Open Sources | Rodrigues & Urlocker » The 451 Group on 'Going Open'

April 14, 2007 | Comments: (0)

The 451 Group on 'Going Open'

TAGS: Open Source

Nearly two months ago, Raven Zachary, a senior analyst with The 451 Group, sent me his research report "Going Open: Software Vendors in Transition." I've been waiting for the chance to read it in full, but it hasn't been easy finding time to plow through its 66 pages. On a flight to Europe yesterday I found the time, and am glad I did.

Raven does an excellent job of dissecting the reasons vendors have given for shifting from proprietary software to open source software, and the sometimes neutered attempts to do so. He writes:

The overall trend of proprietary software vendors ‘going open’ is increasing significantly – either as a major business-model shift away from software license fees as the basis for customer usage or the more limited release of some code using an open source license. The majority of software vendors that have made a move to open source have only done so in the past year or two. The results of these early cases will influence the future direction of proprietary software vendors’ selling practices and end users’ buying preferences. (1)

Unfortunately, a range of dying companies have sought salvation in opening up their products. Raven doesn't call this out (though he does suggest that "Software vendors thriving under their current model aren’t generally looking to make a major business-model shift" 13, and he also lightly suggests that such efforts are not a panacea for distressed companies (27)), but 'Hail Mary' technology dumping may technically count as open source, but it shouldn't count as an open source business. Abstract out these rubbish also-ran "open source" companies, however, and you still have a strong trend in the industry toward open source.

Raven describes open source companies in this way:

Stepping back for a moment, what exactly is an open source software vendor? There are degrees of openness, and this issue is hotly debated. Generally, a software vendor can be considered ‘open’ when a significant percentage of the company’s software assets are released under an approved open source license. The vendor shifts its focus toward value through the quality of the services it provides around its software and the level of innovation being driven by the larger community of outside developers and end users working closely with the vendor development team. (7)

I buy this definition, though I would go one step further: to be an open source company, the company's primary business - its revenues - should derive from the open source software it contributes.

Semantics aside, Raven parses a range of ways that open source software vendors deploy:

• Commercial licensing (i.e., dual-license model)
  
• Commercial upselling ("Community" vs. "Professional" versions)
  
• Subscriptions (Support & Maintenance as a package deal)
  
• Support
  
• Maintenance
  
• Custom development
  
• Proprietary add-ons and extensions
  
• Consulting
  
• Training
  
• Software-as-a-Service
  
• Indemnification
  
• Certified binaries
  
• Documentation (14)

All valid, and looking at the list I can't help but think that we're missing something in these. There is an innovative business model waiting to happen around open source....In the meantime, Raven does suggest that

We believe that a pure play with a single open source product – with a focus on services such as subscriptions, support, training and consulting – is the most beneficial model for end-user consumption. (28)

I happen to agree, but that's not news.

Raven covers a range of other things in the report, tackling questions like:

• Does availability of source code or inclusion of open source software in a proprietary product reduce the valuation of that company?

• How does open source affect sales cycles?

• Which license is ideal for a specific business requirement?

• How can hybrid models attract community involvement without engendering distrust and community backlash?

• And more....

Raven and The 451 Group team have done a great job with this report. I've always liked The 451's analysis, but I particularly like Raven's insight. He actually understands how open source works, and is part of the open source business community. He's nice about lame business models, but isn't willing to pull punches to sell the research.

Posted by Matt Asay on April 14, 2007 01:23 PM

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