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How Open Source Has Been Good for Software Companies

  • August 28, 2002
  • By Sanjay Murthi
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Introduction

When most of us think of software companies, we think about the big 800-pound gorillas in the space—companies such as Microsoft, Oracle, IBM, SUN, and so on. But there are many small software companies out there. Many are thriving in the shadows of the giants.

Lots of folks have suggested that the open source movement will negatively impact software companies by providing free versions of their products to consumers and companies. Some of the material even made one wonder if any software company would survive and whether software company employees should be looking for new careers!

However, I am glad to report that things are not as they seem. After working with many smaller software companies, I found that open source has actually been a boon for many of them as well as their bigger brethren.

An Open Source Positioning Strategy

Why is this a boon? It turns out that many smaller software companies build niche products. Often these products have no real open source competitor. If there is an open source version of their product, frequently it has many features missing and customers would gladly pay to get a full-featured product.

The most successful open source products are horizontally targeted at a widest possible audience—for example, Web browsers, operating systems, editors, utilities, and so on. Open source solutions are also more infrastructure support- or tool-oriented. Many are frameworks for doing essential application plumbing such as Apache Struts, XML parsers, logging frameworks, and so on. The reason for this is that many have risen out of developers being dissatisfied with what is commercially available and turning to building their own solution that they need for a larger project.

Being naturally generous souls, they in turn freely publish this code and make it available to all. It turns out that the biggest consumers for such work products are other developers. Many of these developers work at smaller software or software-based product companies. Small companies are usually short of money and hierarchy. This makes it very easy for small company developers to try out and use new tools. No hierarchy means that there is no corporate mandate that everyone use tool X or tool Y only.

Because there is little money available, small company developers find it hard to get the whiz-bang development tools and infrastructure products that cost the earth. Even spending a thousand dollars per developer is big money in many small companies. Putting down thirty thousand dollars for an application server to do development on will never fly! It is no wonder that developers in such companies actively search for open source solutions that fit their needs.

Exploiting the Open Source Strategy

The open source movement has thus provided a cornucopia of tools and infrastructure products to many smaller companies. This is not to say that big companies are not averse to using them, too. Recently I was surprised to see many open source products packed with Rational's XDE product! Many small companies find it very cost effective to start building products using open source tools and then move onto commercial implementations once they have proved the concept.

For example, at a company I once was at, we started building a commercial product using the Apache Web server and the Resin servlet engine. Once the product proved feasible and we had customers in place, we ported the product over to BEA's Weblogic server. This proved an extremely cost effective way for us to build this product without having to worry about spending thousands of dollars on tools that we would not ultimately use.

Other folks I know have started off using products like MySQL, JBoss, and so on before migrating to commercial solutions. Many vendors of commercial products have understood this and now offer free or nearly free developer licenses. The logic is that the earlier you catch them, the less likely it is that developers are going to investigate other competitive products! This is another unexpected benefit. It has forced infrastructure and tool vendors to compete with open source products. In the old days, this sort of deal for developers was really uncommon.

Microsoft was probably one of the few vendors to bundle in a host of goodies with their operating system licenses and low-cost subscription programs. This is one of the reasons there are so many products that run on Microsoft's Windows platform. This has helped Microsoft because customers now have a wide array of solutions available to them, but only on the Windows platform! You could say that the open source movement has effectively made creating solutions for other software platforms such as Linux and Java much more feasible. This will naturally make them much more competitive to Microsoft in the near future.

I see this as one of the exciting benefits of the open source movement. By providing alternatives, it fosters competition that often dies after a particular vendor gets a large enough market share. Unfortunately, in the software business, the vendor with the largest market share is in a great position and normally succeeds in driving out all competitors or making them marginal.

Summary

Personally, I think that now is a great time to be an independent software vendor (ISV), especially if your products have no open source competitor! The many tools and products available both from open source and from commercial vendors forced to lower their prices makes it much easier to create and build new products. Open source has been a boon for such software vendors and their customers. Products are built on much more stable and well-known tools and technologies. They also are more cost effective because, in many cases, there are fewer royalty fees to pay.

Another piece of good news is that many companies are trying to give back to the open source movement. Examples are tools and libraries from IBM, Java code from SUN, Linux code from Red Hat, and so on. I believe that many companies that do not have the biggest market share in a product area have started to realize that having an open source solution can be a means of survival. Without an open source solution, the company that has the largest market share can effectively steamroller all competition in a segment. With an open source solution, its competitors can retreat to providing add-ons to the open source solution. They can survive and possibly even thrive since creating the add-ons is less expensive than trying to build and support a full solution like the market leader.

So the good news is we can expect to see more commercial product vendors contribute to open source movements. This give and take should benefit all of us.


Copyright © 2002 Sanjay Murthi

Author Information:

Sanjay Murthi is President of SMGlobal Inc. He has over fourteen years of experience in the software industry in a variety of roles and responsibilities. He now helps companies to review and improve their software definition, development and delivery process. He can be contacted at smurthi@smglobal.com.





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