Small and midsize companies are creating IT infrastructures based on open-source software to reduce licensing fees and increase flexibility
Yellow Online, which has 50 employees, doesn't have a support contract for its MySQL database. Instead, Yellow Online's five-person IT staff relies on other MySQL users via the open-source community. "We're really tuned into the online community and don't need an organization to provide support," Zomorrodi says.
Yellow Online runs its Web site, domain name system, and load-balancing servers on 20 Red Hat Linux servers, though the company doesn't have a support contract with Red Hat, either. Zomorrodi says he's not looking to commercial open-source service and support providers because his staff has the in-house capability to support the technology.
Zomorrodi discovered open source in 2002 while he was pursuing an MBA degree at Queens University's Queens School of Business in Kingston, Ontario. In 2002, Yellow Online started moving its front-end Web programs that were written in PL/SQL on Oracle's Internet platform to JavaServer Pages. This made the applications portable and independent of a specific product or vendor. Then the company deployed the applications to the open-source Tomcat app server.
By The Numbers
Like Yellow Online, Independence Air Inc. arose as a new model for doing business in its industry and relies heavily on IT to make it a nimble player. The startup, which had previously operated as a regional airline called Atlantic Coast Airlines and provided service as part of the Delta Connection and United Express programs, took its first solo flight in June 2004, not a great time to launch an airline. "The airline industry is really brutal," IT director Chris Hewes says. "The profit margins are very thin or, in our case, nonexistent." The company reported a loss of $192.2 million on revenue of $500.1 million in 2004.
Although Hewes, a pilot, had been with Atlantic Coast Airlines since 1993, bringing Independence online was the equivalent of launching a new company. No longer could Independence's staff count on having their Web site, reservations, and other systems managed by United.
Hewes promptly set up 300 Neoware Systems Inc. thin-client desktops running Red Hat Linux 6.1 on the back end for the airline's ticket agents. "We had a background in a thin-client environment, so that was definitely what we were going to use moving forward," he says. "I didn't want to put PCs in all the different airports because of the overhead to manage it."
Independence, which has around 3,700 employees, in June chose to test open-source Nagios software to become its network-monitoring platform. "Nagios was just out there on the Internet," Hewes says. He's looking to replace Micromuse Inc. management software, which has proven expensive and cumbersome. "We felt [Micromuse] was the best platform out there for monitoring network uptime and some network appliances," Hewes says. "But every time you wanted to do something with Micromuse, you were required to bring in a $180-per-hour consultant. We don't feel we're getting a good return on our investment with Micromuse."
How Far Can You Go?
Hewes says there's no question Nagios can handle what Micromuse is doing. The question is how much further the company, which operates 400 flights daily serving 41 destinations, can go with the open-source network-monitoring tool. "Will it grow with Independence? We haven't had time to fully investigate," Hewes says.
This spirit of experimentation is common among startups, especially those looking for technology that supports explosive growth. Riding the wave of online gaming's popularity, Bodog.com Entertainment Group SA's transaction volumes have doubled each of the past four years. On any given Sunday during football season, Bodog handles 150,000 sports bets. The company's online poker game, which processes 1,000 hands per minute, also is growing fast and can handle more than 5,000 players concurrently.
Twenty of Bodog's servers run Red Hat Linux, and 10 of those run the Apache Web server. Linux also lets the company choose from a range of hardware options, including 32-bit or 64-bit x86-based systems powered either by Intel's Xeon processors or Advanced Micro Devices Inc.'s Opteron processors.
Bodog, which launched in 1995, is looking for a chance to use more open-source applications, including database and CRM software. While its database is IBM's DB2, chief technology officer Carl Schmidt wants to replace that with several 100-Gbyte MySQL databases. "We're looking at a fully open-source business stack," he says.
As for CRM, "we'll wait as long as we can for a viable open-source solution," Schmidt says. Given the pace at which the market for open-source software is growing and the way it's been embraced by startups with an eye toward the future, Bodog is betting it won't be waiting too long.
This story is part of a cross-CMP Special Report on Business Innovation that should be of special interest to growing midmarket companies. Related stories are being published in six other CMP publications. You can see them and other material at businessinnovation.cmp.com.
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