Is Open Source a better alternative than Software as a Service (SaaS)?

Software as a Service continues to boom. Salesforce.com and other well known providers have been successful, even large companies see rented and externally hosted software as an option. The advantages are clear. (Almost) now upfront investment, monthly/yearly payments, reduced complexity and continuous enhancements and developments to make the solution better. This sounds like paradise. However there are some drawbacks too. Data needs to be stored externally, changes cannot be made so freely as if you own the software, any investment is sunk cost, little control over the software and sometimes issues with integration with existing (internal) systems. These disadvantages can be significant or not, depending on the situation a company is in. Sometimes the legislation may also have an impact. – And, to not forget, SaaS often is not cheap, numbers are typically user based and can stack up quite impressively.So, is Open Source an alternative here? Maybe. SugarCRM has agressively pitched against Salesforce.com and was able to win many former Salesforce.com customers. OpenOffice can be an alternative to Google apps or other internet based office suites. OSCommerce or Magento can be alternatives to rented online shops. If enterprises go the Open Source path they are well consulted to build some internal knowhow or to hire professional help. Done correctly though costs of Open Source solutions can be competitive with SaaS offerings.Regardless of what enterprises decide the probability that they will be using Open Source software – whether internally or as assembled components in SaaS offerings – is big.

RedHat’s Open Source Activity Map

RedHat has published an Open Source Activity Map to illustrate how different countries differentiate in the use and adoption of Open Source. This is quite an interesting tool to look at and when you compare the different countries you can see a number of tendencies:The European countries are still taking the lead with France being the most active, Spain and Germany following. Most of the top 10 are European countries. To a certain extent suprising it position 6 for the UK.The US, despite its size, is only reaching the 9th rank in terms of open source activity, China 15, India 23.Looking at the raw data it’s however worth a discussion how representative the results are. Linux – makes sense taking the RedHat view – seems to be to a certain extent equalized with Open Source. What I really liked about the analysis is the nice mash up with Google Maps and the ability to get an overview quickly thanks to Ajax and graphical visualization.

Is Oracle buying Sun good news for Open Source?

The announcement today that Oracle buys Sun is heating up discussions we had in the past. Is it good when large commercial vendors take over Open Source companies? Now, in this case, Oracle takes over a hardware vendor, but with Java, Glassfish and MySQL to name just a few, Oracle also “eats” a number of very influential and important Open Source projects. While I was positive about Sun taking over MySQL in the past, I am less sure whether I like this new situation with the largest commercial database provider taking over the largest Open Source database. MySQL has taking inroads into Oracle’s territory for quite some time and I am anxious that with this acquisition Oracle will try to marginalize MySQL. Now it also fires back that MySQL owns all intellectual property of the database management code, so forking will not help us as a weapon.What will happen with all of these other Open Source technologies Sun owned and maintained? Glassfish is a direct competitor of BEA (or the former BEA app server), Sun’s integration technology compete with similar technologies from Oracle. We haven’t yet seen a lot of committment from Oracle to nurture the Open Source projects in its possession. Let’s hope it’s different this time.

Whether ompanies making lots of money with open source may not be preferred by enterprises

There have been a number of discussions lately on whether enterprises care whether what they use is really open source (EOS Directory), whether they are ready to contribute (Matthew Aslett, 451 chaos theory) and on how companies can design their revenue model (e.g. the open core thinking). Having talked to many enterprises over the last months and years they have their own perspective on this. Most enterprises want to work with long term viable partners, they want to use software that is still there in a couple of years and many want to purchase some sort of an insurance protection to make sure that if things go wrong they have access to help and support. The whole commercial software movements and the related VC funding is a consequence of this. However, not in all cases this lead to the best solutions and approaches. Many enterprises prefer software products that have a large community supporting it. Commercial open source software however often leads to models with fairly small companies doing the core development of a specialized product, the community being reduced to a testing and bug reporting role. Enterprises also prefer to have full access to the source code, even if they never want to use it themselves. And enterprises love software that can be supported by a number of different providers to create a competitive marketplace. Software from the Apache Foundation scores well along these criterias. VC backed open source companies forced to make money and therefore protect and monetize their IP have more difficulties to live up to these mentioned enterprise criteria. Seeing the constant changes in business models, license models and go-to-market approaches, companies out there are still looking for the recipe for success.There are a number of ways to make money with open source and combined with this there are a number of trade-offs to make and decisions to take:

  • Should the core of the product be open source or commercial?
  • Should extensions of the product be open source or commercial?
  • Should you build a slim more consumer oriented version as open source and an enterprise oriented feature rich version as a commercial software?
  • Can you monetize “management services”, such as packaging, testing?
  • Can support services be provided for money?
  • Do users need training services and are ready to pay for it?
  • Can professional services such as product consulting, implementation/integration support be marketed?

