A blog for the enterprise open source community
Economy down, Red Hat and open source upJay Lyman, March 26, 2009 @ 5:48 pm ET
Red Hat had an impressive quarter, particularly considering current economic conditions, and the company’s CEO spent much of the week talking about the good times for Red Hat and open source, largely as a result of bad times in the economy, although Whitehurst also sees improvement.
It does seem that open source in general stands to gain from the down economy. While I’ve also talked about the difficult economy as a double-edged sword, the cutting comes mostly at the expense of commercial vendors. For open source software in general, it seems the bad economy is definitely good.
We had an interesting discussion about this among some 451 Group analysts and clients, including open source-focused CEOs and VCs this week. Colleague Brenon Daly pointed out Red Hat’s impressive 18% revenue growth in the quarter compared to Oracle’s relatively flat quarter, adding it’s hard to argue with the numbers. This is further reinforcement of the value of open source software and particularly the value of communities, which may not translate to dollars today, but can certainly mean value in the future — whether in conversion to paid use, contribution or simply feedback on the software. This value is also poised to grow as conditions improve.
Some of our recent roundtable discussion also turned on the budgeting and spending, or lack of, from business customers and whether we see a difference in larger, enterprise customers versus smaller, mid-market and smaller operations. We do some differences, but there is no question every size organization is re-examining its IT budget, approach and future. For the smaller sized customers, the IT has always been more tactical than strategic, so while not as lucrative as larger customers, these clients truly need to spend on IT and support to stay running. In the enterprise, even larger, sophisticated organizations — such as those in financial services, where customers have been willing to pay practically any price for performance — there is now greater demand and need for efficiency and cost-consciousness.
The strength of open source during current adversity also illustrates that it has largely passed the test and is now viewed as ready for enterprises and business users of all sizes. These customers have found open source software quality adequate at the least and progressive and innovative in many cases. Now that organizations of all sizes are searching for other places to maximize efficiency and minimize expenses, they are confident that open source software is an effective tool.
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