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Varien’s benefit by open sourcing Magento? 
 
jlaha
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Hello Roy and the Magento team.

I first want to say that I am very excited and impressed by Magento, and want to congratulate you and your company for your efforts.  I think that my experience in the e-commerce arena mirrors your experiences, which lead your company to develop this system.  In fact, I’ve been developing my own system which shares similar features to Magento, but it’s built with Ruby on Rails.

During the time I spent following Magento up until its recent beta release, there was a question in the back of my mind that I’ve always wanted to know the answer to.

Up until now, Varien has spent, in my estimates, close to one year thinking of, planning and developing Magento.  Time is money of course, so if I were to put a number on this time period, I’d say Varien has spent anywhere from $50,000 on the low end to $200,000 or even more on the high end.  This includes employees (project managers, programmers, graphic designers, webmasters—I’m guessing this is the biggest expense category), rent and other expenses to keep the project going like hardware, software, hosting, etc.

So, by giving away something like Magento (a high-level system that in my opinion can compete directly with and on the same level as other expensive enterprise grade e-commerce solutions) completely for free, it begs one to ask the following question:  How does Varien, a for profit company, benefit by open sourcing Magento?  Is there a financial benefit that Varien is hoping to achieve or some other non-monetary benefit, like publicity (which also ties into a monetary benefit)?

I realize that open sourcing sophisticated pieces of software is by no means uncommon.  Firefox, certain distributions of Linux, Linux windows managers like KDE and GNOME, Apache Web Server, PHP and OpenOffice.org are a few great examples of course, but they reach a wider, more general demographic.  In addition, Mozilla does make a nice profit off of Firefox: http://www.internetnews.com/dev-news/article.php/3590756.

I also understand that it is Varien’s goal to build a large community around Magento, which I’m sure won’t take long.

If you could elaborate on my thoughts, it would be most appreciated!

Thanks again and Happy Rosh Hashana,

Jonathan

 
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RoyRubin
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Jonathan - thank you for the kind words. Without going into much detail at this point, Magento is based on a professional open source model. There is a clear economic interest in this initiative and we strongly believe we can create value for the community, our soon to be partners, and Varien itself, naturally. We expect to have products based on Magento, on-demand solutions, services, certifications, trainings, partnerships, etc. The details will unfold in the next few months.

Varien has doubled in size over the past year in anticipation of the release of the product and we look forward to serving the community in the not-so-distant future.

Thanks again.

 
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LorenzoG
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.. and don’t forget all Magento gadgets.. I would love to buy some Magento clothes. I think it wouldn’t be to hard for Varien to put up an e-commerce store wink

I believe very strong on their business idea and I think we have a big win-win situation here .. everyone wins.. Varien and the whole community. I think this will create a whole new ecosystem and I’m certain it will create a lot of new job opportunies for people.

Hmm.. when I’m thinking .. it isn’t maybe a win situation for crappy non-opensource shopping carts .. but that’s another story smile

 
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Johan
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Marketing marketing marketing.

Varien gains a lot from releasing this open source than keeping it closed for several reasons.

Since they own the trademark, they get publicity and customers, who would like to have the company in charge of the application to do their ecommerce site. Instead of a freelancer. Not all customers go this route but it’s based on trust. The trademark means everything.

Also the community will give Varien feedback, solutions, plugins etc. for them to use aswell, which they would never have gotten otherwise. That way they may not have to develop everything themselves, and just keep updating the core. We have seen a large number of ecommerce solutions that are closed, and frankly 90% of them suck! Just because of the lack of input from other professionals.

Just because they released the platform open wont mean they will lose customers. There are many customers to go about and Varien would never be able to do ecommerce solutions for every company in the world. smile I think they will have their hands busy as it is.

It will hopefully be a win-win situation for everyone involved.

 
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lkbryant
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Well then, this begs the next question…

Will the open-source version of Magento be a low-end solution of Varien’s ecommerce system?

Will Varien have a much better souped up version of Magento that they would be selling to their own customers?

Because other than that, I don’t see how Varien can really profit from this. There will be hordes of open source programmers and freelance designers who will be setting up their own development shops world wide based on Magento. That means that Varien would have a very stiff competition getting their own customers.

It will be interesting, very interesting indeed.

 
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RoyRubin
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lakers - We’ve released all we have (nothing has been held back). That said, there may be an enterprise Magento system in the future - only time will tell.

We don’t see web development shops and freelancers as competition. We see them as partners in expanding the usage and adoption of Magento world-wide. In fact, we plan on training them, certifying and helping as much as we can so that Magento customers will receive a product that meets or exceeds their expectations.

 
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Travis
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Owning a market is a huge leap for any business.  Before Magento, I think it’d be safe to say Varien wasn’t even close to being top 3 in our minds for e-commerce.  The value of becoming the Starbucks of coffee, the Google of search engines, the Fender of guitars, is ENORMOUS.

 
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_
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When i saw Magento for the first time (about 3 months ago) i was suspicious. I couldn’t belived that Varien will offer Magento as a free solution. Now after many emails and chats i’m sure that they had the best plan to come to the throne of ecommerce solution providers. And they’re introducing it all the time smile

How many shops can a middle-sized company like Varien introduce in one year ? 20-30, maybe more (custom solutions ofcourse). They could sell Magento and see how the community grows. But as long as they’ll be offering it for free we can expect that the boost will be much bigger.

As we all know the biggest community has osCommerce. And everyone involved in ecommerce heard about it. We must not like osC but we must be aware that this system is the worlds most popular solution.From the first sight Magento is a killing-app and will for sure dethrone the osC. New beta of osC 3 offers nothing new and has more bugs than Magento now wink.

