February 2010

Worldwide revenue from open source software will grow at a 22% compound annual growth rate to reach $8.1 billion by 2013”.


Can open source help startup companies reduce cost, save time, and improve their productivity? This article describes the experience of the startup Eseri which spent three years integrating the world's best open source software into a complete turn-key small to medium enterprise (SME) information technology (IT) solution. Eseri uses their own system to run the company. Having recently launched, they have targeted startups as their most important market segment.

Tools, Time, and Money

How big is the startup segment? Using U.S. Census data, the Kauffman Foundation found in a 2008 study that “the fraction of employment accounted for by U.S. private-sector business startups over the 1980-2005 period is about 3 percent per year”. This translates to about 4 million people working in new businesses in the US and Canada in any given year. By its nature, this segment renews its customer base regularly as new startups are formed. Those that are successful grow to become the established businesses of tomorrow. They make a nice market segment.

What do startups need? A startup ourselves, we have a particularly acute understanding of this question, to which the answers are:

1. powerful tools

2. time

3. money, or at least less bleeding of the little money they have

Startups need to reduce cost expenditure, but they also need powerful technology tools to save them time, so they can focus on their core mission. A startup can cobble together some IT tools cheaply, bringing in the machines they have and using the licenses they can scrounge up. But the integration and maintenance issues will consume their most valuable resource – time. And they won't get the leverage that truly powerful IT can provide to increase productivity and save them even more time.

Increasingly, startups are also virtual. Teams are distributed across a city, region, or the globe, suggesting that a hosted, virtual desktop offering would be useful to help them run a single integrated organization wherever their people may be. Our own startup still does not have a single dedicated bricks and mortar facility, although we operate as a single team with a full suite of collaboration tools to help us get the most out of real-time interaction.

Anatomy of a Solution

At Eseri, we focused our startup on solving the kinds of problems we ourselves encountered, and saw open source as the best and natural solution. Given the risks of committing to proprietary software that could be changed, merged, or license conditions altered without notice, we saw open source as being the safest choice for new companies wanting to avoid large cost investments to solutions that would only bring with them long-term vendor lock-in.

The IT solution we eventually developed is complete, from Intranet to desktops to applications. Since the system is hosted and accessed on virtual desktops, it removes almost all need for local infrastructure. We put effort into developing one-click management software that enables addition, archiving, and restoration of desktops in just minutes whenever required, so IT personnel are not required. A startup can run a business with no more than netbooks and an Internet connection.

As a first step in creating our solution we evaluated open source across the stack, and found it was ready to serve organizations in every functional category from desktops to applications. It quickly became apparent that the unmet requirement was to integrate the software into a turn-key solution that was easy to operate and manage. To meet those goals it became clear that the system should be hosted, and to maximize user familiarity and reduce retraining, it should be virtual desktop based. Realizing this vision ended up taking us three years of steady, hard work.

We started by filtering the open source world to find the very best components. The operating system was our first selection, and we quickly settled on Ubuntu. In 2005, Ubuntu was on track to become the success at which it has now arrived, being sold on desktops by Dell, and released on netbooks with a range of manufacturers. Choosing system software came next, and we assembled a full suite of components from networking to security to user directory software. We then integrated all of these open source elements into a full hosted Intranet, with all of the networking and other software that sits underneath the desktops to support a multi-person organization.

Choosing the best open source SME applications was considerably more challenging. There are thousands of open source software projects, and in any functional category there are several to dozens of choices. These selection decisions were critical, since changing an application after integrating it would be difficult. More importantly, we wanted to provide our customers with peace of mind and the knowledge that the open source they would be using would be a long term solution.

Some application choices were easy – for example OpenOffice.org as the office suite. Most were more difficult, such as choice of the best document management and customer relationship management (CRM) systems. In the CRM space there were a number of open source solutions, with the best known being SugarCRM.com. However, we were uncomfortable with the license approach of SugarCRM, which included proprietary elements and additional costs related to what we perceived as core functionality, and we found the usability surprisingly complex. At the end of the day we chose the vTiger.com application as it:

  • uses free and open source software (FOSS) licensing

  • provides a solution with a very friendly interface

  • is well sized for small and medium sized enterprises

  • has acquired significant market share and become quite successful

Other application choices were made just as carefully, with an eye to choosing the best functionality with pure free and open source software (FOSS) licensing that would guarantee long term cost competitiveness for our customers, and a focus on usability. Our suite now totals 24 applications, providing capability in pretty much every software category an SME might need except enterprise resource planning (ERP), and we have ERP on our product migration plan. Following our theme of making the system as easy to use as possible, we integrated all multi-user applications with the hosted Intranet to provide single-sign-on functionality, automatically logging in each user with the appropriate access rights as soon as they access the application. Since we are also owners of the FreeOpenSourceSoftware and FreeLibreOpenSourceSoftware domains, we published all of the applications in our solution (and more) on our publicly donated Wiki at FreeOpenSourceSoftware.org.


In the open source tradition of proceeding as efficiently as possible, we decided to avoid venture capital (VC) financing, or any type of financing, and to build our solution and create real value through a bootstrapping approach. We assembled a team of six core technical members, two which supported themselves from savings and consulting, and four which worked nights and weekends. We used our own software as soon as it was available to stress it and work out problems, as well as to keep our costs down. We created mailing lists for each area of the company from system administration to management conversations to organized communications. We established a virtual integration lab securely accessible from any location so our distributed team could work from home, and met physically at least once a week to support the team dynamics and schedule rhythm that we needed to progress the company. Our “social events officer” arranged periodic team gatherings where work conversation was off-limits.

We networked as widely as we could to talk to small business owners and managers to understand their key requirements. Local Ottawa organizations like OCRI held regular seminars through the business season, and were invaluable to provide the networking opportunities that allow us to connect with small and new businesses to understand their particular needs and pain-points. We provided beta trials to a few organizations to help validate our approach and obtain valuable feedback to influence our development plan. For example, we learned the benefit of providing bridging from our email system to an organization's existing provider to provide them assurance of reliability before switching over to our system. We now have a handful of customers and a proof of concept plan signed with a large U.S. company to investigate the feasibility of converting 4,000 desktops at remote dealerships from Windows to our solution.

Much of the expert business guidance our startup benefited from came from our Advisory Board. We managed to assemble a great group of advisers, all CEO's with entrepreneurial and startup experience. We met with them individually on occasion for lunch, and we convened a Board of Advisors meeting once a quarter.


Building a startup is a difficult but worthwhile and ultimately fulfilling experience. If we had to pick three key lessons learned, they would be these. First, be absolutely certain of the correctness of your overall vision before you set out and be ready to surmount any and all obstacles that may arise, since the path you are on will be several times as long and difficult as it first appears. Second, build an excellent team at all levels – domain experts and business experts – and get as much help and advice as you can the entire way through. And most importantly, never give up. By the very nature of a startup you are on a winding journey on which your idea will inevitably evolve – all setbacks are invaluable and necessary opportunities to improve your plans.

We are now launching our company, and hope to be able to help other startups solve their IT problems and focus on building their business. If your startup company or organization needs powerful IT, but not the associated cost and time of old-style proprietary solutions, check out ESERI's offering.

Recommended Resources

FOSS IT in a Box


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