Virtusa, an IT services company founded in 1996, was using proprietary version control and collaboration systems to develop software for its clients until Sri Lankan founder Kris Canekeratne decided that a custom solution built on open source components was a better fit for internal use. As a result, the company ended up saving millions of dollars on licensing fees and acquisition costs.

iFAX provides value-added services, support, and hardware to the HylaFAX open source facsimile server software. HylaFAX uses a client-server architecture that allows users to send documents through fax modems from any computer on the network. Nickerson says the company was “founded from the ashes” of a dotcom bust. “In 2000 I relocated from England to start this [other] company with a friend. He had something probably nobody really wanted, like many of the companies of that era. It never took off.” The company failed, but in his newly unemployed state Nickerson found much more time to work on his true passion: the HylaFAX open source project. Nickerson had been involved with the project since 1991, when it was known as FlexFax. It was his first exposure to the concept of open source software development, and he “became very enamored with the idea.” After several years of development that some said was too slow, in 1998 Nickerson was one of the community members responsible for revitalizing the HylaFAX project, when he and fellow developer Robert Colquhoun created community repository hylafax.org. After the dotcom startup died, Nickerson says he was left with a choice. “I could go back to England, or I could continue following the roots I had planted here.” He decided to make his passion into his career, launching iFAX in 2002. “That was my dream,” he says. “My goal was to build a company around this software that would allow me to pay myself and other people who had been involved: to monetize it.”

Nickerson says HylaFAX lends itself very well to a commercial business model. “We were particularly able to monetize it because HylaFAX has very clear business uses. [In the community], we were being solicited by companies all the time: ‘We’d like some support.’ But we’d never gotten organized enough. As soon as we launched iFAX, people started knocking on our door. One of our early customers was AT&T. When one of your first customers is the phone company, you know you’re doing something right.”

iFAX had such a good start that Nickerson never felt the need to solicit venture capital. “We’re completely organically self-funded,” he says. “It is our plan to remain so. Sure, it may have been a good idea to have made a bigger splash; to have come out with a larger plan earlier, but I’ve seen the dark side of VC in the dotcom era, and if that can be avoided, it should be. We already have two masters: the business itself, and the open source community. We can’t have a third.”

Nickerson considers that second master, the community, to be an indispensable part of the success of the company. Other entrepreneurs building a company on top of open source software should do the same, he recommends. “Be true to the community. Be transparent in what you do — 100%. Make it very clear to people that you won’t do anything anti-community. It’s in your best interests to make sure that the software improves and is very healthy, so don’t do anything to jeopardize that. It’s very easy to fall into the trap: let’s build some special sauce and sell that. That’s the way the proprietary software industry works, but it doesn’t map well onto an open source community. It generates hostility and they will leave you.” Instead of creating proprietary add-ons, create superior service, he says. “In our situation, we’re lucky enough to have a large line of hardware along with the software.”

The biggest challenge Nickerson faces with iFAX is one that many entrepreneurs experience: a lack of balance between work and the rest of life. “It’s especially difficult when you’re doing it in the open source software industry because there are no business hours in open source development,” Nickerson says. “They’re global. People do it whenever. It’s usual to see people all over the mailing lists on the weekends. I do it. Several of the employees do it. Nobody asks them to, but it is what we believe in — it is our passion. So it’s very difficult to maintain balance. If you talk to my girlfriend, you’ll know. The needs of the business come first, and on the evenings and weekends, the needs of the open source stuff.”

One of the principles that has guided iFAX’s rapid growth is Nickerson’s belief in “win-win” scenarios. “Open source just allows us to come in at a good price point. The fact that we can get the software exposed to businesses [in the community] and learn from them, and then contribute the improvements back to HylaFAX, is a win-win. We’re able to come in and pitch a lower cost, high performance solution, and we can do that because the software is free; there’s no line item on the quotation for software. And we come in with so many other advantages. It is open, you can modify the source, they can do it themselves. They’re not locked in. It removes a lot of barriers. It’s a great way to do business.”

Another key to success with open source is “looking to the future,” Nickerson says. “Open source project can become irrelevant very quickly, so we have diversified and taken our knowledge and built a second line of business around Asterisk, which is very similar to HylaFAX in some ways. We don’t stand still — we hit the ground running and then keep running.”

Nickerson’s number one piece of advice to entrepreneurs thinking of launching a new business based on open source software is “just do it. Try it. You just don’t know until you do, whether it’s going to take off or not.”

Today, Mindbridge has repurposed itself as an open-source-friendly company, and revamped its infrastructure to run completely on Linux and other open source software. “Having deployed [Linux servers] to our customers, we turned around and said, we can do the same thing internally and save bunches of money. We began a systematic but slow flipping of servers from the Microsoft world over to predominantly Linux — although there are a few BSD boxes around as well,” Christian says. “It’s to the point that today I only have two production Windows servers left, out of 15 or so.”

CEO Rick Puckette is enthusiastic about the change. “When we were using Microsoft, we had a lot more than 15 servers,” he says. “We had upwards of 50 or 60 that were becoming difficult to manage. So as part of this open source initiative, we also chose a virtual machine called Xen, which allows us to put multiple machines on one physical server, to consolidate.” Puckette says that Mindbridge evaluated other virtual machine software, including VMware, but Xen was “very cost-efficient and pretty bulletproof. We also use Hyperic to monitor the health and happiness of the servers,” he says.

Even though Mindbridge now delivers its security monitoring solutions mostly on a Linux platform, some customers still want Microsoft. “We’re willing to accommodate them, for a price,” Christian says. “It costs us significantly more to support a Windows box than a Linux box. It’s almost like Microsoft is now an afterthought.”

The transition to open source has had its share of challenges, Christian and Puckette say, but nothing that they couldn’t overcome. For Christian, the biggest deal was sysadmins who had to learn Linux. “It’s people’s learning curves, no doubt,” he says. “They had only ever administered Microsoft boxes in the past, and had to get used to the idea of command lines. The interesting thing is that a number of our developers came from strong Linux or BSD backgrounds, and they helped the sysadmin people make the transition.” To aid the process, Christian looked specifically for new hires who were eager to learn. “The people I like are pretty inquisitive type people. I tried to filter out the others in the interview process.”

Puckette says it takes some extra time to get an open source infrastructure configured the right way. “The challenge as opposed to buying solutions from one vendor is that when you buy from Microsoft, you can assume it works with other Microsoft products. With open source you have to take more time to make sure all the products interact and all the pieces fit together. But the cost benefits clearly outweigh going with all Microsoft.”

Christian likes the flexibility of open source. “We always find that at the end of the day, when we hit a problem, there was almost always a configuration file you could tweak and make it work the way you want it to work. The management of the systems, the flexibility in the vendors — even within our infrastructure we have three Linux vendors. We pick and choose based on the best tool for the job.”

Mindbridge has also transitioned its development environment. “We use it for all our development of new services that we sell to our customers,” Puckette says. “We bring in as much open source software as possible, and we integrate that software to solve business problems, get to market faster, and focus more on our customers.” Puckette likes the fact that the development community is self-motivated enough to continuously update open source software applications. “I don’t have to fund new features.”

Christian appreciates the benefits of the open source community too. “You get your problems solved easier,” he says. “You put out an email to a user mailing list, and you may get a response from the developer. Try doing that with most commercial vendors. It’s hard to get access to those people. In the open source world, it’s relatively easy.”

For other companies that might be considering a switch from a proprietary foundation to an open source one, Christian has some advice. “Choose a small project and don’t try to flip your infrastructure all at once. Choose something with a high probability of success,” like a Web-based application, “and go for that first. What you’ll be doing is allowing people to learn about the operating system and how to hook that operating system into your existing infrastructure — for example, hooking Linux into your Active Directory structure.”

Puckette says choose something “non-mission critical” to start with. “Put your toe in, pick an application that, if it does go down, the CEO won’t scream about it. Get smart about that one, then take on a mission-critical. Once you cut it over, you’re not paying the big guys.”

SimpleCenter gets shipped with some digital audio receiver products, such as the Motorola simplefi, and it is also downloadable from SimpleCenter.com. SimpleCenter was originally produced by SimpleDevices, which UEI acquired in 2004 as part of its product line expansion. UEI offers a premium version of SimpleCenter for $30 with a proprietary license; it features video transcoding, some remote access and photosharing, and other sync options that run from proprietary codecs, Hersch says; it can’t be released under the GPL.

“Our focus with SimpleCenter is to give consumers the ability to access all their media and devices,” says Michael Hirsch, director of product development for UEI. “Most of the time they have to use different applications for every device. It’s cumbersome and confusing.”

With UEI’s ongoing efforts to expand and enrich SimpleCenter’s feature set, it began to explore new avenues of research. “One of the things we’ve been struggling with is being able to have access to all the devices we want to support and the ongoing testing that is necessary,” says Randy Fish, the lead engineer for SimpleCenter. “We’ve always been a small team, and it’s not possible for us to test every MP3 player and cell phone out there.” Fish discovered the possibilities of interacting with an open source development community watching what happened with another SimpleDevices product, Omnifi, after it was no longer manufactured or supported. “Some users developed a community around it and they were adding features that we never really thought of.”

UEI thought open-sourcing SimpleCenter might be a way to leverage the interest and participation of developers in the community. “We’re up against some big players with big budgets,” Hersch says. “The idea was, how do we compete against that in a way that gets us a product that’s more in line with what users actually want.” In August of 2006, UEI released SimpleCenter as GPL software and set up a project page at SimpleCenter.org.

Fish had no experience with open source software before SimpleCenter was GPLed; in fact, no one at Universal Electronics had ever worked with anything except proprietary software. “This is a new realm for us,” Fish says. “We’re learning as we go how best to work in the open source environment.”

There has been no shortage of interested developers, Fish says, but the challenge has been to persuade those who make changes or add features to give those changes back. For instance, he says, one developer has written code to enable SimpleCenter to run on Linux, but he just hasn’t gotten around to submitting the patches. “They’re on their own timeline,” Fish says. “Obviously, we can’t force them to check anything back in. But we’re trying to figure out ways to incent them to contribute the code back.” UEI is considering offering small rewards like free universal remotes to entice coders to share their enhancements.

One of the biggest challenges UEI is facing is “having the community know that we’re out there,” Fish says. “Getting them to want to contribute. We’re still working toward that, and just getting the word out there that we are open source is one of the first steps. One thing we did think of that might be hard to facilitate is to have some sort of contest for contributions.” Fish says UEI hasn’t hired any open source developers yet, but the company would consider it. “A contest winner would be a solid candidate” for any possible job openings, he says.

Fish says that UEI will probably save some money on research and development as a result of opening the code, but that wasn’t the initial motivation for GPLing SimpleCenter. “We really just want to throw as wide a net over people as possible. There’s a strong analogy to our core remote control business: we capture infrared codes, but we really rely on end users to provide some of that data back to us.” Hersch adds that having a community surrounding SimpleCenter “allows us time to focus on core features that will enable a better experience. If the community feels a certain feature is important, then someone will add it, or motivate us to add it.”