Back in 2010 we were a web development agency, and we spent our time building websites for clients.
But we really wanted to build and sell products.
The reasons were the the usual ones: we wanted to break away from being hostage to key clients, we wanted to recurring revenue and we wanted a business model that scaled beyond each billable hour.
Despite having built (and sold) several proprietary products in the past, we took a slightly different approach back in 2010.
We launched a project management tool that was heavily based on open source software: Planio.
Since then, we’ve grown to 1,200 paying customers spread all over the world served by a small distributed team of 9. We don’t have a cent of venture funding, and we’re 100% bootstrapped.
Why should you start with open-source software?
As a web development agency, we managed client projects with Redmine.
Again and again, customers would tell us that they loved Redmine, and they’d like to keep it even when the project was finished.
This was how our idea was born. We realized that we could start offering hosted Redmine as a service.
From there, we started building our own product on top of Redmine, which turned into Planio, which includes CRM, helpdesk and team chat features.
You can do all the customer development work in the world, but you’ll always run the chance that your product just isn’t really something people are willing to pay for.
By going with a product that already existed, we we knew there was a product/market fit from day one.
What’s the ethical considerations of building a product based on open-source software?
Obviously, there’s always the question of should you take open-source software and turn it into a commercial product.
Our view is that companies that use a particular open source project as a core part of their business will lead to significant advantages for that project.
In our case, we have a vested interest in making sure that development continues on Redmine.
As we’re working with Redmine on a daily basis, we’ve fixed lots of bugs and added new features, which we then contribute to the Redmine project.
Where Does Planio Add Value?
Patrick McKenzie wrote on how proprietary software can compete with open source technology by having better marketing, design, user experience, support and focusing on the users’ problems.
Interestingly, we’ve found that the same applies even if you’re offering software that is open-source technology.
You can’t just go to Redmine.org, sign up and start using it as a project management tool.
Because Redmine is focused towards developers, most people will struggle with the very first sentence, “Redmine is a flexible project management web application. Written using the Ruby on Rails framework, it is cross-platform and cross-database.”
In fact, a significant portion of our customers are people who used to host their own Redmine server, but decided it was more efficient to outsource the work to Planio.
And can’t everyone just copy you?
It’s a non-trivial task to keep Planio servers running smoothly for 1200 customers, some of which require customizations and individual hosting.
We spend a lot of our resources on providing the best support possible to our customers. We find that often people simply want to discuss their problems with a human, rather than hunt through documentation.
There’s also quite a bit of supporting software around the product itself that needs to be built, maintained and developed. This includes billing, marketing and analytic systems.
Is is all smooth sailing?
One of the major challenges we face is that we keep Planio backwards compatible with Redmine, despite the fact that we’ve added an entire CRM and Helpdesk app as well as team chat. This means that decisions on new features or technology choices aren’t always within our control.
Greater Control and Predictability
Ultimately, the move from an agency to a SaaS company means we have a predictable, steadily growing revenue sources that’s diversified over 1200 paying customers.
It’s a great feeling not being hostage to one client that can make or break your cashflow. Our team can be based around the world.
We can focus on improving Planio, adding new features, and providing excellent support, rather than constantly chasing the next project.