December 26, 2017
DevGuild: Pricing Strategy – Founder Journey to Enterprise Revenue
In just five years and under his leadership, RainforestQA has grown from 2 to 80+ employees, more than 10xed revenue, and continued to doubl...
Heavybit hosted Kong CEO and co-founder Augusto “Aghi” Marietti and Kong investor and GGV Capital Managing Partner Glenn Solomon in a fireside chat about the business of open core. Aghi shared his experience on everything from making the transition to open source, to how he thinks about pricing, to how the team is organized. Here are just a few of the lessons we learned on pricing and selling open core from Aghi and Glenn.
Aghi’s team didn’t start out with an open core model, but the team recognized that making the move might be a way to build a strong base of users. “When we were considering open source, we asked, ‘Is this mission-critical? Is there already an existing market for this? Is this not so light-weight that people won’t want to pay for it, or is it so heavyweight that there’s no benefit to open sourcing?’”
A key takeaway from the talk, however, was understanding the impact that opening up Kong to the community would have on their overall go-to-market strategy. “With the open core model, what you gain in marketing you lose in sales. There’s always a balance. You need to continually look ahead.” Maintaining this balance has been a continual challenge for the Kong team.
Aghi and Glenn discussed the changing face of the enterprise software market, and how selling developer tools has changed as developers have more control over the software they use, even within larger organizations. “Legacy players tend to sell to central IT orgs,” said Aghi. “With open core, we sell on use case, instead of to central IT. We enter at a much lower price point, and eventually ‘eat’ the team around central IT.”
As a result, Aghi suggests that open source teams “don’t undervalue the sales engineer. When you’re selling to a technical buyer, it’s a SE-driven sale. The sales engineer builds the trust, and they manage the relationship.”
Glenn asked how Kong decides if new features are incorporated into the open core offering, or added paid enterprise package. Aghi said that that decision always begins with looking at the market. Identifying what functionality will be seen as “state of the art” and what will be seen as a standard feature helps his team understand how to package new features.
They also discussed Kong’s process for dealing with features that aren’t as easy to categorize: “When we are undecided about whether to add a new feature to our enterprise or open source product, we start with our priced package first. It’s much easier to take something out of enterprise than to give it away for free, then decide to charge people later.”
Want to see Glenn and Aghi discuss the challenges of commercializing open source live? They’ll be diving into the business of open core and open source at Open Core Summit this September in San Francisco.