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Bootstrapping with Services: 2600Hz CEO Patrick Sullivan (Part 6)

Posted on Wednesday, Sep 6th 2017

Sramana Mitra: They take over the product roadmap and they don’t pay enough. You lose control of the process and become their outsourced development shop.

Patrick Sullivan: That’s exactly what happens. When you’re stuck in the middle of it, you still get swayed by the brand recognition. That was the hard part. I remember five stories of these big companies trying to push our roadmap in a different direction. We finally had to pull back. That is between 2012 to about 2015.

Around 2016 is when we finally got the platform to a place where it can scale worldwide and it can be distributed in multiple data centers. Right around that time is when we made a conscious effort. The underlying core is done enough so that we don’t really need to be focused on the core anymore. We made a big pivot. Support is better than consulting, but the problem with support is it’s still a lot of people you have to manage and hire. It leads to a lot of support issues. If you don’t get a lot of support issues, then you have a lot of people who are underutilized.

The third transition is going into software sales. That’s the Holy Grail of the platform. We built about 30 applications on top of the platform. Maybe half of them are still open source. The other half are paid applications. The company is taking another big transition which is trying to go away from support and get more towards application. It’s more like the Apple Store business model. It’s exciting.

Because of our open source platform, we have an amazing distribution network around the world where people want these applications. As you know, software is so much more lucrative than support. The other part of that equation was the underlying platform has just gone so robust. We don’t have to spend so much money on support anyways.

Sramana Mitra: Did you make a transition from open source to regular software?

Patrick Sullivan: The core platform is open source. It’s almost a freemium model. If you’re a developer or a company, you can build your own application on top of it and you can go to market. If you want a support contract, you can come to us. What we now offer is a very advanced call center application.

Sramana Mitra: Your platform is open source and applications are paid.

Patrick Sullivan: The other key about this is we’re opening the app exchange so that third-party developers can start selling their software to other people. Now we have a platform that is more robust than anything else in the world. We take a percentage of that sale.

Sramana Mitra: What is the target customer base? Where do you get real traction?

Patrick Sullivan: A lot of our customers are resellers and managed service providers. These are people who have a good relationship with SMB’s or mid-market clients. They can completely white-label our solution. We give them an end-to-end solution. They can put their logo on it and go to market.

On top of that, we have some of the major carriers. When we worked with some of the carriers, we thought that they’d have all these amazing technology. It turns out a lot of the big companies don’t actually build a lot internally. They look for entrepreneurs and they look for the technology and buy that. The carriers we worked with found it a lot easier to license our software versus having to build it themselves.

By licensing our software, they can then white label it. They love that model. We have no big upfront cost. We’re pay-as-you-go. If you want a platform like ours, you have to pay multiple millions of dollars up front and pay a large ongoing licensing fee behind the scenes.

This segment is part 6 in the series : Bootstrapping with Services: 2600Hz CEO Patrick Sullivan
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