The cost-value proposition of open source redux
Open source must shift its core value proposition away from cost reduction
Follow @SavioRodriguesMatt Aslett's post yesterday is one that will surely attract attention and possibly eggs from commercial open source proponents. However, I believe he'll be proven correct. Aslett concludes with the following statement, which is backed up by data earlier in the post:
If open source is to become more relevant to mainstream enterprise users then the focus has to shift from decreasing cost to enabling business practices and increasing revenue generation opportunities.
I completely agree. Our friend Matt Asay comments:
Speaking of "who you ask is important," have you considered that Savio has a vested interest in prospective buyers not fixating on cost? He works for a company that sells incredibly expensive software!
Two things: First, what I blog on InfoWorld and my personal blog are my own views. I use my experience at IBM to provide color to these views, not to advance an IBM or WebSphere "agenda." If I were tasked with the latter, I'd be looking for a raise! Every piece of financial analysis I've done leads me to conclude that a mature open source vendor's financial ratios are no different than their closed source competition. Yes, a startup open source vendor can keep costs down and pass on the savings through lower-priced products. However, this cost advantage is not sustainable. What happens when the $50,000 per server per year price point isn't sufficient to market and sell the product, to invest in R&D, to invest in employees, and to generate a sufficient ROI for investors? Well, you'll increase the price to $60,000 per server per year. That works if your brand isn’t associated with "low cost." By fixating on cost, when open source products can deliver additional benefits, open source vendors are simply trading short-term gains for long-term challenges.
