Last week Austin, Texas played host to a few thousand more IT professionals than it usually does when Spiceworks’ annual user conference, SpiceWorld, hit town.
Spiceworks is recognisable to many for its community of 4.5m IT professionals that use its social network to find, buy and manage more than $650bn worth of technology products and services each year.
However, this side of the business came about almost accidentally at a time when its founders where focused on producing network monitoring, help desk and other software to make life easier for IT admins.
According to co-founder and chief strategy officer Scott Abel: “The idea was simple – let IT pros click a button, tell us what feature they want next, and let the community vote it up or down based on popularity. Not only was it wildly successful, but feature requests led to support, support to general Q&A, Q&A to best practices, then product reviews, purchasing advice, etc. From this seed you grew Spiceworks into the world’s largest social network for IT professionals.”
“In the beginning the community was basically a way to support our users using our software,” agrees says Tabrez Syed, VP of community at Spiceworks. “Then we started to see that people were [discussing topics] that were little or nothing to do with Spiceworks. We realised there was a hole where people can find someone – whether that’s an MSP wanting to talk to another MSP about their expertise in an area, or an IT support guy in a healthcare facility somewhere looking for another IT guy in a healthcare facility – now it’s taken off.”
A different kind of business model
The vendor still has millions of “customers” for its software. The crucial difference to most of its rivals, however, is that Spiceworks doesn’t charge for any of it; its advertising-supported business model means that its users don’t pay a penny.
“The twist was it was going to give it away for free,” says Abel. “Not free for three days, not free for a hundred devices – free for everyone, forever. That had never been done before with enterprise software.”
The company has maintained the same business model ever since. It did attempt to charge a fee for the cloud version of Help Desk launched last year, but has now reverted back to its original free model following pressure from users.
“We got feedback from schools and non-profits telling us it was still too expensive,” says Abel. “So we made some adjustments and now the product is free.”
The “adjustments” involved placing native advertising on the cloud offering, as is on the on-premise version.
According to Nicole Tanzillo, director of product marketing, users can pay to turn the ads off, but most don’t. But with the increasing use of ad blocking software, how does the company envisage the model being a sustainable one? Tanzillo believes it comes with customer loyalty.
“What’s really cool is our relationship we have with our users, so we can see when an ad is blocked and we can use that space to say, ‘hey there’s a lot of [reasons] why schilling ads is going to help keep this great product you love free.’ So we have that back and forth with our users to help them understand that’s part of the deal. And they get it, they understand they’re getting this for free and that relationship is helping to pay for the software.”
It would be natural to assume that Spiceworks’ sweet spot is among cash-strapped SMBs. However, while initially targeting that market, now roughly 40 percent of its users are in the enterprise, with 71 percent of the Fortune 500 using Spiceworks in some way – the community or one of its applications.
“It was clearly scratching an itch,” says Abel.
Of specific interest to the channel is a new free matchmaking service Spiceworks has launched that introduces IT professionals to VARs and MSPs. The company receives a commission on any eventual sales – although even then, Spiceworks’ director of new business initiatives Ted Nikita, comments: “Eventually we’ll make money on this, but it’s not a key essential in helping them choose [a partner].”
As well as offering its products for free, Spiceworks’ corporate identity also seems different to its rivals. For example, you won’t find the typical IT industry uniform of chinos and business speak at SpiceWorld, which is described as “a spin-free zone” by Abel.
The company also places a lot of importance on having fun (the company mascot is an orange dinosaur) and the execs often use the word ‘family’ to describe its user community (to the extent two users who met via Spiceworks are getting married next year).
Indeed, giving the software away for free and creating the IT industry’s biggest support network has created a fierce loyalty among its users (one user has a tattoo of the Spiceworks’ dinosaur.)
Making plans
Spiceworks can’t yet be considered a huge company in the IT industry – it has only a few hundred employees – although it’s growing fast. So with a legion of fans behind it and revenues up 40 percent last year, what does the future hold for the company?
“If you’re the rest of the world we’re coming for you,” Abel tells Channel Pro.
The exec explains the company is actively looking for other already-commoditised markets to target with it’s no cost model. “If it’s not commoditised, my model isn’t going to work; it’s a waste of my time,” he comments.
“When we look at other adjacent IT disciplines – DBA, DevOps, they are probably going to be the next ones – that’s what we’ll do. What are vendors struggling to get money out of? We should give that away for free and then we’ll figure how we make money on that later.”
Noting the potential for conflict with the firm’s vendor sponsors, Abel offers these reassuring words: “If you’re a customer [advertiser] of ours, don’t freak out. It doesn’t mean I’m going to cannibalise your business, it means I’m going to cannibalise the part of your business that’s going away anyway.
“Every market goes through commoditisation….When markets commoditise, that’s when it’s time for a new distribution model.”
