. This strategy was later abandoned, and since then all software available from eZ Systems stand under the GPL.

The lynch-pin of the dual-license model (that is used by vendors like MySQL and eZ Systems) is the GPL and the fact that the vendor owns the copyright of the whole source code. Only as copyright holder can the vendor decide if its software can also be combined with proprietary source code under certain circumstances. These basic conditions allow vendors to have part in the earned revenue of proprietary solutions based on the product.

Projects like TYPO3 or Drupal, developed by the community, also stand under the GPL. The difference is there is no one entity that owns the copyright to the whole code and could offer it under conditions that would make it compatible with proprietary extensions. For Open Source vendors to be commercially successful,  the dual license model isn’t necessary. This has been proven by the financial support in the form of 7 million US-dollars of venture capital for the start-up Acquia founded by Drupal founder Dries Buytaert. What is important is that a relevant market is emerging around an open source product or project.

With some Open Source software, proprietary complete solutions can be made and sold. In these cases, vendors use software components that use a non-viral license, such as the Apache License.

Commercial Open Source

Before we broach the subject of the best way for software vendors or system integrators to market themselves in the PHP environment, it should be pointed out that my intent is not to give specific tips on how to market complete proprietary software. Instead this article will be about commercial Open Source and how vendors can sell PHP-based Open Source products, and how a system integrator can use such software to survive in the market.

The marketing agency founded by this author is committed to the open source vision and therefore this article will only support organizations within this scope. Of course legitimate Open Source business models that also include partly proprietary code exist, as mentioned above. In any case most of recommendations given here apply, regardless of the chosen software license, because they are universally valid marketing rules.

Communicating Openly

For marketing purposes, Open Source has essential advantages. Open Source makes ideal use of the Internet as distributive channel. Buyers can be attracted with appropriately licensed software that can be downloaded and tried over the internet for free, worldwide. However, the download alone isn’t enough to make an Open Source product known in the market. In other words: Just because my software can be downloaded at no cost, doesn't mean the users know of its existence.

This is where marketing comes into play, to communicate with potential and existing customers. The marketing of Open Source software can make great use of the internet in order to reach worldwide target groups. Unfortunately, marketing mostly has a negative reputation with programmers usually because it is wrongly equated with advertisement. However, the marketing of software has nothing to do with the manipulative and pesky commercial breaks that we know from TV.

Instead, marketing Open Source software is about the distribution of useful information for buyers and users. In the broadest sense, marketing covers communication from the organization to the outside world, as well as the information exchange within the organization and most of all within the developer community.

This foremost applies to all the vendors of Open Source products. Their weal and woe depend on how well they represent themselves to the outside, since the name of the product is often close to (and sometimes, like with MySQL, identical to) the name of the organization. For system integrators, it is important to have a good relationship with open source communities, especially those whose software is used in customer projects.

A vendor’s as well as a system integrator’s successful marketing communication includes all participants of an Open Source ecosystem, consisting most importantly of customers, partner organizations and programmers. This is most evident for vendors of Open Source products, since for example a software developer who asks astute questions in a forum could be working for an organization that could potentially become a customer or partner organization. From this point of view the community is not only a group of programmers but also an alliance of everyone interested in the product.

Making use of Interactive Channels

Open Source communities distinguish themselves through interactive collaboration on the development of software over the internet. Marketing should make use of interaction, which is the feature that distinguishes the Internet as a communication media from TV, radio, newspapers and books. Appropriate communication tools are referred to as Social Software, which includes weblogs, wikis, forums etc. For Open Source projects, these tools are part of standard communications, expected from all participants in the ecosystem.

Inexpensive software and hardware combined with Social Media portals like YouTube even allow young organizations to offer appealing information without great financial expenses. A screencast, in form of a video, demonstrates the potential of the software to the whole world within minutes, can be generated on any desktop computer, uploaded to YouTube and easily be integrated into a website.

The crucial advantage of interactive marketing communication on the internet is its ability to reduce costs and risk because of the following reasons:

• Less error prone: Just like the Open Source programming model allows developers to extend the product incrementally based on community feedback, the marketing of Open Source products can adjust their campaigns again and again within the scope of interactive communication.
• Immediate results: Rather than spend a vast amount of time and money in advance to develop perfect marketing, incremental and frugal steps can achieve immediate marketing results.
• Reduced risk: An Open Source Organization can gradually broaden its marketing efforts from minuscule initiatives that only address specific and small target groups, to broadly arranged global PR campaigns. This all happens parallel to a growing group of customers and trust in an incremental marketing strategy.

These advantages of interactive communication can not only be taken advantage of by vendors of Open Source software, but also by vendors and system integrators that may utilize Open Source components, but distribute the overall product as proprietary software. They could, for example, introduce the new proprietary product or add on to the Open Source communities, whose source codes are used, in an early phase. Thus a group of regular buyers for ones product may emerge from these communities. Of course one should stand out as contributor in a positive way and for example report or repair errors that have occurred while using an Open Source project – otherwise you will be seen as freeloader.

Defining Target Groups

Marketing always begins with the customer and how offered software can help him solve a problem. Without understanding the needs of the customer it is impossible to communicate successfully with him. Even though this should be obvious, many organizations fail to define a target group.

Is it necessary to spends tens of thousands of Euros for a market analysis in order to understand your customers? In one of the best books concerning software marketing, Geoffrey A. Moore appeals to the informed intuition as a valuable and inexpensive solution. Moore defines informed intuition as something that isn’t based on the statistical analysis of relevant data. Moreover informed intuition has something to do with drawing conclusions from a few distinctive visual impressions and experience regarding a target group.

