Open Source Franchising (more)

Open Source franchising is aimed at delivering to the market IT basic services using OSS, with a fixed-time fixed-price methodology meeting clearly defined performance criteria (SLA).

Open Source franchising for customers is about getting business value with a shorter time of deployment, getting reliable solutions and services through certified franchisees instead of waiting for local resellers, known to spend little time management customers’ problems.
As seen with Geeksoncall, there is space for growing in computer services franchise arena, and no one has explored yet such potential market using commercial open source software.

Appropriating returns is not trivial for ventures making business with open innovation, but Sun could profit from running a partnership franchising program, offering franchisees the following services:

  • training;
    .
  • certifications;
    .
  • global marketing;
    .
  • subscription services;
    .
  • value added services (indemnification, benchmarking and stack assurance, mediation, etc).

Sun besides fee incomes, will be fueling a profitable mechanism for selling its hardware products along with subscription services and value-added services through the franchising channel.

Franchisees, delivering basic services with a standard methodology, can be perceived as more valuable then VAR channels, representing for the vendor a more effective distribution mechanism to medium-to-large buyers.

Becoming a Franchisee require investing time and money to become proficient with Franchisor’s products and procedures, in order to be able to deliver services on time, on budget and respecting SLAs.

Who might be interested in joining the OS franchise program?

The Observatory of European SMEs noticed that:

Small firms have a short-term perspective and expect quick and concrete results.

So existing ventures are unlikely to apply at the very beginning, since small firms can’t afford to offer its personnel intensive training, as employees are needed in day-to-day activities.

New ventures instead could join the franchising program, forming their business strategy without worrying about any earlier decision. Moreover Start-ups might apply knowing that belonging to a franchise can affect positively newness and smallness liabilities, and lower market entry barriers.

Newness. Start-ups lack of relationships with any kind of stakeholder, while the Franchisor, as established firm, has the level of access, legitimacy, track of record and reputation required to aid effectively the franchisee to develop relationships. Otherwise the entrepreneur must somehow absorb any risk a customer should take to do business with her start-up.

Smallness. A small firm can’t employ many people, and often is missing the required skills; a limited market presence and therefore a limited market power put small firms in a weak position in negotiations. The Franchisor’s network of enterprises can be helpful to locate skilled resources, where the fixed price policy defined by the Franchisor makes easier contractualization.

Market Entry barriers.The skills and experience of the Franchisor, along with a strong brand and an international advertising and public relations programs can help start-ups to get into the market.

Last but not least the cost of entry might cost less than ordinary computer service franchising business fares, see Geeksoncall fares to get an idea.

Previous others’ posts and comments on open source franchising:

Matt Asay’s post on his blog (my answer)
Frank Hecker’s comments

Matt Asay’s post on Infoworld
James McGovern’s post
Savio Rodrigues’s post
Sergio Montoro’s post (spanish)

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4 thoughts on “Open Source Franchising (more)

  1. I looked at the Geeks On Call site — very interesting, and I think a good starting point for considering what a FLOSS franchising business would look like. Basically from a franchisee point of view the Geeks On Call business model appears to require only someone with the necessary franchise fee and some employees with the relevant certifications (Microsoft, etc.); Geeks On Call adds value through assistance with marketing, scheduling and dispatch, employee recruiting, tech support, and so on. Geeks On Call appears to concern themselves mainly with desktop hardware and software and networks (including firewalls, etc.), but apparently doesn’t support actual server-side applications (except perhaps stuff like Exchange).

    Here are some scenarios I can think of for a “Geeks On Call”-like franchise operation that goes beyond basic hardware and software support:

    1. Geeks On Call itself moves “up the stack” and begins installing and supporting server-side applications. Given there traditional orientation I suspect they’d extend their existing Microsoft partnership and do this based on Microsoft server applications (e.g., Exchange, Sharepoint, etc.).

    2. A hardware vendor like Sun goes into the franchising business using FLOSS server-side software, in the manner you suggest.

    3. A software vendor like Red Hat does this; Red Hat of course already has both a certification program and a growing stack of server applications software). They partner with a hardware vendor to handle the hardware part of the business.

    4. A more radical idea: Why install software locally at the customer’s premises? If you have a strong franchisor with deep experience in FLOSS, why not leverage that experience to host the relevant applications centrally like SalesForce.com, Google, etc? Then the franchisee would only be responsible for initial account setup (including data conversion and perhaps limited customization), customer training, and level 1 support; they wouldn’t have to worry about dealing with the customer’s operational issues (backup, server administration, and so on).

    Of course, this model doesn’t really serve the needs of a company like Sun (which wants to sell hardware) or Red Hat (which wants to sell RHEL subscriptions). However if a new company wanted to be just a franchisor (like Geeks On Call) and not be distracted by other lines of business (like selling hardware or software), then this is the model I think might work best. The company wouldn’t even need necessarily to build its own operational infrastructure; it could potentially piggyback on the infrastructure built by others (e.g., Amazon).

  2. I’m following your line of thought, and I totally agree from point 1 to 3.

    I understand reasons behind the more radical idea you depicted in point 4, I see Google trying to do this, they have no concern about their channel program: they’re much alike an (the) Internet Application Service Provider.
    But companies like to store their own data by their systems, at least so far, and it might be really tough to let they change their minds. And internet reliability might be an issue too, at least down here in Italy.

    And yes, as you observed this model doesn’t serve the needs of a company like Sun (which wants to sell hardware AND subscription) nor Red Hat.

  3. Frank,

    One question about your “#4 A more radical idea”:

    What value is left on the table for the franchisee? The type of work that remains doesn’t appear to be valuable enough (in the eyes of the customer) to drive enough revenue or margins to make a franchise worthwhile. I could be wrong though.

  4. Savio are you saying that franchising business models are not valuable?
    Weather or not we talk about software I would say that franchising it’s a wealthy business: in 2001 only in US the Franchising Business provided 9,797,117 jobs, met a $229.1 billion payroll, and produced $624.6 billion of output.
    What I’m stating is that it makes a lot of sense for OS basic services, for all parties.

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