Deal Radar 2009: Collaborative Software Initiative

I continue coverage of commercial open source with Collaborative Software Initiative (CSI). Founded in April 2007 by Stuart Cohen, the company applies open source methodologies to software development and business communities.

Cohen, the former CEO of Open Source Development Labs (ODSL), had a number of conversations with big Linux users who were increasingly looking for ways to collaborate on building business applications. He felt that that there was unmet demand for a partner who could facilitate the development of business applications that would ultimately lower the cost of development while increasing the quality of code, transparency and support. He quit ODSL to build a company to try to fulfill that demand.

The company uses open source software both to support its own business and to build applications for its customers. It also uses collaboration tools, such as CollabNet, to facilitate the community source model for developing these applications. CSI develops and manages community sourcing programs at prices much cheaper traditional development models. According to the company, this is unlike anyone serving the business applications space today. Since IBM, SAP, Oracle and other major application vendors are not interested in a niche market that scopes at $2 million projects that take less than two years, CSI is in a lucrative place where there is nobody else doing community sourcing.

The company’s market segments to date have been financial services and the public sector. They also see new a demand emerging in health care, supply chain, pharma, digital entertainment and clean energy. However, its most successful projects started in the financial services and public sector since they have specific common requirements for business applications. The company got market traction in these cases through its partners, who brought them customers who saw the value of collaboration and community sourcing.

CSI also has a pricing model it says is unique. First, there is the cost for development, where they scope a project among the “community,” or the core team. They determine the full cost of the development, usually under $2 million for a given project, and the initial participants split this cost among themselves. Then, there is the cost for ongoing services and support. The “community” or core team then decides how the software should be licensed and hosted.

CSI has partnered with a number of companies including HP, IBM, Intel and Novell and has fewer than 100 customers so far. In September 2008, the company launched TriSano™, a public health application and community. It is an open source, citizen-focused surveillance system for infectious disease management that allows local, state and federal entities to track, control and prevent illness and death.

CSI had its seed round of approximately $1 million from OVP Venture Partners in April 2007 and expects to raise a Series A this year. Also in 2007, the company saw its first revenue of $500,000 and grew to just less then $1 million in 2008. CSI plans to grow the business through individual business units, specifically in financial services, public health and compliance, and through its new core team projects, including CSI TriSano. The company is also working on building “business units” to support the vertical markets where community sourcing is seeing the widest and fastest adoption based on customer needs and is open to acquisition of those units.

Interesting model!

Recommended Reading:

*OpenSource Thought Leader and CollabNet Founder Brian Behlendorf
*Deal Radar 2009: Plain Black
*Deal Radar 2009: Service-now.com

This segment is a part in the series : Deal Radar 2009