Paolo Juvara is the CEO of OpenBravo, an open source enterprise resource planning (ERP) company. Prior to joining OpenBravo in 2007, he was based in Redwood Shores, California, working for Oracle Corporation in applications development. He held a broad range of development and management roles within Oracle’s Applications business, including positions on the financials, supply chain management, CRM and business intelligence development teams. Paolo also worked in Paris, France, as part of Oracle’s Globalization team. An Italian, Paolo graduated from Politecnico di Milano with a degree in electronic engineering and a specialization in software engineering.
Sramana: Paolo, what is the genesis of your story? Where are you from?
Paolo Juvara: I am Italian and was born in Milan. I went to school in Milan, and after I graduated I knew I wanted to have an international experience. I began working for Oracle in France and was very lucky that I was able to be an ambassador for a new product launched for the French market. Two years later I became the development manager of the product and was stationed in Redwood Shores, where I spent the next 12 years.
After 14 years at Oracle, I realized that either I was going to work for Oracle for the rest of my life or had change my path soon. I decided I wanted to look for other opportunities, and I wanted to move out of Silicon Valley. I had spent a lot of time working with ERP and also found myself attracted to the open source movement, which was really emerging at that time. It was considered a groundbreaking way of developing software.
As I began looking for opportunities, I stumbled upon a small company from Pamplona in northern Spain. I came across the company at a conference in Paris where they announced their existence and their intention to take the ERP market by storm. I was taken aback by these guys from Pamplona! I really wanted to get to know them, so I got in touch with the founders.
They had gotten to the point where they had a small engineering team of six people in Spain. They had a very talented team, but they did not have anyone with past leadership of developing products in a professional manner. They felt that they needed someone who had done that, and they recruited me as the CTO. This was in 2007.
If we flash back to mid-2005, we will find that the company was founded by two students and a professor at a university in Pamplona. They started working for the IT department, and they were PhD students. They developed a campus management system. Afterward they decided they had built enough of a solution that they could use that software to provide IT services to their local region. The implemented a few projects before they realized they could just develop a product instead of trying to do project after project.
The decided to focus on building an ERP, but they did not have an open source concept. From an engineering efficiency standpoint, they decided to implement open source software. In May 2005, they started looking for investors to help them move forward. They found a local venture capital firm that gave them a first round of seed money. With that funding they were able to recruit our first CEO, who had the vision of open source software gaining [popularity] a worldwide basis. He changed the mentality of the company from a small provider of distribution to being something that could have global ambitions.
I joined the company a few months later. The company published its first product in 2006 and had a huge dissemination. SourceForge.net was used as the repository.
Sramana: What was the impact of using SourceForge.net for the repository, and when did that happen?
Paolo Juvara: We put the product on SourceForge.net in 2006, and the result was amazing. There was such a high level of activity that OpenBravo was on the front page of the website. OpenBravo was consistently among the top six projects, which resulted in a lot of visibility.
Sramana: Once you got to the first page, that must have been an immense amount of visibility, and I can certainly see how that would get your project rolling. What did you do to get to the first page?
Paolo Juvara: There actually was not a huge open source culture within the company when OpenBravowas first placed on SourceForge.net. The company decided to hire a community manager who was very active in the OpenOffice project and had been instrumental in getting that project traction in the Spanish community.
He not only energized everybody in the company, but he posted the project to SourceForge.net and went and spoke about it on a lot of forums and blogs. That is very common today, but at the time it was something new. Those efforts created a sense of community among our users, and word about OpenBravo started spreading virally.
Sramana: What did the community manager to do plant the seeds for OpenBravo and create an open source community around that product?
Paolo Juvara: The most important thing is that he was familiar with how the activity rankings on SourceForge.net worked. He determined that the SourceForge.net activity rating was based on the amount of code changed and contributed to the project. Another important aspect of the ranking was the amount of activity in the forums. The final key metric for activity rankings was the level of activity a project would have in the SourceForce.net Issue Tracker.
