Nicola Kenn: Free software has silver lining

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Not charging for its product has proven to be a money-making strategy for a Wellington company Silverstripe

For Wellington website development company SilverStripe, international success has arrived through a rather unorthodox business plan - by giving away their product.

The small company decided last year to offer its innovative website building program to customers free. And co-founder Sigurd Magnusson says SilverStripe has never looked back.

"We knew that the product was worthwhile and that it would be useful to a large number of people, and then we realised the only option was for it to be free."

In February last year, the first version of SilverStripe was made available on the company's website. Like other open-source programs it is completely free to download, and skilled users are able to adapt and improve it to suit their needs.

After being featured on a major technology website, traffic to SilverStripe's site increased exponentially overnight and the attention snowballed - 100,000 downloads later, Magnusson says SilverStripe is proof that the open-source model can work. "By putting our software out there for free, it was a fantastic billboard for what we can do."

As a result, companies throughout the world have been paying the SilverStripe team to customise the program, adding features specific to their needs.

There was also the ulterior motive of having people outside the company working on the program, one of the trademarks of open-source software. "When we release a new version, we get hundreds of pieces of feedback from people who are evaluating the new version and finding bugs, so it's very much a collective way of doing things.

"We stood to lose little and there was a large opportunity to gain. Looking back over the last 12 months, we've been surprised at how well it's worked out."

Surprised might be an understatement - SilverStripe's revenue has increased more than 400 per cent in the past year. Ranked by Deloitte as one of the fastest-growing software companies in the Asia-Pacific region, SilverStripe has become a multi-million-dollar company with its technology used to create and update websites worldwide.


Its latest success is winning a contract to power the website for the United States Democratic Party's national convention in August, when delegates will select either Barack Obama or Hillary Clinton to run as the Democratic candidate for President.

It was the buzz on technology websites that led to the win. "They emailed us saying they had downloaded and used the software and they felt it was a close match to what they needed. They wanted us to take the product and add the graphic design and some of the specific features they wanted."

Open-sourcing SilverStripe has also seen the company attract other overseas clients, largely from the United States and Europe. It's a big step-up for Magnusson and co-founder Tim Copeland who, barely out of high school, formed SilverStripe in 2000.

"We didn't know a lot about business," Magnusson says, "but we were very passionate and so we just figured it all out. To begin with, we did piecemeal jobs for anyone. But we tried to be as diligent as we could so, with every month that passed, we could do something a little more sophisticated."

As the company has grown, so has the need for skills, a factor that resulted in Silicon Valley developer Brian Calhoun

being appointed chief executive. The company now has 15 staff operating in the heart of Wellington's central business district.

There are four shareholders, including Silverstripe's co-founders.

The company has had no outside investment. Finance has come mostly from clients, with some from NZ Trade & Enterprise and the Foundation for Research, Science and Technology. Its ad hoc beginnings have perhaps been responsible for the breadth of work done by SilverStripe. "Typically, a company, especially in New Zealand, is either a software company or a website development company," Magnusson says. "We've undertaken the challenge to do both of those."

THE split between building websites and creating software is one of the greatest challenges the company has faced. "There's a myriad of website development companies out there and it's hard enough just being that," Magnusson says. "It's also hard to produce a piece of software - especially if you're giving it away for free."

About 80 per cent of company time is spent on website development, creating sites for clients that include Meridian Energy and the Government.

The remaining staff hours are devoted to building SilverStripe's website-creating software.

SilverStripe aims to make building and maintaining websites easier for professional website developers and those with less technical knowledge. Magnusson compares the program to a car - developers acting as mechanics and the client as the driver. For the client, the complex machinery remains out of sight, and out of mind. "There's a real focus on making it easy for developing a site. At the same time, it's been very much about allowing customers to update a website by themselves. One of the rare things that we have done is divide those two roles."

But although SilverStripe was attractive to other developers, it wasn't something that they necessarily wanted to buy. This led Copeland and Magnusson to turn to the open-source strategy. "Ultimately," Magnusson says, "I think people don't enjoy having to pay for software and being restricted with what they can do with it. What we're doing is the more sustainable way of producing software."

That concept is becoming increasingly attractive to companies in New Zealand and overseas. Before open-sourcing SilverStripe, the company's clients were exclusively New Zealand-based. Now half the work the company does comes from overseas, particularly the United States.

Further expansion is on the horizon, but Magnusson says it's also important to consolidate the growth of the past year. "We're just trying to make the existing machine really hum".

Finding a balance between software and website development may still prove difficult but, for Magnusson, one of the biggest challenges SilverStripe faces is getting more developers outside the company involved.

"We're extending our hands very openly and it's just a case of time. I'm really looking forward to the day where there's just as many people outside the office as there are inside providing really meaningful contributions to the architecture, features, translations and all that kind of stuff."

SilverStripe

Head office: Wellington.

What it does: Provides software that allows users to create and manage websites. Also creates customised websites for individual clients.

Most famous client: United States Democratic Party.

Key strategy: Giving away software.

- NZ Herald

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