Open Sources | Rodrigues & Urlocker » Putting risk where it belongs: on vendors

October 04, 2006 | Comments: (0)

Putting risk where it belongs: on vendors

TAGS: Open Source

I'm in the middle of doing a podcast with Dave Dargo, CTO of Ingres (and a friend of several years). Dave just made an interesting point:

Proprietary software puts the risk of acquisition firmly on the customer (caveat emptor), whereas open source puts the risk of acquisition firmly on the vendor.

What does he mean?

If you're an enterprise customer and you buy from a proprietary vendor, you pay a big upfront license fee. You do this without having any real hands-on experience with the software you're buying. You buy on faith.

Interestingly, you also pay a huge amount to have that sales guy sitting in your office. On average, proprietary enterprise vendors spend 5-10x more on sales and marketing than they do on R&D. I'm sure buyers like to have lunch with their sales guy, but wouldn't they rather have a product that actually works?

Back to faith. In open source, risk shifts to the vendor, because there is no upfront license fee, just the ongoing support and maintenance. As such, if the open source vendor fails to deliver ongoing value, you dump them. Period. And if the product is great but the support is not, you can go to one of their SIs or others to get support.

Yes, this puts a lot of risk on open source vendors. No, it's not easy. But yes, it is a dramatically better value proposition for enterprise buyers. No question.

Enterprises should stop paying Monopoly Money (licenses) to vendors. They should pay for value, not licenses.

Posted by Matt Asay on October 4, 2006 08:38 AM

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