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Actuate Corporation Message Board

  • goofy_investor goofy_investor Jun 27, 2005 12:30 PM Flag

    The Real Open Source Revolution

    OPINION
    The Real Open Source Revolution
    As open source gains momentum, it becomes clear that the revolution is in the business model, not the pricing.

    Shirish Netke, Aztec Software

    According to Arthur Schopenhauer, the 19th century philosopher, all truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident. Open source is now coming close to stage Three. It has recently gained momentum because it supports the immediate economic imperative to cut cost and has the potential to demonstrate a positive ROI on projects and increase predictability in measuring output.

    Open source is not about free software. It is really about a new business model for software services. Open source software provides the impetus for a new kind of intellectual services based on a set of software building blocks which have become a part of the new software ecosystem. This ecosystem will create new opportunities for software vendors, service providers as well as equipment suppliers. Ultimately, the viability of this ecosystem will depend on one thing - the players? ability to actively and transparently align with customers? business interests.

    How pervasive is open-source software in the enterprise? In November 2004, InformationWeek Research published the results of a survey that sought to answer that question. After interviewing 420 business-technology professionals knowledgeable about their companies? IT systems, the team found the following:

    ? Approximately 58% of businesses polled have been using open source products for at least two years
    ? Two-thirds of the companies surveyed used open source products
    ? An additional 16% expect to implement open source software in 2005

    Many companies consistently cite cost savings (in terms of license fees and hardware) as one of their top reasons for implementing open-source software. For others, it boils down to a simple equation:

    Open source = open standards = better interoperability = more resources

    While the proliferation of Linux is used as a benchmark for open source adoption, the real opportunity in open source is in infrastructure components such as databases, application servers and portal which form the ?plumbing? of an enterprise software application. Implementing an optimal combination of software components requires a sophisticated understanding of infrastructure technologies and product engineering skills. Intellectual service providers with product building skills are well suited to create built-to-order plumbing for applications.

    This availability of built-to-order open source infrastructure presents a unique opportunity for application software vendors, especially start ups. A typical start up spends a significant amount of time and effort in building the plumbing of their application before it focuses on the value-added, domain specific aspects of their solution. This time and effort can be minimized to bring the product to customers faster and potentially cheaper than before. Large software vendors who have built their products more than a few years ago also benefit from migrating proprietary components of their software to open source. The resulting saving in licensing fees can be passed on directly to their enterprise customers making them more competitive.

    The proliferation of open source has also led to new business models for infrastructure software players. JBOSS (www.jboss.com) forgoes licensing fees on its product but has a revenue stream based on subscription, maintenance and support. Jaspersoft (www.jaspersoft.com) takes advantage of JasperReports, a popular open source reporting solution to provide a commercial solution which includes support and services.
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      The proliferation of open source has also led to new and innovative approaches to managing the legalities of intellectual property. Palamida, a start up in San Francisco, is able to review software code and compare it with 100,000 SourceForge programs to check for similarities. Many more examples are expected to emerge which address other obstacles in the deployment of open source solutions. The viability of these solutions will depend on their ability to persistently add value in the open source ecosystem.

      The growing adoption of open-source software has created an urgent need for skills that have not traditionally been a part of the software ecosystem. Some vendors are taking additional steps to safeguard their future in open source. IBM is addressing the problem by providing professors with classroom materials on open-source software or by technically training faculty. Beyond school, some companies encourage their developers to choose the software tools they like, rather than tie them to a corporate standard. This looser approach gives developers the freedom to experiment and gain experience with open-source software.

      Another set of vendors emerging in the open source ecosystem are those who provide product engineering services. These companies also resemble traditional software companies in their DNA but make their revenue from intellectual services related to product engineering without owning intellectual property. Some savvy independent software vendors interested in developing open source offerings have realized outsourced product engineering dovetails neatly with open source. Taking advantage of global talent pools allows them combine the advantages of open source with scalable outsourced services to get finished products in front of customers faster and cheaper than their competitors.

      The new economics of open-source software are similar to the economics of free Internet search, TV, radio, or checking accounts ? the money is not in the product; it's in the services and value delivered around the product. In a sense, the new breed of intellectual service providers are the modern day version of inn keepers and blue jeans suppliers of the open source ecosystem.

      A lot has been written about the raging debate between open source and proprietary solutions. In practical business terms, the choice of which software to use depends on a judicious trade-off between paying licensing fees for proprietary software versus paying for support services for open source components. A combination of open source and proprietary solutions may very well be the right answer for creating an infrastructure stack depending on the customer?s requirements.

      The open source ecosystem needs to be customer-centric to be viable. There will be a lot of unknowns on the way to the evolution of the ecosystem with a combination of products, services and business models. While the new ecosystem may shrink the time to market and open source software may present a compelling alternative to proprietary solutions, the migration will not be easy. The Darwinian process will ensure that those who add value to customers will survive. Those who do not, will not..

 

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