When a company wanting to make money with open source has to answer the questions above, then there always have to be considered some consequences in key areas of the business. How will potential partners (needed to bring the software to the market) accept revenue models, how will a community react, how will potential customers cope with it? And does a decision restrict the company in the way other software components can be integrated or used?The ideal scenario for Enterprises might be a company with a widely open product (core and extensions) and an attractive but not mandatory services portfolio on top. Ideally the product is able to attract a large community and the processes and procedures applied ensure a high standard for – software quality and a manageable release frequency. It is obvious however that with such an approach growth and expected multiples are less attractive for investors than IP and product centric companies. We have even observed that a number of companies have moved away from the ideal scenario after they received VC funding and are now protecting and monetizing more and more of their IP. Which, in some cases, makes them a less attractive choice for enterprises.The continuous struggle on how to make money with something that is perceived as being free will continue. We most likely will see new models and trials and sort of “thanks” to the current economic conditions we well probably also see more humble approaches that may actually please enterprises much better than some of the marketing oriented open source misuses that we have observed in the market.

Do Enterprises care whether it is really Open Source?

There’s a pretty stable definition out there what Open Source software is all about and what license models should allow for and what not. Despite of that Enterprises seem not to care too much about this.For many enterprise using Open Source support and services are more important than the true nature of software, it seems. Often the prefer the commercially licensed product with the attached subscriptions to be on the safe side. But this can mean that the software they use isn’t Open Source at all and that changes and modifications they do might not even belong them.A lot of Open Source software today is consumed as Software as a Services (SaaS). In this case nobody – cares whether the software that is the basis of the application is Open Source or not. And this makes sense, because in this case a service is purchased not a software.Many customers also buy appliances instead of – software and hardware separately. Again, nobody needs to worry about what’s in the box, it’s purchased as an integral product.And, when Enterprises buy commercial software products, a lot of it today is assembled from Open Source components. But there is no need to care about this as what companies buy is the packaged software.So, four cases, but only in one of them the nature of the software is critical. There hasn’t been enough push back from Enterprises to force commercial open source companies to come up with Open Source compliant commercial license models. Some of the problems can be resolved in individual negotiations, but that’s cumbersome. So, what would be preferrable are license models that allow the commercial software company to make money while protecting as much of the Open Source nature of the base software. Let’s see what new models we’ll see over the next months and years.

Open source business solutions very active on SourceForge

-I just reviewed the list of the most active projects on Sourceforge.net during March 2009. It’s quite telling.Of the top 12 five of the projects are business solutions. You find the usual suspects like OpenBravo ERP or ADempiere, but there are also less known representatives of this category such as PostBooks ERP, WebERP or OrangeHRM. For the other seven projects it can be said that it’s the usual mix of tools, gaming components and frameworks.Here’s the list of the top 12 projects:1. Notepad++ (editor, tool)2. Openbravo ERP (business solution, ERP)3. ADempiere ERP Business Suite (business solution, ERP/CRM)4. ZK – Simply Ajax and Mobile (Ajax Java framework)5. Zenoss Core – Enterprise IT Monitoring (Infrastructure, monitoring tool)6. MediaInfo (tool/component, reads meta data from multimedia files)7. PostBooks ERP, accounting, CRM by xTuple (business solution, ERP/CRM package)8. Mumble (tool/component for gaming)9. phpMyAdmin (infrastructure, tool to manage MySQL databases)10. ffdshow tryouts (tool/component to view multimedia files)11. webERP web-based ERP -Accounting (business solution)12. OrangeHRM – Human Resource Management (business solution)Activity isn’t the best indicator for Enterprise Readiness, but it certainly displays the traction of a project and to a certain extent the ability to survive. So it’s a good idea to look at the activity ranking of software deployed in enterprise IT.

Are successful commercial open source vendors a safe bet?