He established the SourceForge.net Issue Tracker as a business process for us and got other people in the company involved in the forums. We made sure there was always somebody from the company active addressing topics in the forums. Every post was answered in a timely manner with a good level of competence.
Another benefit was that we were the only major open source ERP. The only other open source companyhad two people, and it eventually collapsed and was acquired by another company. They did not have the bandwidth needed to create a community around themselves. That is why we were able to consistently get ranked in the top six every day where other projects could not.
Sramana: You had a lot of success on SourceForge.net, but how did you create your brand in the greater open source community?
Paolo Juvara: In September 2007, we began to consistently rank as the No. 1 project on SourceForge.net. That was a huge achievement for us. We even made project of the month. We also attended several open source events and we received the Best in Class award at LinuxWorld Expo. Our activity in the open source community really helped drive our brand across the world.
One of the things that has been good for us and that I would recommend to other entrepreneurs who are building a software company is to use open source methods to build a global brand. It is far easier to do it as an open source company than as a traditional software company.
Sramana: In 2007, when you began reaching the top spot on SourceForge and receiving awards, what was your product distribution like? Were there any trends among customer types?
Paolo Juvara: At that time, we were still primarily a direct services business. We had an open source software offering, but we made money by doing projects and consulting work for customers based on our open source project. In 2008, we changed to pure channels, and we no longer do direct implementations.
In 2007, we had a couple of international projects, and the rest of our work was done in Spain. Our primary activity was in the distribution industry. In late 2007, we acquired a small Spanish open source project called LibrePOS that expanded our functionality. That has directly resulted in our OpenBravo POS product line.
Once we acquired LibrePOS, that opened a very important sector for us, which was the retail industry. From there we expanded into public service and public administration. We have also found that a lot of nonprofit organizations use OpenBravo.
Sramana: You are in a very competitive space; from low-end ERP solutions to high-end ones, there are a lot of offerings. QuickBooks is a dominant player in the segment, and they are not very expensive. With that in mind, what do you think has driven the adoption of open source ERP?
Paolo Juvara: It is a very tough market. It probably does not get any more difficult than ERP. The sales cycles are long, the value of the sales varies because of the competition that you mentioned, and by nature it is a channel business which brings in its own unique complexities. With channels you have a lot of dependencies with your partners.
With that being said, we have gained a good level of success. Our secret is providing an ERP that is functionally complete and able to evolve, yet is agile with components. We just launched OpenBravo3, and I think that offering will really complete our story. We had an issue with our earlier releases where the upgrades were difficult for our customers. We solved that problem in 2009. We made it much easier for people to move from one version of a product to another.
Sramana: ERP has largely been a channel business and the accountants choose the accounting system, especially in the small business world. Somehow you have managed to make open source ERP a valid strategy for your company. How did you do it?
Paolo Juvara: The adaptability of our solution is the reason we have been successful and are adopted by people within organizations who are forward-thinking. One of the comments we often hear when it comes to QuickBooks and other similar tools is, “Our accountants like it, but the product is limiting the ability of the rest of the company to grow,” which is true. Just because something works for accountants does not make it a good fit for a company. OpenBravo is adaptable to so many situations, and we help companies grow.
Smaller companies will end up growing to a certain point, and then they realize they have to drop QuickBooks. They will then try to adopt another solution that has a few additional capabilities, and then when they outgrow that they move on to another solution. Growing a company in that manner requires not only continual investment in technology but a constant change between different vendors ERP systems. That is why ERPs have gained a reputation as being difficult products. That is always precisely why people like OpenBravo.
OpenBravo frees companies from that costly growth cycle. We allow companies to start very small. You can begin using our ERP the moment you have an account. You can grow functionality through our agile ERP mentality and add on as you need it.
Sramana: Small companies have hardly any IT resources. They need to focus on their core business. OpenBravo would require them to have at least some IT resources. Are you primarily getting customers who are moving on from a first solution such as QuickBooks?
