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.

Serdar Yegulalp, Contributor

January 29, 2009

10 Min Read

With hard economic times all around and no relief in sight, there's terrible pressure all around to cut budgets, tighten belts, and get the most for the least. That sounds like a perfect scenario for a CIO or IT department to make a jump to open source, and it indeed may well be.

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Still, switching to open source isn't like waving a magic wand. Like any other cost-cutting measure, a move to open source will only benefit you if you're actually saving money with it in the long run. Because the exact mechanics of cost savings via open source can be a little deceptive, here's a guide to getting the most from a jump to open source, both in the short and the long run.

How Open Source's Cost Savings Work

Before we get into a discussion of costs, let's spare a few words about the term "open source." For the sake of this article, we'll use a fairly generic and broadly accepted definition of the term: programs for which the source code is freely available and modifiable, which can typically be downloaded and used free of charge. It will also refer -- more often than not -- to open source applications that have the support of a commercial outfit behind it.

Most open source programs that are backed by a given vendor follow the same basic model: The program itself is free, but there may be a charge for additional things like professional-level components or technical support. The exact mix varies. Some companies charge nothing across the board for software, and only sell support; others offer certain features as cost-plus add-ons.

What's tougher to keep in mind is that these up-front costs are, as with any software investment, only the beginning. It's how these things pay for themselves over time -- or don't pay for themselves over time -- that matters most.

The analyst firm 451 Group conducted its own investigations into open source's cost savings back in October 2006, and concluded that lower costs are one of the most persistent reasons for adopting open source solutions -- even if the up-front cost for a given software product isn't where most of the money goes for it.

The costs divide roughly between "hard" and "soft" with the former consisting of things like actual software licenses, support, training, and so on; and the latter being things a little more difficult to qualify like lost (or gained) productivity. The latter surfaces most with any directly user-facing applications. If you make major changes to anything that's used internally on a daily basis, make sure you can spare time and cash for retraining.

Seeing For Yourself

A key element of evaluating open source's cost savings is the fact that most open source solutions can be tried as-is without any heavy-duty financial commitment up front. Less so with commercial software, where 30-, 60-, or 120-day trial periods make it difficult to determine what the long-term payoffs will be without paying up. To that end, 451 Group also found that once people make the switch to open source, they can see firsthand how the real long-term benefits aren't in the immediate financial sense.

These other benefits aren't generic. In other words, they'll prove themselves differently to each company depending on the implementation.

The "open source" part of the equation, for those who are relatively clued-in about what open source represents in the first place, means things like less vendor lock-in and inclusive support for open standards. Actually, the question of less lock-in also represents a potential cost issue in the long term as well. The less vendor lock-in you have, the less time and effort (and, yes, money) you'll need to spend wrestling with that issue when and if it becomes a problem.

Mark Driver, a research analyst with the Gartner Group, takes the view that open source works best when community support is "good enough" for the deployment in question. "If you end up paying a commercial vendor for service and support" (whether open source or proprietary) "the role of licensing gets smaller and smaller over time. We believe fully 50% of people deploying OSS aren't actually saving money over closed source alternatives in the long run. They're still getting value, though." He wasn't thrilled by the idea of free software being a one-to-one replacement, though: "Free doesn't mean much if you lower the quality of service (and increase risk)."

The conceit that cost savings is not the only thing you'll get from switching to open source, and maybe not even the most important thing, has been prevalent for a while now. In a survey conducted in 2005 by, they found the key advantage of open source is not cost savings but flexibility. "Real TCO takes years to gauge," says Driver, so perhaps relying on TCO as the most valuable or immediate metric for whether or not to adopt open source isn't the best idea.

How Much And Where?

The exact amount of cost savings is variable, and debatable, probably because no two companies -- even those that use the exact same software -- are alike. A good deal of this may be because there are often few formal procedures in place for evaluating such costs within an organization, whether open source is involved or not.

Because of this, the numbers themselves can seem counter-intuitive. One survey conducted by SysLab found that smaller companies (10 people or so) only saved about 2% overall, with larger outfits (100+ people) saving about 6% to 7%. "The reason for this lies in the lack of internal know-how of the open source products," they claimed. "The enterprise can only work with expensive external support and the thereby resulting higher costs for training will burden the budget." (These particular numbers, however, carry with them the assumption that a) there is automatically a lack of internal know-how vis--vis using open source, and b) the only way to acquire such know-how is to hire expensive external support.)

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.


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.

About the Author(s)

Serdar Yegulalp


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