Open VBX

Yesterday our portfolio company Twilio announced the developer availability of their Open VBX platform. Techcrunch and GigaOm had good posts on it. Techcrunch called it "open source google voice for business" and Om Malik said "OpenVBX is simple and yields the one thing users want most: a voice mail box that also forwards calls to different numbers."

There is other open source PBX software out there, namely Asterisk and Freeswitch. And there are other cloud based telephony APIs as well. But what is important about Open VBX and the Twilio web service API for telephony is the pairing of the two. With Open VBX you get free software to build telephony services and a web based telephony cloud to provision the numbers, calls, text messages, and way more.

My partner Albert, who led our investment in Twilio, has more on his blog. If you are interested in Open VBX, you should read his post.

We are big fans of the open source software movement. We believe that free and open software opens up markets and new capabilities much more quickly than closed and expensive software products. In the comments to my post on another open source effort we are funding, MongoDB, there was a discussion about why a VC firm would want to invest in free and open software. In that discussion, I explained that there are a number of ways to make money with open source software. The most obvious one is the "Red Hat" model of building a services and support business on top of the open source software. Red Hat has revenues of almost $600mm per year and boasts a public market valuation of over $5bn. MySQL, which also used that approach, sold to Sun for $1bn.

But the intersection of web services and open source opens up some more interesting possibilities. Look at WordPress. The WordPress software is available open source. But they also operate a hosted version at that is a commercial effort. MongoDB is available as open source software that anyone can download and run on their servers for free. But I am sure that hosted versions of MongoDB will become popular as well.

And Open VBX takes that model and adds something more. Yes, there will be hosted versions of Open VBX. Dreamhost already offers a one click install of Open VBX. But Twilio's telephony APIs for phone calls, messaging, and more are paid offerings that plug into Open VBX and offer another business model for open source software.

So we believe the pairing of open source software and cloud based business models vastly increases the commercial potential of open source software and we are excited to see Twilio leading the market into this exciting new world of open software.

#VC & Technology

Comments (Archived):

  1. kidmercury

    great post boss. open source + cloud is def where it’s at. it also sets the stage for voluntary participation in the cloud and federated models. IMHO this model will disrupt the cloud stuff that is not rooted in open source, which constitutes most web services. open source + cloud will allow for superior platform governance IMHO.

    1. fredwilson

      yeah, cause you can take your toys and go home

    2. Matt A. Myers

      1st post! Oh wait.. damn you kidmercury.. damn you…I’m only awake so early because I have an email to re-write while it’s fresh in mind. ๐Ÿ™ An older Gmail window open draft auto-save undid my nearly finished saved draft. First time that’s happened to me.. be warned people.. :(This announcement is sexy to me. Congrats to Twilio too.P.S. I like the pricing structure for Twilio

      1. Mark Essel

        It’s the last commenter that wins here Matthew. Think of all the great community info you miss by hitting the naked post.

    3. Mark Essel

      Right on Kid, was comparing current social webs to cultural hegemonies this morning.The ruling class of businesses which provide connectivity can dictate terms to members. Luckily we have social mobility to counter this power. But how many social updates from friends am I now missing because they assume everyone’s on Facebook?I already pay a thought tax for using English (it’s my native language but I still can’t map all my thoughts into words), imagine paying an additional tax for speaking. Web communication and distributed broadcasting is arguably just as important as speech in a world connected by the social web.Had to shake out some socialist ideas this morning, back to Darwinian capitalism maรฑana.

      1. Brad Dickason

        I’m wondering if the connection/API route works in non-techie spaces as well. For example we’re building salon software and plan to create some excellent API’s to facilitate tie-ins to other services… but how many salon owners will really take advantage of that? I guess it will just be the other software providers that play in the space?The main use i’ve had in mind so far is to tie our booking engine (receptionist books a client via calendar + online booking) into other services such as Styleseat (myspace for stylists) so people can book through that service and it will update their salon’s appointment book automatically.Does anyone have good examples of API success in ‘sleepy’ industries i.e. ones not filled with developers?

