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Is Open Source A Recession-Fighting Tool?

The buzz on open source is that it can slash IT costs and save budgets. Our Linux expert looks at where and how much can be saved with FOSS -- and gives some caveats.
Driver sees a major difference between the big and small companies thus:


"Larger companies often have the internal bandwidth and technical capability to rely on internal resources for support; consequently they can rely less on third party commercial channels for support. This also applies to companies within more technology-aggressive industries (e.g., telecom, some elements of financial services). Smaller companies simply don't have the bandwidth for robust internal support. For these I see a lot of 'driving without car insurance' scenarios. In other words, they are using open source successfully, but have increased risk that may catch up with them over time."

The 451 Group report discussed above takes a different approach toward discussing cost savings: It cites cost savings as a major motivator for adopting OSS, but at the same time found that many of the very people interested in adopting open source (40%) had no actual process for determining the total cost savings. Another major issue was a lack of focus on life-cycle cost savings instead of only whatever savings are garnered from initial deployments -- possibly also because of the lack of a total life-cycle cost estimate.

It is worth mentioning at this point that there is absolutely no reason, short of gross incompatibilities, to think of going open source as an all-or-nothing project. If it makes financial and practical sense to use a mix of open and proprietary products (even if only as a transitional phase towards going wholly open), then go for it.

Extensibility And Flexibility

Open source products can be used in an enterprise in two general ways: as infrastructure, and as user-facing applications. The former used to be open source's mainstay, but Roger Burkhardt, CEO of Ingres, has commented on how broader open source adoption means OSS will be used "further up the stack" for databases, middleware, business intelligence, and so on, as opposed to just operating systems or other underlying infrastructure. SugarCRM and OrangeHRM, for instance, are open source platforms for running CRM and human resources, respectively. The former is one of the most vibrant of commercially supported open source projects, since it's also attracted a broad range of third-party developers that have extended the core platform in ways that would be the envy of most any proprietary program. The extensibility of open source is itself another form of cost-savings.

Things you would normally have to pay for as add-ons are often available as no-cost or extremely low-cost community-developed bonuses. Any company that finds value in transforming what it uses -- even if only trivially -- will find an instant cost savings in open source, although the effort required to do the transforming is itself an expense. It may come in the form of hiring consultants or keeping a full-time staffer to do that work, but it will still be a cost in some form.

The Futures Of Open Source Companies Themselves

So far we've only talked about open source as it applies to an organization that plans to make use of it. What of the companies that sell and support open source themselves? If the rough economic times are ahead, how will they fare, and what will that mean to their customers?

The general consensus is that hard economic times are good for open source outfits. Most of them run leaner and meaner by design, are privately held, and therefore don't need to post as much in the way of growth or earnings to be successful. However, that in turn makes them appetizing acquisition for other companies -- many of which may have shareholders to appease, and whose stance on open source isn't always clear. The research firm 451 Group took a look at that very issue and reported:


...'transformative deals' are the least-likely transactions to get inked this year and that there is expected to be an acceleration of 'bolt-on' acquisitions, which are typically low-risk deals that allow companies to sell technology developed by a startup into their existing customer base. Therefore, open source software vendors are likely to be attractive targets, especially if the prediction that current economic conditions will increase the adoption of open source proves to be correct.

One myth that needs to be dispelled is the concept that an open source product is "immune" to economic downturn. The core code of an open source product is capable of surviving far more hardship than a proprietary product -- if the outfit currently developing it goes bust, another one can pick up where the previous owners left off with minimal friction. But that doesn't mean it will happen. There's always the possibility that the project in question may languish while a competitor or successor receives more attention.

Conclusions

There's little question that using open source can become a solid part of any company's cost-cutting process, whether in good times or bad. What's also important is that there be other positive benefits -- that the savings be quantifiable; that an eye be kept towards long-term benefits as well as immediate ones; that there's some awareness of how to leverage the additional value of open source (flexibility, malleability). Open source may seem like magic, and sometimes it is. But that shouldn't be an excuse to use magical thinking to leverage it.