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While this post has Basecamp-related content, it’s not really about Basecamp. It’s about considering alternate business models for small software companies looking to capitalize on a success without imploding or losing the spirit of what made them able to produce the success in the first place. I believe that as more small teams start producing the killer Web 2.0 apps this is an issue they are going to run into. So let’s be proactive about it. Here goes…
I’ve been spending a lot of time thinking about how to open up new markets for Basecamp, and I wanted to share a few things and also ask for some feedback. I believe there’s an interesting discussion to be had here.
We’ve had a fair number of requests for an installed version of Basecamp (Basecamp is currently only available in an ASP-model hosted environment). A version that people can run on their own servers, behind their own firewall. Some people just aren’t comfortable with hosted software. We can appreciate that.
Now, there’s a lot of money to be made selling installable enterprise-ish software like Basecamp. Similar products like Socialtext or eProject can sell for thousands of dollars a year once you buy a license for just a few employees, and over ten thousand a year for medium sized companies. The problem for us is that even though the revenue is there, we don’t have the manpower to service a wide and varying installed base. And — even more fundamentally — we don’t want to. I’m afraid that a large installed base will divert our focus away from progress and more towards management. We want to create and build, not manage. We’re trying to avoid unproductive human scaling at all costs.
So, I’ve been thinking. Thinking of ways to offer an installed version of Basecamp that benefits our customers and also benefits us. Something that we can manage with the team we have. Something that lets us be who we are and also gives our customers what they need to be who they are.
What I think we’d like to do is limit the number of installed copies to something we could manage and also, at the same time, give those limited customers a super-high level of personal service. A system where everyone wins.
There may be a dozen or more ways to get there, but I’ve put down a few thoughts below. I’d love to hear what you think:
1. We could set a public price, accept refundable deposits from those who are interested in buying a license, and then pick 10 companies randomly and sell them an installed version. We’d do this every year so we could grow slowly with our installed base. We think 10 is a manageable number for our current team to handle in the first year.
2. We could auction off copies in dutch auction style. Start at a certain price, and the top 10 bidders get it at the 10th highest bid.
3. We could set the price at X and then increase the price 50% for each copy sold (making this transparent, of course). This would probably set a natural ceiling. And, if it didn’t, we could surely afford to bring an extra person on or two to service these accounts and also help make the product better.
4. We could set the price high, but also let people who buy in share in the profits of the hosted version. So, they’re getting the product and also getting a piece of the action. An investment in what they use. Something they can believe in on both sides.
5. We could sell it cheap as-is — no support. Use at your own risk. It would be a solid working product, but what you buy is what you get. You have the option to buy a new version with all the new stuff when it comes out, but there are no incremental versions.
6. Pick the 5 (or 10) companies that have both shown interest and that we admire and want to work with and just sell it to them. Amazon.com, for example.
7. Have companies that really want a license “apply” for it by writing up their reasons, how they’ll be using it, how it will benefit them, and why they are the best choice. Sort of like a college admissions process to pick 10 “students” for a specialized program. We’ll pick the ones that we think have the best story and need for our product.
8. Simply not offer an installed version at all and focus all our energy on the hosted version. We don’t have to be all things to all people.
I recognize that some of these models may be flawed, some impossible, and some have real potential, but they are just the beginnings of business model ideas. And I do think it’s time to talk about alternate pricing models for installed software above and beyond the old “seats” model.
So, what do you think? Have you thought about this yourself? Have you tried any of these? Let’s hear it.