        1. Mark Essel

          The API has to be fulfilled by a human usable front end (web app, iphone app, etc) before sleepy industries will pick it up. It needs to be in a form adopters/end users can get their head around.APIs are good for fairly technical people, but pretty worthless for non programmers unless someone creates the human / API glue

  2. David Semeria

    Whenever anyone wants to demonstrate open source can deliver a viable business model, the words Red Hat and MySQL invariably appear .The reality is that only Red Hat meets the criteria. MySQL was a huge exit but had incredibly low conversion rates (less than 0.1%).It remains to be seen whether Red Hat is the rule or the exception.Very many smaller companies struggle to keep afloat using the open source + paid support/modules model.

    1. fredwilson

      that’s why the introduction of cloud-based business models to the mix is so exciting

    2. maxniederhofer

      …which is why hosted + open source is a big deal.

      1. David Semeria

        Up to a point. Since the product is open, anyone can host it.This approach also means you have two core businesses: development + hosting.I’m not against the model, but I don’t believe it’s a panacea.

        1. Peter Van Dijck

          I think the point is that apart from hosting and consulting services (oldskool), you can also provide cloud services (API’s etc).

    3. kidmercury

      great point david. personally i like to see companies that are firmly non-technology (like media) invest in open source. when they do this, they externalize much of their software development costs while allowing them to focus more on their core, non-technology competencies. digital publishing companies that work off open source content management systems are my favorite such an environment open source is immensely helping the business reduce costs and thus has huge business value, but the companies are not using the paid support/modules monetization system and are not really hardcore technology companies to begin with.

    4. ShanaC

      do you know why MySQL had such a low conversion? And will it change because of LAMP (most people probably won’t need bigdata databases, or will they?)

      1. David Semeria

        Good question Shana.Basically because the core (free) product was (is) so reliable, well-documented and extensive. Few people needed to pay for support or proprietary extensions.There is some sort of lesson in there, somewhere….

    5. Sebastian Wain

      Please add JBoss to the discussion and its history:…Yes, Open Source is not the business panacea or a business model per-se, but the development community will tolerate less closed source initiatives in the future, so in the next years will be more difficult to build new communities around closed source initiatives (except with well established ones like MS, Apple, Oracle). So, in some way Open Source is a defensive move but you need to play it right.

  3. Tereza

    Can we come up with a nifty name for the business model for Open Source plus Cloud…..kinda like Freemium?I guess at core it is Freemium, but I yearn for something more specific and snappy.

    1. Matt A. Myers

      I’ve put my thinking cap on. Perhaps later today I’ll have some ideas other than Cloudium, once I wake up some more. ๐Ÿ˜›

      1. Tereza

        Managed Cloudsourcing?

        1. Dan Ramsden

          Open Cloud?

        2. fredwilson

          i like cloudsource

          1. Fred T

            Better snag it before Marc Benioff claims it under cloudforce =)

          2. ShanaC

            Open Cloud, It’s not going to be a rainy day when you use it.

  4. Harry DeMott

    Interesting for sure. One question: a while ago when you were looking around for an OnSip phone for your new place – why didn’t you use this technology and essentially set up a small PBX for your home – 4 family members are no different than 4 offices?

    1. fredwilson

      i was going to do that but open VBX was not ready to go yetand onsip is really really easyi am very happy with onsip

  5. Peter Miron

    it will be interesting to see how companies that take this approach end up competing in the b2b space against Amazon Web Services. Amazon’s use of MySQL for their Relational Data Service (RDS), seems to set the template for how they might be able to monetize other more application-specific open source efforts (on top of all AWS more generally).

      1. Peter Miron

        my point was less about where they’re currently hosted and more about when Amazon might start offering their own Elastic PBX as they’ve done with Relational Data Service (MySQL) and Elastic Map Reduce (Hadoop). a PBX is obviously a bit further up the stack from the typical infrastructure tools offered through AWS, kind of curious where Amazon ends up drawing the line.

  6. RichardF

    I like what Twilio are doing Fred but is this really an extension of the Twilio api (sort of white labelling) rather than true open source? I haven’t had a look but how easy is it to take Open VBX and use another provider?

    1. fredwilson

      good question Richardhopefully the twilio team will engage with this thread and answer your question

    2. kidmercury

      +1 richard for an excellent question

    3. andrewwatson

      there are other providers that can process TwiML if you want to use one.

    4. jeffiel

      Richard, great question.Here’s how we think about it: the Twilio Cloud APIs provides primitive building blocks, where developers can build anything to meet their business needs. There’s very little app-layer assumptions built in. So each developer needing those application concepts, voicemail for example, has total flexibility but needs to builds it from scratch.OpenVBX is an effort to provide developers with these higher level application/business constructs. By open sourcing it, each developer can completely customize / hack it to fit their specific business needs. But they didn’t need to start from scratch if they don’t want to.RE: other providers, yes, you could hack openvbx to use other backends. We address this question in our FAQ: Twilio’s backend provides rich features, scalability and reliability – so for real business applications, we don’t think there’s much reason to reduce the utility or reliability of OpenVBX with another backend. But OpenVBX is open source, so developers are free to modify the code however they find interesting.

      1. kidmercury

        wow, that’s truly outstanding. thanks for the code! ๐Ÿ™‚

      2. RichardF

        Thanks for the explanation Jeff. It’s a great strategy too. I doubt many people will seek an alternative provider.

    5. Mark Essel

      Great question and answer from Jeff. This is the kind of info that really attracts developers to services

  7. elicitech

    The leading (by revenue) open source software providers nowadays follow the dual core licensing model. For those who don’t know, it is about providing a free open source community supported version of the product and on top of it a subscription based enterprise version with additional features and professional support. I generalize here. Think companies like Talend, Alfesco, Pentaho, aso.For those companies, open source is first a way to cut the traditional enterprise software sales cycle and push the product in the hands of users. Community and cooperation are also relevant but to a lesser degree.From a customer perspective, the open source products go straight into the company’s IT infrastructure, aka private cloud today. For many reasons: control, security, bad habits. It may change but public cloud infrastructure are not #1 on the CIO priority list when critical processes/sensitive data are in. For commodity apps like email or telephony, why not.I think that tying 2 buzzwords do not make for a market. Open Source is mainly dealing with highly complex IT environments plagued by years of proprietary software investments. On the other hand, Cloud is playing its cards as a cheap and convenient substitute to privately owned datacenters. They simply do not share the same levels in the stack and will hardly meet in the years to come.That said, combining FOSS and Cloud is a charm when it comes to trying, testing or exploring new services.

  8. Mark Collier

    Good post Fred. We’ve been a big fan of twilio (at Rackspace) and are seeing a lot of companies exploring new business models based on cloud. I often use the “wordpress model” internally to describe the phenomenon and I think it’s destined to replace the “red hat model” in the market and the lexicon.BTW, I continue to have problems posting comments to your blog from my iphone. Something about Disqus is just not working. When I click “post as…” nothing happens.

    1. fredwilson

      thanks for pointing out the disqus issuesi will make sure they see this comment

    2. Fred T

      Mark, try scrolling up on the screen. You will see a popup window asking for your email and username. The only downside is you cannot login as your original account.I too am posting from my iPhone. I lost the first draft once (the joy) so I had to start over. Not bad for phone access though.

    3. Mark Essel

      Mark it opens a log in far off your screen. Just scroll up.My exploratory venture Victus Media has left and returned to Rack Space- good stuff. Needed to try out EngineYard but they’re too Rails focused for our needs.

    4. Fernando Gutierrez

      Forgive me for my ignorance, but what’s the model? As far as I know it’s free to open a blog there and most of them don’t have ads… where’s the revenue? services to businesses? if so, how is it different from Red Hat?

        1. Fernando Gutierrez

          Thanks Shana! I had seen that some of the blogs I read that were hosted there had more features, but I thought that they had moved to the self hosted version to get them.

          1. ShanaC

            there is also the VIP service. You might be referring to that. Techcruch and GigaOM both do that. I don’t know what the deal is with that (those are custom build so…)

          2. Mark Essel

            I prefer the self hosted route. I feel that I’m not being monetized enough as a regular wordpress user. Maybe Tumblr or Posterous will show us all the way to best monetize blog platforms :D?

