#388 Pricing a Self-Managed Product

This week we discussed pricing our self-deployed, self-managed offering. Should it be more or less expensive than a SaaS license?

Parabol is open-source and has been since the beginning. Being open-source brings with it many advantages. It is a powerful attractor for talent, it opens our business up to potential long tail effects from our community, and security professionals can inspect our code for vulnerabilities directly without needing to take our word for it.

If our source code is freely available, we must provide value on top of our source code in order for customers to justify paying for us. After all, if they can get it for free – why pay?

Most commonly, companies like ours create value on top of their open-source offerings by being excellent at operations and support. We’re no different in our approach from companies like Automattic (who’ve created and maintain WordPress), GitLab, RedHat, or Mattermost in offering SaaS solutions and “white glove” support for their products. Like some of these companies, Parabol also operates single-tenant versions of our solution. But what if somebody wants to do all the legwork themselves and just use our source code to host and operate a version of Parabol? What motivations would they have to pay us?

One way we’ve protected the investment we’ve made into building Parabol is to offer a dual license: a license that stipulates our source code is free for non-commercial use but must be relicensed if used in a commercial setting.

Additionally, our source code is protected by the Affero GPL license (“AGPL”). The AGPL mandates that any software derived from or using AGPL-licensed code must also be distributed under the same license. This requirement compels companies to disclose the source code of their proprietary software when used with AGPL-licensed components. This is a powerful disincentive to using our product for free.

As the copyright holders to Parabol’s source code, we provide organizations a re-licensed version of our software that can be run locally free from the risks introduced by the AGPL in exchange for a license fee.

Additionally, we provide folks who want to self-deploy and self-manage support in getting Parabol running and maintained on their local infrastructure. We also provide access to our container repository and references for how to deploy and operate Parabol – including a docker-compose or set of Helm charts for Kubernetes.

This week, inquiries for the self-managed, licensed version of Parabol prompted a discussion on if we should reprice this offer. Should it be more than, less than, or equal to our Enterprise or Private-Managed instances offerings?

On the one hand, the customer is doing more of the work themselves when operating our platform. There is a good argument to make the offering relatively less expensive when compared to our SaaS.

On the other hand, supporting self-deployed, self-managed instances is significantly higher. There is an economy of scale that is impossible to realize when compared to our SaaS.

In the end, pricing this offering similarly to our Enterprise SaaS offering – seems to be just about right.

Our self-deployed, self-managed customer set is small compared to the other ways customers buy and use Parabol. However, we’ve found that merely having a self-managed product on offer helps potential customers feel like they have options. When prospects feel they have options, negotiations are often more relaxed. It makes sense for us to keep offering a self-deployed, self-managed product for this reason alone.

If you’re contemplating starting a software business, we invite you to borrow from what we’ve learned.

Metrics remained largely unchanged from last week. Several significant features and enhancements are set to launch in the coming weeks (which we’ll definitely cover here!), and we’re eager to monitor their impact on these trends.

…wrapped up a two-week product design workshop. We engaged our full team’s attention on building additional value for team and organization leaders. We’re excited to bring these ideas to life!

…ship a new release of Parabol with many new features. No doubt, next week we’ll have a lot to share on what’s being released. We had intended to ship earlier but inadvertently broke our ability to release when a breaking change was introduced by one of the automations that automatically keeps our dependencies up to date. We’ve made the fix and improved our automation to reduce the chances of this happening again 😎