HashCorp Reading Notes

Musings

A 10,000-word long read: https://mp.weixin.qq.com/s/Y2A7-Ui2nzUgodkEbgR6lQ

There are quite a few ideas I find myself agreeing with:

1. “Tackle technical challenges in open source.” I don’t fully agree with this one. In my view, open source addresses small-scale needs, or some specific and very common problem; once scale grows, you need commercialization to solve it, and when requirements become complex and call for a whole series of measures, you need a commercialized technical solution.
2. “Individuals or small teams should be able to use it for free.” This logic basically holds. For cross-team collaboration needs, the commercialization opportunity is much greater.
3. “Make the low-price-barrier core product simple and easy to use, while still accommodating the future complex needs of organizations internally.” I strongly agree with this.
4. Even when some functionality exists in open source, those features can’t solve the problems enterprises face from a complete use-case level. In real practice, this gap gets amplified.
5. Frame the discussion around a concrete use case rather than around a single feature; this also makes it easier for sales to communicate.
6. It’s not hard for an open-source company to land a few customer orders. But when it comes to marketing and sales, the core is being repeatable/scalable.
7. Using open source to establish a de facto standard is the most solid, invisible moat for an enterprise.
8. Under the open-source model, the biggest challenge for sales is the company’s own open-source product.
9. You’d think the S&M (Sales & Marketing) spend under an open-source model should be lower than at a traditional software company. Yet HashiCorp’s S&M/Rev ratio exceeds 60%, which is fairly high among public SaaS companies. Times are changing: many of open source’s operating costs sit at the intersection of technology and brand, and if you put this under marketing, marketing costs naturally rise sharply, and this is becoming a trend.
10. Open source is inherently a global business. HashiCorp and Confluent both expanded internationally very quickly. Both commercialized over roughly five years, and both already derive 35% of revenue from outside the US.
11. Masters of the channel game. In its second year of commercialization, HashiCorp began aggressively developing partners; within three or four years it had built a network of 170+ ISVs and over 450 integration partners.
12. When facing large customers, simply handing them tools is far from enough. The most advanced enterprise software companies deliver not just tools but the methodology behind those tools (and producing that methodology is not cheap, either). For a project of this scale, you can’t just provide a set of tools; you also have to show them the way to get there. What tool-class products compete on is often not raw performance, but the methodology behind the tool that represents a new mode of production. Abstracting best practices into a methodology is no easier than improving engineering performance. Only once you make that methodology the de facto standard do you have a real moat.
13. A moat is absolutely not just turning your product into a big, all-encompassing platform by blindly piling up a bunch of 60-to-70-point products.
14. In HashiCorp’s S-1, this model is further refined into adopt, land, expand, and extend. In essence it’s also the PLG playbook:
    • Use community/marketing to drive Adopt
    • Use a simple, easy-to-start product plus a low initial price to lower the barrier to initial Landing
    • Achieve organic growth via Usage to Expand
    • Finally use the product portfolio to Extend within each cohort
15. In the SaaS land-and-expand model, an indispensable piece is usage-based pricing. Look at the pricing of a few products on HCP today and you may notice something: the design of the pricing unit is actually quite deliberate. Besides being easy to compute, the pricing unit you set must avoid a situation where usage is discouraged when customers feel the marginal cost of consumption.
16. ETL company Airbyte (https://github.com/airbytehq/airbyte) just closed a $150M Series B, with valuation soaring to $1.5Bn! In under 20 months, it has rapidly raised $181M across three rounds.
17. In an era where the SaaS model is widely accepted, it’s almost a given that latecomers will quickly build a Cloud version to seize the “grassroots” market, and it will only arrive faster and faster.
18. Win developers’ minds and hearts! HashiCorp’s repos add up to over 220k stars.
19. Almost no successful open-source community, in its early days, avoided doing a lot of things offline that, in hindsight, look completely unscalable. A pure misconception: launch on GitHub, do some online promotion on HN and Reddit, answer questions and PRs, polish the tech and performance, and the community and users will just gather around on their own?
20. First, Meetups are a must; latch onto every community you can. At the start, relying on friends and family to spread the word is of course slow. Later, the two founders actively went to all sorts of local Seattle community meetups, the Ruby community, QCon, DevOpsDay, and so on, seeking every chance to get their faces out there.
21. HashiCorp began building out its community in every dimension, the most important being HUG, HashiCorp User Groups. This self-organized network scattered around the world now has 37k+ members across 53 countries. Countless spontaneous meetups and events continually deepen relationships with developers.
22. HashiCorp places extraordinary emphasis on investing in conferences.
23. Especially important: take the initiative and engage deeply with early users on the front line.
24. You should be able to name the first 100 users of your project!
25. The community is not the ultimate goal. Ms. M believes the ultimate goal is still to become the industry’s de facto standard. To achieve that, product design, community building, and partnerships with commercial partners form an inseparable whole.
26. From a product design standpoint: don’t hold back for a big bang; the first product only needs to prove the idea.
27. Comparing the star-to-contributor ratios of a few top open-source projects, the fascinating finding is that this ratio is astonishingly similar, almost always around 0.03!
28. Some open-source companies treat community operations as a purely marketing “user community,” overlooking the importance of every stakeholder in the complex open-source ecosystem. To keep up such passionate persistence before the business takes off, genuine love is a necessary condition.
29. A methodology for product design: first and foremost, always put it first, Built for workflow, not technologies. They break workflow into three parts: People, process, tools. When designing a workflow product/tool, many people only look at the tool’s own features and never consider what skills it demands of people, whether it assumes IT processes are self-service or ticket-based, and which of these can be abstracted out to stay consistent as the environment and specific technologies change.
30. Respect technology, but value the human element even more. As with the Cloud Operation Model mentioned earlier, they found you can’t just hand the customer the final, super-impressive best practice; to show the customer your way to get there, you have to accept some less-than-perfect solutions along the way.
31. Like many open-source companies, HashiCorp also follows the philosophy of transparent operation, publishing many of the company’s management rules, decision principles, and so on online. This is quite hard; it’s relatively easy at the start, but as commercialization deepens, many things instead become murky.
32. Both companies place enormous emphasis on writing and over-communication! That’s a good thing.