Rethinking Open Source Strategy

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One of my graduate student teams recently pitched me on the virtues of open source software.

The leader of that pack works for a not-for-profit corporation, so you know what his bias was. The rest of them work for companies that exist for profit -- and you probably can guess what their biases were.

We analyzed some open source alternatives to Microsoft Office, Siebel Systems CRM and other proprietary applications and even some data base management software. We concluded that while they were all impressive, they were still not quite the real thing. Nor, we concluded, would they offer the cost savings that everyone had been lobbied to expect.

I then took the analysis to our CIO Advisory Council, 25 or so CIOs from the greater Philadelphia area, and asked them straight up, What are you doing about open source software in your companies?'' Note that the companies in the room included Rohm and Haas, Unisys, Johnson & Johnson, Sunoco, Wawa, Vanguard, Aramark, Sungard, The Philadelphia Stock Exchange, Cigna, and Wyeth-Ayerst, among other prominent companies. My back-of-the-envelope calculation indicated the people taking that ad hoc survey spent about $5 billion a year on technology -- surely they'd be interested in something that might save them some serious money.

What do you think that they said?

Nearly all of them were anything but enthusiastic about open source software -- aside from the use of ''not on my desktop'' Linux and Apache. Several of them indicated the cost savings they might enjoy from migration would be eaten alive by the migration cost itself, not to mention the hassle and weirdo factors. (Many of the CIOs were far more concerned about cell phone bills than the cost of Microsoft Office licenses.)

Sun Microsystems and Google recently announced a partnership whereby Google would distribute Sun's software, including its competitor, to Microsoft Office, OpenOffice. If you look at the list of open source alternatives to the proprietary systems that we buy, deploy and support, the list is getting longer and longer -- and the features richer and richer.

The not-for-profit and for-profit open source support community also is getting much more sophisticated and professional. More importantly, many of the largest technology vendors long ago embraced open source software.

So are we there yet?

We're getting closer. And it's not the features and compatibility of open source software that are getting us there, though it certainly helps the open source cause. It's the structure and mechanics of the software industry that's making open source more attractive to increasing numbers of small, medium and even large companies.

Yes, I know I already said that my CIO Advisory Council rejected open source software and that my graduate students made a less-than-convincing case against the proprietary software giants. But there are some trends that bear very close watching over the next few years -- trends that might very well change their minds.

The first trend regards pricing.

At some point, technology managers are going to resist the sheer cost of buying -- and maintaining -- enterprise software. While I realize that there are always 'deals' out there, enterprise software is incredibly expensive. And there are human factors. Experts out there are telling us over and over again that most users barely use 10 percent of the features embedded in large software suites. And then there's the shelfware issue.

The second trend is hosting.

Many companies are looking seriously at renting software instead of buying, deploying and supporting complex applications. As the hosting/renting trend continues, companies will revisit how they spend their technology dollars in some creative ways. The evolution of thin client architectures is part of this trend.

Third, the new software architectures based largely on Web Services standards will enable whole new service-oriented and event-driven architectures that will challenge traditional software distribution and pricing models. (This is part of the Sun/Google long-term strategy.)

These three trends will place tremendous pressure on the large proprietary software vendors to re-think their pricing strategies. If they fail to adjust their prices, more and more companies will defect to alternative software acquisition and support approaches. Some will rent, some will move toward new architectures, and some will strongly consider open source alternatives.

This all will play out over the next three to five years -- not in a decade or two. The major software vendors can influence the direction all this takes, but the only way they can guarantee market share is to reduce their profits. Regardless of how pro-active the major vendors become, the three pressure points described above will accelerate changes in how software is designed, acquired, distributed, supported and priced.

Does this mean open source software will become more popular over time? It depends on how the software market shakes out. Here are some scenarios that will influence the adoption of open source software:

  • If the large proprietary software vendors fail to radically alter their pricing policies, then more and more companies will look to open source alternatives;
  • If the expected trends toward hosting and renting fail to continue and the large proprietary software vendors fail to radically alter their pricing policies, the adoption of open source software will dramatically increase;
  • If whole new software architectures fail to evolve, expected trends toward hosting and renting fail to continue and the large proprietary software vendors fail to radically alter their pricing policies, the adoption of open source could become as popular, if not more so, than proprietary software, and
  • Let's also acknowledge the role open source software might play in renting/hosting, and the new architectures which could be based on open source applications and open source components.

    One thing is for sure... The open source movement is gaining momentum and serious technology managers are beginning to rethink how they might participate in the open source movement. So what would you say if I asked you straight up, Wwhat are you doing about open source software in your companies?''

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