TechCrunch posts a heads up on ActiveCollab, a new open source alternative to popular online project management tool Basecamp, by Web 2.0 poster children 37Signals, and talks about the possible threat to current monopoly and current business model if the software is of high quality.

Personally I think that’s bonkers. The assertion that a newly released piece of software that is largely untested in the market will seriously compete with an established player, that has north of 500k subscriptions and growing, needs to be reconsidered.

As an aside – the announcement/blog post in itself is not really that important because it’s something that you can just ignore, but what does irritate me somewhat is that TechCrunch is supposed to a pillar and messenger of all the Web 2.0 goodness starting to appear on the net – we rely on TechCrunch for quality information. So why are they posting something like this?

Getting back to the matter at hand, I’m not sure that we can take ActiveCollab seriously for a long time, for several reasons.

Firstly, there is a very fragmented market out there, where the Basecamp and thus 37Signals market is primarily made up of business people who want/need a good affordable tool that just works. Conversely, the ActiveCollab market is going to be primarily technical people who have the skill to install and run an implementation of the software, or DIY people who either enjoy doing it or want to save money.

On that note, the software is written in PHP 5, which most mainstream hosts don’t yet support – so even if you wanted to install it you’re probably going to have a hassle doing so.

If you do install ActiveCollab and want new features, you’ll probably have to upgrade to a newer version – which requires management and further time investment.  With Basecamp you get that done for you and since 37Signals is both motivated and financed to do so, chances are you’re going to get a better product.

My intention with this post is not to be negative – I applaud the developer and wish him well, but I do ask “where is the value?” and since we’re on a Web 2.0 theme here, I extend that to you – if you’re developing something along Web 2.0 lines, where are you providing value to your users

The notion that we can simply build something cool with awesome new technologies and then hope that it will create buzz and catch fire, generating 500k subscribers in the process, needs serious (credit card) testing. 

Like ActiveCollab, building something and then offering it for free doesn’t seem to be a long term sustainable business model – how do you make money? (especially if you need to make money to survive) – unless of course you’re building something simply to show off your skills (which isn’t always a bad idea of course).