OSBC report: It's all about disruption

Open source is thriving by helping CIOs reduce their IT budgets

I've been going to Open Source Business Conference since the very beginning -- back when "open source business" seemed like an oxymoron. Matt Asay, extreme blogger and biz dev guy over at Alfresco, runs the program, and it has evolved nicely over the years. I'm pleased to see that there's less focus on licensing discussions than ever. (Or at least, when licensing is discussed, it's in the context of business model implications, which makes it interesting to more than just lawyers.)

One theme that was evident was the impact of the recent economic downturn on open source. While some companies have reported delays in deals and more approvals required (one CIO had to approve four times) overall, it appears that open source companies adoption and revenues are growing. IDC has reported that 72 percent of IT organizations surveyed are evaluating or planning to expand their use of Linux, for example. (Not surprisingly, Microsoft's own research says that because of the downturn, migrations in general are down.)

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Deals still take time, and companies need to articulate the value of the commercial offering beyond what is available in the community, but business appears to be good for most open source players.

And the reason is simple: Open source fits with the mandate most companies have to reduce their IT budgets. That's what makes it disruptive. The other reason, which is perhaps a bit more subtle, is that most open source companies have scaled their marketing and sales expenses to be in line with an overall lower price tag than traditional closed source enterprise software. Instead of a large, expensive field sales organization, they have inside sales reps. Proof-of-concept projects are replaced with a DIY model of having the prospect download the software and try it out. And instead of expensive brand marketing, it's all about lead generation and nurturing, to enable customers to self-qualify.

In other words, open source companies may be better positioned to deliver results in down economy, both because their products are more cost effective and their operations are leaner. I'm not sure it's inherent in the model, but the two certainly seem to go together quite often.

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