From my point of view, people are sick of Cube-Cart, osC (and forks), XCart and many more ecommerce systems. Those are simply old, full of bugs that were never resolved and those systems aren’t following the newest trends. And at this point comes our saviour mr.Magento to rescue mrs.Ecommerce grin. God bless you guys smile

But seriously if Varien will offer a certifications, courses , trainings , partnerships etc. they will earn much more than only by selling M. They’ll become the first-choice company for many users and further maybe begin to set trends in ecommerce. And then they can focus only on creating a network that will assemble proffesionals and companies around the world. That will for sure secure also the quality of created solutions. That’ll be more profitable (through certifications, partnerships etc) that any other business activity.

I wish that Varien had 1’000’000 users and 10$ from everyone grin.

 
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YoavKutner
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A.Piotrowski - could not have said it better my self smile

Thanks for the support.

Yoav

 
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Johan
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Most people are still stuck in the old ways of doing business. So they might have a hard time understanding the business model and how it makes money.

A.Piotrowski sums it up pretty nicely. There are a multitude of ways to get clients and money. Just look at Red Hat Linux for example.

lakers,

Like I mentioned they would not be able to take on all clients in the world even if they wanted to. And I am sure they will get ton of business as it is.

 
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lopsta.com
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i think closed source has no future.
just look at how quick the volunteer translators for magento into german language have started to pick up the task.
i think within a couple of days this can be finished.
so you can open another market (ie germany) just with community contribution without any investment.
this would never happen with closed source.
there’s no doubt that this is the right way.

the logo is nice, you should really set up a merchandise shop. will help spread the word too. just use a spreadshirt shop.

 
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Excuse me Varien team but i’ll make a simple calculation to dispel fears of others tongue rolleye .

Basing on Zend prices we have:

- $125 for every examination (Zend Cert.)
- $800- $1500 for every conference (per person)
- $800 for every online training (Zend Cert.)
- $30 for every Zend Cert. study guide

Assuming that:
1. Varien will get a developer network of 10000 people worldwide and 20% of them will buy a certification : $250’000
2. Four conferences yearly, every with audience of 100 people: $320’000 - $600’000
3. If 5% of participants that want to make a certification will buy a online training: $80’000
4. If 40% of participants will buy a study guide: $24’000

So without great effort Varien can earn about $600’000 - $950’000 only by offering certification plans and organizing conferences. The more developers will be using Magento the more of them will want to make a certification. We all know that developers love cartificates grin.

Varien as a market leader and trend-setter can also get a huge amount of partners. If one of requirements will be that 50% of developers in partners company must be Magento-certified (as in Zend) than they will earn much much more.

They have a head for business so i’m preety sure that they’ll find many other possibilities to earn money from Magento. The certifications are only a part of bigger plan wink. If i was Roy grin i would also consider offering magazines with tutorials, guides, interviews etc. In Poland they are very popular for Linux and PHP so why not offer something similar for Magento and ecommerce ?

 
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austinstorm
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I can not wait to hire a developer to customize Magento. I have implemented a number of e-commerce sites over the years, and one thing I’ve learned is that a one-size fits all is impossible. Even the simplest store could benefit with some kind of basic customization…

I anticipate people will be slathering to give Varien money, and I can’t think of a more deserving bunch. I don’t know them personally, but absolutely everything I’ve seen leads me to believe that they are very humble, very professional folks.

 
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lopsta.com
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austinstorm - 14 September 2007 11:17 AM

… and one thing I’ve learned is that a one-size fits all is impossible.

thats very true and the best argument pro open source.

 
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SeanCulver
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At first to be completely honest I was a bit shocked at the idea of partner and their associated fee’s. Especially when I looked at the price tag.  However after closing my jaw and thinking about it for a moment, it could be expected for such a high quality product. As the people above had said, the Magento Team has invested Thousands if not hundreds of thousands of man hours, money, you name it.  I can only imagine the costs of such a project and they are well above $200,000 I would guess more about $1,000,000+.  I think there is a new business model emerging, I think if it is executed properly can be a win-win for all parties involved.

I am wondering with the developer investing so much in the Magento partnership program do you think this will sky rocket costs for the end user.  I am forecasting that the average cost per shop will be higher than that of any other solution.  I personally have no problem with that as you get for what you pay for, but it will limit the customer market for the developer if indeed the end shop owner who wants to use Magento finds its costing him a fortune.

I like most people on the forums are extremely thankful for Magento and its brilliant team. I can see now that not only do they have intelligent programmers but genius marketers and strategists.

The risks that Varien are taking are quite huge, and indeed I hope they are very successful.  Kudos to you Varian.

 
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RoyRubin
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Thanks for the comments Sean. You bring up some great points - I will try to answer them all.

First, the partner network is a new concept in the open source eCommerce space. We are bringing to the table much more than just a platform / product with the goal of creating a global ecosystem that will thrive around Magento. Partners are at the core of this strategy.

The partner program pricing is fair given what we are providing under the plans (and its quite a bit). The partners can count on Varien to grow the brand, provide leads, conduct marketing activities, provide support, etc. and thus grow the Magento market. The partners (as well as Varien) will certainly benefit from a larger market and a strong demand for the product. That said, the program is not required. We only want partners who see the value and share our vision to be part of it. So far the response has been phenomenal.

In regards to end-user costs - I am not sure the partner program will have an effect. If anything, it should lower the costs (assuming leads are provided and each individual partners does not have to spend as much on marketing). The reality is that Magento is a product that requires a certain level of expertise and this will have a greater effect on pricing/costs than anything. I don’t see an associate partner raising prices since the cost of entry to our program is so low.

Thanks again for the great comments. We are at the forefront of creating a new, emerging market for the soon-to-be leading eCommerce product on the market and welcome the community and our soon to be partners to take part and lead the effort.

 
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