BORN FREE
May 28th 2009
Open-source software firms are flourishing, but are also becoming less
distinctive
MANY technology firms are floundering amid the recession. But many of
the ones that offer services tied to open-source software--free
programs written by volunteers who collaborate online--are boasting
double-digit growth. Sales at Red Hat, the world's biggest independent
open-source firm with annual revenues of $653m, grew by 18%
year-on-year in the first quarter. More and more firms, particularly in
Europe, seem prepared to embrace open source (see chart). "Budgets are
tight and we think that is good for open source," said Jim Whitehurst,
Red Hat's boss, when announcing the results.
Indeed, open source is so widely accepted that traditional software
firms are beginning to dabble in it, while some open-source firms are
starting to sell proprietary add-ons to open-source programs instead of
charging to provide support to firms using open-source software. If
current trends hold, traditional software firms and their open-source
rivals will soon be hard to tell apart. "A new pragmatism is rising,"
says Matt Asay, an open-source advocate and an executive at Alfresco,
which makes open-source software that helps firms manage digital
content.
The "free and open-source software" movement, as it is officially
called, has come a long way from its anti-establishment origins.
Pioneers such as Richard Stallman did not want users to be locked into
monolithic products, but to be able to change programs in whatever way
they wanted, and to share their modifications.
For years, this software commons was no more than an obscure sideshow.
But then the internet provided volunteer programmers with a way to
co-operate cheaply. IBM and Oracle, two industry giants, threw their
weight behind the Linux operating system, in part to weaken their rival
Microsoft. After the dotcom bubble burst in 2001, many firms turned to
Linux and other open-source software to save money.
Cost is once again the main reason why companies are turning to open
source, says Jeffrey Hammond of Forrester Research, a consultancy. Its
success is no longer limited to basic software, such as Linux or
Apache, a program that powers web servers. Open-source firms are
flourishing in databases (Ingres, for instance), business intelligence
(JasperSoft), customer-relationship management and other business
applications (SugarCRM, Alfresco). In addition, open-source firms have
started to move into new markets without proprietary rivals. For
instance, a company called Cloudera distributes a version of Hadoop, a
program which helps firms process and analyse the unprecedented volumes
of data generated by large websites.
But cost is not the only reason for open source's growing popularity.
Many firms now know that it offers more flexibility than proprietary
programs, the licences for which often include restrictions on how they
can be used, explains Matthew Aslett, of the 451 Group, a
market-research firm. And companies no longer perceive free software as
riskier, he adds. Getting sued for running programs that inadvertently
violate somebody else's intellectual property, for instance, has proven
not to be as big an issue as once feared. Most open-source firms
indemnify their customers against such lawsuits in any case.
All this has led many companies to develop a much more pragmatic
approach to open-source software. In the late 1990s installing Linux
was often something of a gesture of defiance against Microsoft's
domination of the software industry. Today decisions are more rational.
The key question is whether the savings in licensing fees for
proprietary products outweigh the additional costs in manpower to
integrate and operate the free alternative. "Open-source software has
become a means to an end," says Forrester's Mr Hammond. "Most firms
don't really care that it is libre, as in freedom, but that it is
gratis, as in beer."
Open-source firms themselves have also become increasingly pragmatic.
Red Hat and Novell, its main rival, still make money by giving away
Linux and charging for support: customers sign up for a subscription
that gives them the right to all the updates and someone to call if
something goes wrong. Yet recent years have seen a flowering of
different business models. A popular approach is to sell proprietary
extensions to an open-source core. "The support model does not scale
well," Mr Aslett explains. It does not generate the returns expected by
venture capitalists, who invested more than $3 billion in 163
open-source firms between 1997 and 2008, according to a study by the
451 Group.
Conversely, having realised that they can economise on resources and
garner good ideas, proprietary software firms are increasingly taking a
liking to open-source programs, albeit mostly at the edges of their
offerings. IBM has sprinkled open-source software throughout its
product line and is rumoured to be interested in buying Red Hat. If
Oracle's acquisition of Sun Microsystems goes through, it will have an
even bigger open-source portfolio including MySQL, a popular program
for databases. Even Microsoft now carefully embraces what its managers
once described as a "cancer".
Cloud computing--the delivery of processing power over the internet
from vast warehouses of shared machines--will further blur the lines
between proprietary and open-source software. Most of the firms
peddling this model, such as Amazon and Google, use open-source
software, since having to pay licensing fees would make the business
unprofitable. But their services also rely on code developed in-house,
which is not given away free. Microsoft, meanwhile, is building a huge
cloud using its own software. If computing becomes a service delivered
over the internet, it will hardly matter how the underlying software is
developed.
Does this mean that the quest for openness in software is obsolete? On
the contrary. If they are not careful, companies and consumers could
get locked into a cloud even more tightly than into a piece of
software. This is because data residing in the cloud can be hard to
move to another service. "If you have a gigabyte somewhere, it develops
a certain inertia," says Mike Olson, the boss of Cloudera, which
recently found it could not switch from a poor storage service because
there was no way to move the data.
This sort of problem has spawned an open-data movement. In March a
group of technology firms led by IBM published an "Open Cloud
Manifesto" that has since received the support of more than 150
companies and organisations. It is only a beginning, but perhaps this
time around the industry will not have to go through a long proprietary
period before rediscovering the virtues of openness.
See this article with graphics and related items at
http://www.economist.com/business/displaystory.cfm?story_id=13743278
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