Paolo Juvara: We do see a lot of customers who originally used a product like QuickBooks and have found that their business is pushing them beyond what their current offering can provide. They then want to avoid costs, so they begin to explore open source ERPs, which inevitably leads them to OpenBravo. Many of them will become customers. That is the pull effect.
The push effect is different. There are a lot of service providers that rely on open source products. They can differentiate themselves by becoming experts with OpenBravo. They can then make the recommendation to their clients, who will likely be the small businesses.
Sramana: Essentially you are appealing to businesses that are using the open source base, and your offering is easy to customize to match their workflow. Are there trends in the types of businesses using your software?
Paolo Juvara: If we are talking about the pull effect, then those are companies who have an IT department, and they are actively looking at open source to reduce their costs. If we are talking about the push effect, then the company demographics are much more varied as those solutions are essentially sold by third-party service providers that will use the OpenBravo software as part of their solution.
Sramana: How did your revenue evolve? In 2007 and 2008 you were doing consulting to bring in revenue, correct?
Paolo Juvara: The company started in 2006 and did less than 500,000 euros. In 2007, the company did 1.5 million euros. Those revenues came from consulting, training, and support. The company’s revenue grew threefold during its first three years. Once we began acquiring partnership fees as a source of revenue, we were able to stop providing integration services. That transition year was a difficult year for us because our integration services revenue disappeared and our professional server revenues did not come as quickly as we had hoped, which resulted in our revenue dropping.
Sramana: What was your company’s core offering once you stopped offering integration services? Did you charge for premium features?
Paolo Juvara: We had to change the business model a number of times. Our first professional edition did not offer any real differentiation other than support. We found that model did not work in our space. The majority of our users did not feel it was necessary to pay for support.
We then decided to build enhanced administration and system management tools and made that available only in the professional edition of OpenBravo. That strategy worked, so we have continued down that path and now have even more features available in our professional edition. We also allow our partners to develop specific solutions that are tailored for certain sectors. Those specific solutions require the use of our professional edition.
Sramana: What types of professional solutions have been built using this model to date? What industry segments are attractive, and what kinds of partners have you been able to recruit?
Paolo Juvara: It varies a lot. Some of our partners are focused on services and are not interested in developing a specific commercial solution. We have other partners who are aggregators of open source solutions and their specialty is developing integration components. They develop tools to allow various open source projects to integrate with one another. We also have an increased number of specialists who go for very specific sectors, such as geographic sectors, or from business vertical perspectives. We have companies that use our solution to develop solutions for higher education, private schools, retail businesses, nonprofits, fashion manufacturers, food distribution, hospitality, and hospital management.
Sramana: Have you been able to get all of these commercial solution developer partners through SourceForge.net?
Paolo Juvara: We have outgrown SourceForge.net and now have our own repository, which we established in 2009.
Sramana: How much of your revenue today comes from those types of partnerships?
Paolo Juvara: Around a third. We get another third of our revenue from partnership fees for those who have developed solutions that they resell to others, and we get our remaining revenue by providing direct services to our developer partners.
Sramana: Tell me about your organization. Are you still based in the north of Spain?
Paolo Juvara: We have expanded over the years. We have the original office in Pamplona, and that is still our headquarters. It is a small town away from the major commercial centers, so in 2008 we opened an office in Barcelona. We also have a small commercial office in Calcutta, India. About two months ago I moved back to San Francisco, and I am now in the process of opening a U.S. office.
Sramana: How many people do you have, and how are they split up among the different offices?
Paolo Juvara: Overall the company has 64 people. The vast majority of our workers are in Spain. We have a few people scattered around, such as a person in Costa Rica, a person in the UK, and a person in the Netherlands. We have three people in India. In the United States we have the head of marketing and me.
Sramana: In terms of distribution of people, is most of your team focused on engineering?
Paolo Juvara: We have 26 people in product development. The rest are in the support organization, and we have 12 people in consulting. We have a very small team of commercial salespeople who support our partners.
Sramana: Do you do your engineering consulting from Spain?
Paolo Juvara: About a third of our consulting work is actually engineering consulting. Visas are an issue because we are getting a lot of technical demand we have not been able to satisfy.
Sramana: How has the company been financed so far?
Paolo Juvara: We have taken two rounds of venture capital. The first round was for 6 million euros, and we had another round in 2008 which brought in specific competencies on the software industry. We brought in technical VCs who can also help us with processes. That round raised 5.5 million euros among the three firms.
Sramana: You have raised a substantial amount of money.
Paolo Juvara: It is not easy to raise the money.
Sramana: Given the amount of money you have raised compared with the amount of revenue required to give your investors a return on their money, you are going to have to grow the company a lot, and fast. How do you propose to do that?
Paolo Juvara: Excellent point, and that is our big challenge. There are a number of benchmarks that we have to consider. In the early 1990s ERP companies did not require as much capital. Our investors understand our plan, and they are not putting too much pressure on us to accelerate because they see our plan. Thanks to the open source designation we have an avenue for growth that this market has not had before.
We also hope our new POS product will accelerate the growth of the company. We are refining our business model to further accelerate our growth. I will admit that our biggest challenge is to show that we can indeed grow this company.
Sramana: What levers are you going to push to accelerate growth?
Paolo Juvara: From my perspective, we need to take advantage of our open source background and leverage that from a commercial standpoint. We have a very real pull-and-push effect. Our partners push the product onto the market by finding customers. In that use case, the partner cares more about the open source nature of the software than their customers do.
The pull effect is illustrated by the 30,000 monthly downloads of our software. We have 40,000 installations a month. Companies take our product and put it into production. We do not monetize the total number of installations that are put into production to its full potential. I believe we need to monetize that area more than we do now to be successful in the long run.
One of the key aspects going forward will be certification. When certification comes into the picture, more users will find the product more valuable and will have more confidence in deploying the solution. OpenBravo should be easy to install and deploy for someone with the correct skill sets. It is not a trivial product. If we made a trivial product, we would be limited in scope and functionality to the point where we would not do anything more than QuickBooks does. The key for us is to maintain the philosophy of starting small and letting our software grow with the business.
Sramana: If I were you, I would keep your partnership business that allows your partners to build commercial solutions on top of your open source core. I do believe that you would grow a lot faster if you kept the consulting to yourself. If you are getting 30,000 downloads a month, there is definitely a market for consulting services.
Paolo Juvara: It would grow a lot faster. That is a debate that we have had many times within the company. I think that would limit the company in some ways.
Sramana: True, but the consulting would not be your sole purpose. You have other revenue streams. At least 40% of your business should be consulting, which would let you get a lot more leverage. You are not monetizing the your monthly downloads and installations nearly enough. I think you need to drill down there and get some monetization from that.
Paolo Juvara: Yes, we have certainly debated that. We could probably grow from 5 million to 20 million euros. That is not bad. However, if we reach that level we may end up destroying our partner channel.
Sramana: Are the majority of your partners developing commercial software solutions on top of your open source product, or are they doing consulting services based on your open source product?
Paolo Juvara: It is a combination of both. There are a lot of partners who provide services on top of the commercial services. If we start competing with them, we will destroy that channel. We will have to limit our consulting to our core product.
Sramana: I encourage you to do that. The open source business model has some scaling issues. You are discovering some of them. When it comes to your core software, you will still find there is a need for consulting work. If you give that core to channel partners, you will not have a business model.
Paolo Juvara: Perhaps. We will see. I appreciate the perspective you provide.
Sramana: I am just giving you my observations of the open source industry. I really enjoyed your story. Good luck!
Reference Person:
Paolo Juvara Linkedin.com Interview