When enterprises are selecting a technology to implement, one criteria is whether the technology and the company behind have a good chance to survive. So, what about commercial open source vendors such as SugarCRM or Alfresco? There are usually three exit scenarios for these vendors, going public, being acquired or folding. Let’s forget the third scenario for now. If commercial open source vendors go public (especially during these days) then that’s a good news and a sign for a strong track record. If a commercial open source company is being acquired then this is probably good news too. In most of the cases these companies are bought for the technology, not the customer base. So the risk, that the product is going to disappear is fairly small, most likely the technology is going to survive. Conclusion, picking a strong commercially oriented open source vendor is in most cases a good choice and probably more future proof than picking a traditional commercial product coming even from the largest vendors.

Updated German language Open Source catalogue published

New German language Open Source CatalogueFor our German reading audience we have updated the “Open Source Catalogue” that was published last time in December 2008 as PDF. It can be downloaded on a new site that will host the German language catalogue going forward. The new version of the catalogue shows some 40 changed projects and also the latest additions already published on EOS Directory. For the time being we haven’t planned to published an English version as we assume that English speaking people are happy enough with the online site. Should there be other oppinions around then we are happy to hear them.

Open Source lowers the cost for all industries

There have been many debates on whether enterprises can lower their IT cost using Open Source. As we learned it depends on the situation and the case. Does this mean that the cost argument for Open Source is a lost case? Not at all! It’s just that the thought to start with the enterprise is missing the point.In reality Open Source is has changed the IT industry. Not just the software product business but also the services business. Open Source has been instrumental in lowering IT cost on a macroeconomical level. Take these examples:

  • SaaS (software as a service) is changing the way we do IT and has lowered the cost and time scale for setting up new applications and functionalities drastically.
  • Cloud computing allows to run applications at a fraction of the cost compared to the past. Open Source plays a key role here.
  • Most software producers today leverage Open Source components,Open Source software management tools, testing tools, collaboration tools, etc. to be able to produce new releases in less time and finally at a lower cost. Some of these gains are transfered to the buyer who can acquire software at lower prices.
  • System integrators are profiting of a large range of tools, frameworks, technologies out of the Open Source portfolio. This allows them to be more productive and to have lower internal costs. Again,a big share of these improvements are resulting in lower project prices or daily rates.
  • The competition between Open Source and proprietary commercial software products has forced the vendors to lower their prices and to even give away entry level products.
  • The list could go on for quite some time.

Open Source has influenced and impacted all the “players” in the IT world, be it buyers/users, producers, integrators and other service providers. The real economical impact of Open Source probably can’t be estimated easily but certainly goes into the billions of USD and higher. There is of course also a bit of an offsetting factor to be considered, as some/many of the contributions to Open Source projects are paid by the same players mentioned before. But as always you could ask the question – what would these people have done otherwise?

The financial value of Open Source

What’s the cumulated financial value of the today existing open source code base? It’s a big number, for sure. If you take published numbers and multiply them in a simple exercise, you might come close to the truth. Blackduck claims to have indexed a couple of billions of lines of code in its repository. Assuming they only index 70% (they mention 185’000 projects) and “a couple” is “5” then we might end up with 7 to 10 billion lines of code. If we multiply this with the estimated value (or cost to develop) of one line of code (let’s take 15 USD for the exercise here), we end up with a total value of USD 100 to 150 billion. What is interesting here is that only a little piece of this is funded by Venture Capital (the 451 Chaos blog mentioned 2.95 billion USD total investment (and most of it goes into marketing and sales, rather than into product development) until today), so where is the rest coming from? I would assume that some of it comes from enterprises and large organizations, but this is probably max 20-30% of it. The bigger share actually comes from individuals and small companies, people either sharing what they have done with a social idea behind or planning to build or extend a business around it.Another interesting question is whether these “investments” will go up or down during the tough times we are going through. I actually think they are likely to increase because of two reasons. First, there’s a lot of development capacity available in large companies, but little money to spend for buying software. Companies are trying to keep their staff busy, so it’s well possible that they invest in some piece of software and share it with others. Secondly small companies will suffer of less demand from their customers, they will have time available to invest into the future. As the open source approach has proven to be a good vehicle to publish and market software, many will take this route.What does this mean for all of us? Well, yes, we can expect more good software coming from the Open Source world and the innovation will continue.

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