openerp-community team mailing list archive

[Fabien Pinckaers <fp@xxxxxxxxxxx>]

OpenERP Enterprise

Eric and All,

Thanks for providing such a feedback. I read all mails and I will try to
answer everyone's question here.


*Why is OpenERP Enterprise Key for OpenERP?*

As an introduction, OpenERP Enterprise is key for OpenERP as it finances
all our R&D and marketing investment. The OpenERP Enterprise service
offer is what allowed to release v6, v6.1, v7, v8, and future ones.
Building an exceptionnal product requires to invest a lot in R&D, which
is very different than building new features on top of customer projects.

If we would not have invested in R&D, OpenERP would still be like this:
  http://www.cyclaero.com/OpenERP/OpenERP5-screenshot.png

In others words, OpenERP would be dead as it could not compete with
existing players. And most partners would have left OpenERP too as
OpenERP services companies were not profitable on versions 6 or earlier.

OpenERP Enterprise is key for customers too. In the past, with SAP or
others, customers used to buy one version of a product and stay with it
for 7 years.  They never upgrade and, after 7 years, they are so
deprecated that they usually completly migrate to another software. I
want to build a service where customer evolve with the software, where
they can benefit from new features frequently and where partners grow by
selling to existing users, not only to new ones.

I want to build long term relationship with our users where migrations
are not a technical pain, but where an upgrade to a future version is a
way for customers to benefit from lots of new features.

For new community members, you can learn our business model in this 3
years old post:
    http://v6.openerp.com/node/465


*Why is it super hard to have such a business model?*

We invest more than 45% of our charges in the product and it's super
important to keep such a high ratio for the future of OpenERP. (mostly
in R&D, but with a bit of marketing too) To sustain publisher
activities, as our cost of sales is ~30%, it means we need a service
with "75% gross margin" to be break-even.

Such a business model is SUPER HARD.

It's not possible to sustain a R&D department with services like
consulting, support, development, training, etc. as these services do
not allow 75% gross margin.

As we don't want to sell licences (proprietary models easily allow 70%
gross margin), the only solution we found without crossing the "non open
source" line is what I would call "One 2 Many" services. Things we do
once but provides a value for several customers. This allow us to
leverage the size effect.

Maintenance is the best example of One2many services:
  - bugs are fixed once for everyone
  - upgrade costs a lot for the firsts 100 customers but then it's less
than 4 hours of work per customer.

The service is also SUPER HARD to deliver at a low price (unlimited
maintenance tickets, upgrades at no extra costs). No other publisher in
the world has such an offer. In all others ERPs, upgrades costs 10x the
price we charge with OpenERP.

The good news is that we succeeded this super hard challenge as we are
break-even (but it costed us a few millions eur to deploy the model)


*What's the current status?*

OpenERP Enterprise is a great success: 1000+ customers, 50% of our
current revenues, 84% gross margin, only 13.07% annual churn [1], 84%
growth YoY, ~600 db upgraded in 2013.

Having only 13% churn is incredibly good. It means that a customer who
choosed OpenERP Enterprise stays on average 7.7 years with us. The
reasons why customers stop subscribing to OpenERP Enterprise:
  - 5.25% Don't Use OpenERP: project failure due to partner/customer
  - 3.41% No value perceived
  - 0.71% Unstatisfied by service
  - 3.63% Financial issue (no more money, includes customer/partner
bankruptcy)
  - The rest renew their OpenERP Enterprise subscription after one year

But we also had some failures, mostly in getting new customers. Once a
customer purchased the service, they mostly stay with it. (87%, which is
more than ok)

For getting new customers, I would say our main failure is the value
perceived BY THE PARTNER. We still have a lot of partners (I would say
30% but I have no exact number) that don't sell OpenERP Enterprise for
different reasons.

This is not a critic of the partners as I know it's not easy to
understand the value and how to benefit from it. I had the same problems
with our own sales 2 years ago, they always tried to apply big discount.
Now we solved this for our sales.

Over the past years, we didn't try to fix this and we focused only the
good partners. (70% of our revenues are done by only 30% of our
partners) Our way to solve the problem was to redirect all our efforts
on good partners (leads, time spent, public visibility, ...).

But I think we can now improve and openly discuss so that we try to fit
everyone's need.


*What are the values of OpenERP Enterprise?*

OpenERP Enterprise's values are:
1/ upgrade to future versions
2/ unlimited bugfix guarantee
3/ ability to merge bugs in stable branch
4/ private use clause allowing not to redistribute your customer code
5/ two hours of support
6/ Access to our top ressources


Value 1, upgrade, is super important to everyone: partners & customers.
 Customers because he benefits from new features frequently and partners
because they can sell more services for these new features.

Value 2, is more complex. It's a real value for customers but not for
partners as partners sometimes prefer to charge man*days to fix issues
on projects. It can be a value for partners if they are on fixed price
rather than time and material basis.  Most open source companies
(including ourself) try to do everything on their own instead of relying
on someone else. I saw A LOT of customers that paid A LOT to partners
for things that are covered by OpenERP Enterprise for less than half the
price they paid!

Value 3, is not important for customers but is improtant for partners if
they think for the long term. Some partners prefer to just have a short
term vision and think it's not that important to merge their fixes in
the stable branch.

Value 4, is only important for big customers having a legal department.
The others cheat and prefer to be illegal by not redistributing their code.

Value 5, is a low value but helps new customers as we handle their first
issues even if it's not a bug. It's improtant because some customers buy
an OpenERP Enterprise because they just have one annoying blocking point.

