Rethinking Open Source Strategy

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: