CEO panel says open source keeps IT spending down

SAN FRANCISCO -- The Software 2004 conference here played host to a panel of CEOs who opined on the state of the software industry for an audience of 1,100 software executives.

Moderating the panel was Tony Zingale, former president and CEO of Clarify. Panelists included Jim Green, chairman and CEO of Composite Software; Juli Hanna Farris, founder and CEO of Scalix;  Arup Gupta, president of Tata Consultancy Services; and Jeff Rodek, chairman and CEO of Hyperion.

Zingale's first question dealt with growth of the software industry, asking the panel whether it would come from organic, internal growth, or through mergers and acquisitions (M&As).

The CEO at Hyperion, which reports having 50 percent of its customer base companies in the $500 million range and up, quickly responded.

"If anything, we are deciding which products and even customers to kill, not grow."

However, Farris had a different view, explaining that Scalix is focused on messaging technology where a lot of good work has already been done. Therefore the company is using the M&A model to grow.

"We are marrying Linux and messaging. Acquisitions are an important way to accelerate.  Messaging has been around for awhile and so there is a lot of important technology that hasn't seen its way to market."

 Green, whose company creates middleware for data integration, said that innovation can work against a company in the current climate.

"When a market consolidates to a few players, then the suppliers to them are there to fill in the missing gaps [in their software]. That's how the market will grow."

 As the economy begins to pick up steam, Zingale asked the group if they believe IT spending will increase.

 Rodek said "it is going up, down, and flat," and then explained his multilevel point of view.

"People think of total IT spending. But with open source and offshore, total spending can be flat.  IT is growing by investing in process improvements. Software spending could be going up while total spend is flat, down, or slightly up."

Farris was equally succinct, saying, "IT spending follows pain. Spending on Linux is a quick payback but the enterprise is not ready for longer term spending."

Green said he didn't care if IT spending was going up or not, agreeing with Rodek that the way IT spends money is changing.

"More money is being spent on offshore and open source."

 Rodek said what all of the panelists said at one point or another in the discussion, that companies are leveraging their prior IT investments to get more out of the same infrastructure.

 Green agreed. "We sold customers a Greyhound bus when all they needed was a Volkswagen."

"Yes," Farris added, "open source, getting something for free, is a way to make up for our past sins."

Zingale ended the talk with the question that starts most conversations in the industry today: offshoring. All of the panelists were in favor and saw only its benefits. Not a negative word was spoken.

Arup said in the past it was a cost issue now it has moved to an issue of process improvement.

All of the panelists agreed with Jim Green. He saw no difference between using a provider in Berkeley, California, or one in India for software development.

 "There is no big difference between managing a distributed development environment that is in say Boston, Reston, and Berkeley. Add Bangalore and it doesn’t really make a difference."