A blog for the enterprise open source community
Is less more?Matthew Aslett, October 27, 2008 @ 11:32 am ET
One of the criticisms I have seen out in the blogosphere of our recently released report “Open Source is Not a Business Model” is that it overlooks a group of vendors for which pure open source is providing a tidy revenue stream.
The comments go along the lines of “what about the consultants I/my friends/relations used to set up and support their home networks/small businesses?”.
I was reminded of this when reading “Jerry Maguire on the future of the free software industry” in which Dave Neary, a consultant and member of the Gnome community, outlines his “Jerry Maguire” vision of the free software industry.
“Free software doesn’t get developed like proprietary software, why should the free software industry look like the proprietary software industry? Here’s my vision of the future: Smaller businesses. Each with fewer, happier clients. Less money. Lots of them, all over the world,” he writes.
This is, I must admit, a constituency of the open source vendor landscape that we overlooked when putting together our report, since our report was focused on enterprise software vendors, and of course it is possible for individuals or small businesses to generate decent revenue providing support for free and open source software.
What we observed from our research, however, is that as vendors target enterprise users, most of the vendors building business around open source code are using some form of commercial licensing to distribute, or generate revenue from, open source software.
In terms of the “lots of smaller vendors” idea, this represents the long tail in terms of open source revenue, and there is clearly a large opportunity out there for small vendors making a tidy living by providing consulting and support services around open source projects.
What I would question (and this is not a criticism of Neary’s vision) is whether there is anything open source-specific about this opportunity.
To be clear on what I mean by this: there is a massive ecosystem of small and one-man IT service providers that has developed around Microsoft’s software portfolio. They provide consulting and support services and fill a gap in the market by responding to opportunities that are too small for Microsoft to respond to.
Open source provides a significant opportunity for these businesses to form a similar ecosystem around open source software, not least since with open source code they have the opportunity to become real experts in the code itself, contribute to its development, and avoid the margin-cutting licensing fees charged by Microsoft.
Of course what they gain in potential margin-per-customer they lose in the actual number of potential customers (for now at least). A previous CAOS report, The SMB market opportunity found that the SMB market was unlikely to be a happy hunting ground for open source software vendors. There again, we were looking at the subject from the perspective of enterprise software vendors.
Perhaps then, there is the scope for another research report on the opportunities open source provides for service providers targeting the SMB and SOHO space. It would be interesting but that is not really our coverage area.
In the meantime I maintain, however, that while open source is an enabler in that market, there would be little to differentiate between the Microsoft support specialist and the open source support specialist in terms of the business model they employ.
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