Financial downturns: Good for OSS, Bad for OSPOs

Nobody knows if we are in a recession right now. Many companies in the tech sector are acting like it, though, cutting thousands of employees.

Recessions can be good for open source, though. Historically, companies tend to significantly increase their use of open source during tough financial times. During the great recession in 2008-2009 companies that provide services based on open source software were able to thrive during the economic downturn. During the pandemic, the world turned to technology to modernize and adapt, and open source and cloud companies continued to thrive.

It's easy to understand why open source software is appealing during a recession. But it's not all good news. OSPOs are frequently targeted for layoffs. For example, Google just laid off some of its most experienced open source managers. It's not just Google - many of the companies that we work with denying requests for additional headcount or trimming their OSPOs.

On the face of it, it doesn't make sense. Almost every OSPO struggles with the amount of work it needs to manage. Asking for greater volume with fewer people can lead to lower throughput and greater risks. So why do companies cut their OSPOs? Because top executives don't always understand the connection between OSPO activities and their bottom line.

Adapting your OSPO

Fortunately, there are things you can do to help prepare your OSPO to survive - and even thrive - in spite of financial headwinds. While every company is different, there are a number of tactics that will help.

Invest in automation

Start by working to increase your throughput through automation. Even if your OSPO is not cut, you should expect that it will be difficult to get additional headcount even as the number of requests grow. But busyness can be trap. If all your time is taken up just handling the day-to-day press of issues, it will be hard to find the time to make strategic improvements to your OSPO. Concretely, increased automation usually means building open source scanning and reporting into your CI/CD ( continuous integration / continuous deployment ) pipeline. This will allow you to catch issues faster and closer to the source, making management or mitigation faster and easier.

Identify and align with the real drivers of value in your organization

The real reason why OSPOs get cut is because business leaders do not understand how your OSPO directly contributes to the financial health of the company. The good news is that this is a reporting and communication issue, one that is fixable.

You start by identifying the cost and profit drivers for your organization. There is no one single business model, so there is one single answer. But most often, the underlying reasons for organizations to engage with open source can usually classified as one of these five items:

1. Gain mindshare/marketshare
2. Recruit, retain, and develop
3. Reduce the cost of product/service delivery
4. Develop a platform for innovation
5. Reduce long term risk

In broad strokes, you can summarize these by saying that the first three items are about increasing revenue or reducing the cost of goods sold. Items four and five are about reducing risks associated with outside actors. In a recession, the business focus is on revenues and costs, so that is where your time is best spent.

Two quick stories about OSPOs that learned how to align with their business.

Possible driver #1: Using OSS to get mindshare and marketshare

Many of you will be familiar with the concept of a "sales funnel." A sales funnel is a representation of the journey from your prospect’s first contact with you until a completed purchase. It helps your sales team understand where they need to follow up or alter the sales process due to drop off in the funnel. It is called a funnel because there is some loss at each stage. For example, for every 1000 people that visit your website, 50 sign up for the newsletter. For every 50 that sign up for the newsletter, 10 get a software demo, and 2 buy the product.

Open source projects are not advertising - and they should not be. Nevertheless, a careful study of those who engage with any of the open source projects that you sponsor may reveal that your open source engagement can be a very effective means of improving your company's sales funnel.

At one company, the OSPO identified that more than 90% of paid commercial contracts started with an evaluation of the company's OSS. Due to the high level of conversion from OSS user to commercial user, the implied value of each download of the company's OSS was about $50. The positive experiences that people had interacting with the company's OSS presence directly led to increased conversion and higher profits.

Possible driver #2: Employee acquisition and retention

According to Builtin.com, the cost of employee turnover is extremely high.For technical positions, the cost to the company of a lost employee can be as high as 100-150 percent of the employee's salary.. So how does this connect to open source and your OSPO? It turns out that your open source policies can directly affect employee happiness and measurably increase retention.

At one company, they regularly surveyed their employees to measure employee happiness. In one office, the measured satisfaction was at -20 on a scale of +100 to -100. One perennial sore spot: the difficulty of engaging with open source communities due to internal policies.

After the OSPO implemented a new policy, the score in that office jumped 40 points, with the change in policy credited for the improvement. An internal analysis suggested that 6-8 developers stayed an additional year due to the policy change. This resulted in an estimated avoided cost of over $2M dollars due to improved open source practices.

Similarly, OSPO activities can result in easier employee acquistion and less time for employee training - both of which are tied to real dollars in your company's HR budget.

Getting down to dollars and cents

These same tactics may not be applicable to your organization. Nevertheless, your company uses open source because it makes economic sense to do so. Thinking deeply about how your open source program aligns with your company's overall business structure can help reveal how you can report your impact in a way that makes financial sense to top leadership. It may not be your regular way of thinking about or measuring your impact, but it can have a big effect on how easy it is to get resources.

As noted above, there is one single way to tie OSPO activities to company health. However, we have always found that a company's relationship with open source can have significant effects on how much money they make. If you need help figuring out how to apply this analysis to your organization, reach out to us about an virtual OSPO subscription and we can help.