For example, someone who wants to offer their PHP product to the banking sector will quickly gain an overall impression of potential buyers after speaking to a handful of the people in question. It won’t be necessary to hire a marketing institute for a representative survey.

Moore helpfully describes in his book example scenarios that make it clear to the marketer who the responsible technician is on the client side as well as the one making the buying decision. For example, he suggests to first describe a section of the daily work routine that shows which problems can occur without the new software. The same work routine is then described again, only this time it shows how the offered software can solve the occurring problems.

As long as programmers develop software for programmers they can effortlessly put themselves in the user’s position and communicate with him. An example would be phpMyAdmin, which PHP developers prefer to use for the web based administration of MySQL. Further examples include libraries or frameworks like the Zend Framework and eZ Components. With these products it is relatively easy for software providers to fulfill the needs of their target groups.

For complex PHP applications that are meant for inexperienced end users, it is entirely the opposite. None of the Open Source CMSs written in PHP that are available these days are easy to operate. This seems to be a problem within the whole CMS market . Many a usability obstacle is also hidden in SugarCRM, for example. It is much harder for software developers to fulfill the needs of end users that don't have the patience or the background knowledge of a programmer.

If you don’t want to sell software to programmers, you should make sure that the target group is understood, or problems accepting the product are bound to occur. Furthermore the marketing won’t reach the target group. The Open Source development model has its advantages here too because it allows the product to be offered to the general public in its early stages for testing in order to indentify and eliminate possible deficiencies early on.

Taking on Position

Those who understand their target groups are able to position their products well. Positioning goes hand in hand with branding. Both are concerned with filling a slot and gaining market leadership. The reward for these efforts is being able to obtain higher margins and thus higher profit more easily as market leader.

With branding and positioning, perception is more important than reality. One can discuss endlessly whether or not it is true what the SugarCRM website says: SugarCRM is the world's leading provider of commercial open source customer relationship management (CRM). From the marketing point of view it is merely important that potential buyers share this assessment.

For example, if one were to search for "cms" on sourceforge, over 2000 projects are listed. No one will ever compare these projects to each other and pick the best CMS. Instead they would orientate themselves towards those CMS that they’ve heard of before. A known brand saves the customer time, because he can trust that a known CMS has been used successfully by many others.

The CMS market is especially over-saturated with a vast number of open source or proprietary CMSs, written in PHP. The most famous are probably eZ Publish, Drupal, Joomla! and TYPO3. Since there can be only one market leader, Acquia seems to be following an advisable path in order to position Drupal better against its competitors. Rather than present itself as the millionth PHP CMS, Acquia has created the niche Social Publishing. This is a smart move, because it is easier positioning yourself as market leader in your own defined slot.

If you are still looking for a name for your product, especially if your target group consists of technical philistines, you should refrain from using word constructions such as "phpMyAdmin". Also broad terms, such as "phpwcms" should be avoided. These labels already include the product category (like WCMS as abbreviation for Web Content Management System) and only spread confusion demonstrated in the dialogue below:

• Person A: "Which PHP WCMS would you recommend?"
• Person B: "We use phpwcms."
• Person A: "Yeah I know. I asked you for a PHP WCMS, but what is the name of the software that you use?"

It is a bad habit, appending "php" either to the front or the end of the name of a product that isn’t intended for a PHP programmer as the user. This happens, based on the false assumption that PHP in itself is a sales argument. On the contrary, the customer is firstly interested if the software can help him solve a business relevant problem. The programming language is of secondary importance.

Becoming Known

If you are able to define your target group and can find your slot you merely have to increase your visibility. This is best achieved through public relations, although that does not mean the distribution of press releases about online services. That isn’t very promising.

Instead, from the start, join forces with a PR agency that has good personal connections to journalists and bloggers, and who can establish new connections in a professional manner. Such PR agencies use their network to systematically supply journalists and bloggers with interesting information, e.g. about a PHP product.

In order to execute a PR campaign on your own, you should have the appropriate connections or leave it be. Nothing annoys journalists and bloggers more than an overeager founder of a company who praises his own product to the skies.

The content of the PR campaign should be precise and name the interesting thing about the product without too many words. Furthermore the advantages of the product concerning the market slot should be accentuated at the beginning or end of every press release. For example, SugarCRM positions itself as flexible and cost efficient alternative to proprietary CRMs.

The reach of a PR campaign should also be well thought out. If you want to offer your PHP product internationally all information released should be offered in English and the website should be in English. In this case it would be wise to entrust a PR agency in the USA with the press release since public relations is highly dependent on regional conditions and the USA is still the leading market where software is concerned.

If you want to concentrate on a specific region, e.g. the German speaking area, you should take similar steps. However you need to consider that many technical terms in the High Tech sector are once again in English and probably shouldn’t be translated.

Depending on which phase the advertised product is in, a PR campaign should address the respective target group in different ways. For example, a PR campaign for a beta release should focus on weblogs that usually reach an audience keen on experimenting. Later, when the stable release is to be made known, it makes sense to contact the analysts and journalists of bigger online and offline magazines in order to place a review or interview accordingly in publications that are usually read by pragmatic buyers.

Recommended Reading

• Al Ries, Jack Trout: Positioning
• Al Ries, Laura Ries: The 22 Immutable Laws of Branding
• Marty Neumeier: The Brand Gap