Value 6: OpenERP Enterprise customers can subcontract our ressources to
help on the project on key aspects: scalability, analysis, ... That's
very important for some customers/partners but we charge this in extra
to less than 10% of our Enterprise customers.

*What are our main problems?*

We have mainly two problems with the current situation:

1/ Our OpenERP Enterprise service is visible ONLY by the partners as
it's technical stuff and, when the customer need our services, the
partner is the only interface. We should make our services become a
value and visible by the end-user.

2/ Our success on OpenERP Enterprise is due to 30% of our partners
(mostly the silver and gold ones) but for the other 30% of partners, the
partner is a real problem as he is the blocking point to the sale.
(willingly or not)

3/ Work on the perception of the service. Our marketing sucks. We don't
even have a clear product sheet. If you sell migrations, for sure nobody
will want to buy it. Migrations are painful and costly. If you sell
upgrade to benefit this X new feature, it's a great offer.


*How can we improve the value of OpenERP Enterprise?*

Things we will do:
  - reach excellence in our services
  - make the service become more visible by the end-user: integrate the
service in the application (e.g. livechat), follow of upgrade or bugs
status, ...
  - integrate a strong support offer as an option (not only maintenance
but also 24/24 unlimited support for use and configuration)
  - work on the perception (marketing investment)
  - invest in sales (help the partner close deals to secure the Enterprise)
  - stop the 2 hours of support and work on a great service: unlimited
or nothing

Things that could work but I would like to avoid:
  - don't release bugfixes publicly (only for customers)
  - don't release new developments (an open core strategy), e.g. we
invest to clean accounting and we charge for these modules in v8.
  - skip the partner and sell directly (at least for bad partners)
  - stop partnership with partners that don't generate revenues but
costs us money

I would be very happy to add a high value service in OpenERP Enterprise
if we find one. But I would like to avoid adding small services to it
(the sum of small valued services do not make a great service). It's
better to do one thing perfectly rather than bundling lots of different
services in the offer.


*Misc notes*

Some complains about the price. For me, it's not an issue. OpenERP is
already cheaper than the competition and we offer more services as
others don't include the upgrade in their maintenance contract. If some
complains about the price it's because the value is not understood, not
because the price is too expensive.  I prefer to work on the value
rather than de-valuing our offer.  If the offer is not proposed to the
customer efficiently, for sure he will consider it's too expensive.

I will not decrease the price of OpenERP Enterprise as: it's impossible
to offer such a service for cheaper than that. I actually would prefer
to increase the price and increase the quality of service accordingly.

Interestingly, when we sell directly, we sell at 35€, with a maximum
discount of 10%. We have no problem with proposing that and it's always
accepted by the customer. Some partners have difficulties to resell it
at 17.5€ we have to work on this.

For big projects (>50 users), we always accept to negociate case by
case. So, the pricing is not an issue as we are quite open. One of our
internal rule to check if our pricing is not to high or too low, is to
say that 15% of the project value is a fair price:
  - partner get 85% of revenue for its implementation services
  - OpenERP get 15% of revenue for maintenance services
We are sometimes higher, sometimes lower, according to the project, but
it gives you an idea.

I don't like to split migration and support because I only envision
customer relationship in the long term. If the customer have to pay to
upgrade, he will try to avoid it and it's a business stopper for the
partner. I have the feeling that those that asks this did not understand
the real value of OpenERP (upselling).

Migration of custom modules is guaranteed (at an extra 800€/1000 lines
of code). So, it's not an blocking point to upgrades. The value received
with the new features are more than worth this extra cost. In the
future, I expect we will even be able to divide this by the number of
customers using these community modules. This would allow to upgrade an
accounting localisation for only 70€. But we are not fully mature yet on
this.


As a summary; OpenERP Enterprise is a great success for us but we can do
much better as we still have 30% of partners that are not ok with it.

I am open to the discussion if we can find other ways to improve this.




On 02/22/2014 06:08 AM, Eric Caudal wrote:
> Hi OpenERP Partners,
> There has been some questioning about the OpenERP Enterprise Contract
> after some of Fabien's email and there is a real debate/questioning
> about the value that this contract brings to the final customer.
> 
> Current value is difficult to sell and lies basically (at least in my
> current sales experience) on the migration and somehow on the bug
> fixing. Other advantages are more difficult to handle:
> - Private license has been a reason for me but I think this is very
> specific to some customers.
> - There are those 2 hours support but this is few and not proportional
> to the number of users ...
> - The other reasons (automatic update and security alerts) seems to me
> accessories and not decision-makers
> 
> So now the question would be what would bring additional value to the
> contract that would really interest the end customer?
> 
> I am thinking about the following advantages that could be added to the
> current package (for same price):
> - one certification voucher
> - one access to a dashboard to check one or several OpenERP instance
> health (with statistics and alert if down)
> - specific Android application, only available if a valid contract is up
> (could be business oriented or support oriented)
> 
> What about you?
> -- 
> Eric CAUDAL
> 
> Eric Caudal
> /CEO/
> --
> *Elico Corporation, Shanghai branch
> /OpenERP Premium Certified Training Partner/ *
> Cell: + 86 186 2136 1670
> Office: + 86 21 6211 8017/27/37
> Skype: elico.corp
> eric.caudal@xxxxxxxxxxxxxx <mailto:eric.caudal@xxxxxxxxxxxxxx>
> http://www.elico-corp.com
> 
> Elico Corp
> 
> 
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-- 
Fabien Pinckaers
CEO OpenERP
Chaussée de Namur 40
B-1367 Grand-Rosière
Belgium
Phone: +32.81.81.37.00
Fax: +32.81.73.35.01
Web: http://openerp.com