      1. fredwilson

        they do monetize with ads and affiliate linksand they offer a high end services business on

  9. Mark Essel

    Had no idea USV was involved with Twilio. We use them for text messages for

    1. ShanaC

      that’s a great service to build off of. Like hugely great. Newsday listed garage sales, and there is an email list in my area that lists similar sales in the Jewish community. This is a totally great niche if you can convince people it it worth it to pay a dollar to list their garage sales. I would totally use it!

      1. Mark Essel

        Thanks Shana for the feedback. The limiting issue is neither my cofounder Tyler, nor myself are passionate about garage sales. We simply chose it as a good example to show what could be done with location based event updating networks. The events can be any niche that makes sense and our framework is the same: tech meetups, live jazz music, glass blowing classes. We need to create a generic service that anyone can build on, and charge a small share of the $ to support network growth and updates.

  10. Fred T

    I too believe that open source is a dynamic way of increasing enterprise scalability because not only does it invite a plethora of API iterations, but this “ecosystem” (or government) encourages economic growth, thus startup inception from this platform alone. One example: our product (web 2.0 cloud servers) can perform real time data replication and server migration with the capability of running through different OS’s simultaneously – and through remote virtual servers. Yes, thanks to an enterprise-grade Linux open source platform.

    1. Guest

      So I realized it’s waffles. Not pancakes.Fred T (rkteck1245)

  11. andrewwatson

    VBX is a great platform and the Twilio team have done a great job with it. I was honored to be included in the VBX community very early on and to start developing plugins for it.I know there are competing platforms in this space but that’s a good thing, in my opinion. I’ve already constructed 3 plugins for it which you can find here which integrate with FourSquare, Chirbit and (The FourSquare one got mentioned in GigaOM, TechCrunch and Albert’s post too which was awesome) I’m planning on several more soon too.The advent of OpenVBX actually impacted my own startup in a fairly major way which I wrote about here:

  12. knowledgenotebook

    FINALLY people have come around… I believed in giving people/consumers choices: local and “cloud” for data storage, each has its own merit… in a way similar to the metaphor of “steak” and “salmon”.Been there done that and STILL DOING IT.

  13. kidmercury

    also, remixing mods from the open source community, plus setting the defaults….voila, fredphone enterprise system. could be part of the default setup package for businesses granted a license to operate in fredland. they’ll still have to pay usage fees in fredbucks though (and a fredtax on earnings).

  14. Judy

    Great question and answer from Jeff. This is the kind of info that really attracts developers to aspire and improve applications and business models. This is good for us end-users.Well done.

  15. pwb

    Cool that OpenVBX is built on CodeIgniter, a clean and lean PHP platform.But this whole thing should really be SaaS. I’m thinking RingCentral with better system reliability and customizability.

    1. andrewwatson

      The idea is that multiple people could build their own SaaS offerings on OpenVBX with their own customizations and competitive differentiations.

  16. Sfraise77

    Open Source is clearly the future, you can see it in everything from web development to mobile operating systems. I use the Joomla open source CMS in almost all of my web projects, and I LOVE my Android based phone. Oh yeah, always use FireFox as my browser (still waiting on Chrome to catch up).Open Source simply means less expensive and more customization imo, who in the world isn’t for all that?

  17. Marilyn Byrd

    Fred, you’ve done it again …. created a blog post that fosters the most interesting comments! And what a great way to commemorate your son’s graduation. BTW congrats on that.

  18. HowieG

    Fred I agree with the open source. I am a big supporter of it. Red Hat is interesting. Not sure if the early investors got out in time but the stock peaked at 150 during the height of the Dotcom bubble (I was a big proponent of it back then) i am shocked they are only $600million now. And of course a ton of investors lost their shirts, homes, kids LOLHow do you manage this as a VC. Is the goal to stay for the long run since I have to assume if you invested pre-IPO you still made money. But post you didn’t. Would USQ have sold at 150?

  19. vruz

    which begs for the question… when -if ever– will we have a distributed, open source Twitter?

  20. fredwilson

    the paul forster quote is such a good onethanks for bringing that into the conversationbut in telephony, customers are used to paying for minutesthey even do that with skype on off network calls