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Commercial OpenSource: SpringSource CEO Rod Johnson (Part 6)

Posted on Monday, Jan 19th 2009

SM: I do like that you initially started out as a bootstrapped company. Do you think that helped you focus in the beginning?

RJ: One reason I am happy that we waited for three years prior to being funded, aside from figuring things out without the potentially unwanted help from VCs, is that we had to keep an incredibly close eye on revenues and expenses month by month during that period. Today companies are worried about being in a tougher economic environment, but we are not. We learned to live without eating our way through large amounts of money.

SM: Bootstrapping is very good in terms of developing good habits. If you are flushed with money right away you tend to want to spend it.

RJ: It is interesting, the culutural change that you can get.

SM: Earlier you mentioned that you would have preferred to have raised money a year before you actually did. Why was that?

RJ: I think about nine months would have been fine. As soon as we figured out what we wanted to bring a server product to market and have a complete enterprise Java software stack rather than developing complementary to the products of other vendors we should have raised money. We should have realized that it would take an amount of engineering resources that we could not fund through our present business model.

SM: Today, when you have to do your up sale, do you need a direct sales force to work with your customers? If so, how big is it?

RJ: Yes we do. We have about 15 in our direct sales force. Our total number is 130.

SM: You are essentially in the full CIO sales cycle.

RJ: It is a lot faster because OpenSource got in the door. The terrifying thing from an expense point of view in the traditional enterprise sale is the cost of presales. Presales consultants are very expensive. If you are closed source play you can get into proof of concepts and it becomes unpaid consulting. For a decent-sized software company like BEA, the cost of sales is 45%.

SM: That has been the enterprise software business model problem for the longest time.

RJ: It is much cheaper for us. Our reps often talk to people who know our software better than we do. We have a fairly typical OpenSource model which deals with very large numbers of leads going through the system. We have in excess of 500,000 unique visitors a month to our community websites. They go into a lead scoring and lead nurturing system and the most promising ones end up in the queues of the territory managers. We don’t do cold calling.

SM: How long is your sales cycle?

RJ: It varies depending on the scale of the deal. The larger deals are probably 3 months to 6 months. A larger deal is anything from $200,000-$1 million.

SM: It is pretty good if you can close those types of deals in 3-6 months.

RJ: Much of our training business is practically taking orders now as well because so much of it is online. We even do take orders by credit cards, so some of it happens without any involvement of resources on our end.

SM: You do the training itself online?

RJ: No, we don’t. It will be interesting to see what effect travel budgets has on our training program. We may have to decide to start doing that. We run trainings across Europe and the US. We fly our instructors into major cities. We probably run six training sessions a year in Chicago and DC.

This segment is part 6 in the series : Commercial OpenSource: SpringSource CEO Rod Johnson
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