Taking risks is not always in the best interest of a CIO. That’s understandable. But a risk averse nature also limits innovation and cost efficiency in many cases. If the old saying “CIOs never get sacked for buying IBM/Oracle/Microsoft” really still holds true, even during the economic crisis we are in, then it can be assumed that many IT organization leave out cost saving potentials. I have been in situation where CIOs rather went for multi million Microsoft Sharepoint projects than to take a bit of risk and work with well established Open Source alternatives. And even governmental organizations in most cases prefer the office suite from Microsoft instead of betting on OpenOffice.org, despite of the millions of license dollars to be paid. From a technical point of view this can’t really be explained. While both products may have their advantages and disadvantges, the usual needs of a government organization can certainly be fulfilled by both commercial and Open Source solutions.

Two things are to be added here: First, Open Source technologies have improved a lot over the last years, they are certainly “good enough” for most use cases. Secondly, giving the tough economic time, focusing on spending money on true innovation and fostering the local IT services industry could be a good idea, especially for government organizations.

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When discussing with large enterprises why they don’t see disadvantages of commercial proprietary software solution compared to Open Source they may point to an “escrow agreement“, a contract that ensures that they have access to the source code if anything goes wrong (provider going bankrupt, for example). So, in the worst case, an enterprise could take the source code and continue to work. But that’s theory. I have never seen a company making any use of an escrow agreement. And, different to Open Source, the code transferred under the terms of the escrow agreement, hasn’t been written with the idea of other people reading and maintaining it. Very few companies probably have the right people and skills in house to make use of the code inherited. So, while an escrow agreement signals “safety”, in reality it’s most of the time worthless.

Open Source on the other side is very different. If an Enterprise asks a provider to deliver a software application with the intention to be published as Open Source code this ensures a number of things:

• The code (hopefully) is written in a way that other people can read and understand it
• The license chosen will enable the re-use of other open source projects and therefore limit the effort and cost of development
• Input from a potential community will increase the quality and provide input for further enhancements
• Processes and procedures inherited from other Open Source projects can enable higher software quality

So, even when enterprises sign an escrow agreement and can enforce access to the source code, they will always profit much less than when going the Open Source route.

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Software as a Service continues to boom. Salesforce.com and other well known providers have been successful, even large companies see rented and externally hosted software as an option. The advantages are clear. (Almost) now upfront investment, monthly/yearly payments, reduced complexity and continuous enhancements and developments to make the solution better. This sounds like paradise. However there are some drawbacks too. Data needs to be stored externally, changes cannot be made so freely as if you own the software, any investment is sunk cost, little control over the software and sometimes issues with integration with existing (internal) systems. These disadvantages can be significant or not, depending on the situation a company is in. Sometimes the legislation may also have an impact.  And, to not forget, SaaS often is not cheap, numbers are typically user based and can stack up quite impressively.

So, is Open Source an alternative here? Maybe. SugarCRM has agressively pitched against Salesforce.com and was able to win many former Salesforce.com customers. OpenOffice can be an alternative to Google apps or other internet based office suites. OSCommerce or Magento can be alternatives to rented online shops. If enterprises go the Open Source path they are well consulted to build some internal knowhow or to hire professional help. Done correctly though costs of Open Source solutions can be competitive with SaaS offerings.

Regardless of what enterprises decide the probability that they will be using Open Source software - whether internally or as assembled components in SaaS offerings - is big.

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RedHat has published an Open Source Activity Map to illustrate how different countries differentiate in the use and adoption of Open Source. This is quite an interesting tool to look at and when you compare the different countries you can see a number of tendencies:

The European countries are still taking the lead with France being the most active, Spain and Germany following. Most of the top 10 are European countries. To a certain extent suprising it position 6 for the UK.

The US, despite its size, is only reaching the 9th rank in terms of open source activity, China 15, India 23.

Looking at the raw data it’s however worth a discussion how representative the results are. Linux - makes sense taking the RedHat view - seems to be to a certain extent equalized with Open Source. What I really liked about the analysis is the nice mash up with Google Maps and the ability to get an overview quickly thanks to Ajax and graphical visualization.

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The announcement today that Oracle buys Sun is heating up discussions we had in the past. Is it good when large commercial vendors take over Open Source companies? Now, in this case, Oracle takes over a hardware vendor, but with Java, Glassfish and MySQL to name just a few, Oracle also “eats” a number of very influential and important Open Source projects. While I was positive about Sun taking over MySQL in the past, I am less sure whether I like this new situation with the largest commercial database provider taking over the largest Open Source database. MySQL has taking inroads into Oracle’s territory for quite some time and I am anxious that with this acquisition Oracle will try to marginalize MySQL. Now it also fires back that MySQL owns all intellectual property of the database management code, so forking will not help us as a weapon.

What will happen with all of these other Open Source technologies Sun owned and maintained? Glassfish is a direct competitor of BEA (or the former BEA app server), Sun’s integration technology compete with similar technologies from Oracle. We haven’t yet seen a lot of committment from Oracle to nurture the Open Source projects in its possession. Let’s hope it’s different this time.

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There have been a number of discussions lately on whether enterprises care whether what they use is really open source (EOS Directory), whether they are ready to contribute (Matthew Aslett, 451 chaos theory) and on how companies can design their revenue model (e.g. the open core thinking). Having talked to many enterprises over the last months and years they have their own perspective on this. Most enterprises want to work with long term viable partners, they want to use software that is still there in a couple of years and many want to purchase some sort of an insurance protection to make sure that if things go wrong they have access to help and support. The whole commercial software movements and the related VC funding is a consequence of this. However, not in all cases this lead to the best solutions and approaches. Many enterprises prefer software products that have a large community supporting it. Commercial open source software however often leads to models with fairly small companies doing the core development of a specialized product, the community being reduced to a testing and bug reporting role. Enterprises also prefer to have full access to the source code, even if they never want to use it themselves. And enterprises love software that can be supported by a number of different providers to create a competitive marketplace. Software from the Apache Foundation scores well along these criterias. VC backed open source companies forced to make money and therefore protect and monetize their IP have more difficulties to live up to these mentioned enterprise criteria. Seeing the constant changes in business models, license models and go-to-market approaches, companies out there are still looking for the recipe for success.

There are a number of ways to make money with open source and combined with this there are a number of trade-offs to make and decisions to take:

• Should the core of the product be open source or commercial?
• Should extensions of the product be open source or commercial?
• Should you build a slim more consumer oriented version as open source and an enterprise oriented feature rich version as a commercial software?
• Can you monetize “management services”, such as packaging, testing?
• Can support services be provided for money?
• Do users need training services and are ready to pay for it?
• Can professional services such as product consulting, implementation/integration support be marketed?

When a company wanting to make money with open source has to answer the questions above, then there always have to be considered some consequences in key areas of the business. How will potential partners (needed to bring the software to the market) accept revenue models, how will a community react, how will potential customers cope with it? And does a decision restrict the company in the way other software components can be integrated or used?

The ideal scenario for Enterprises might be a company with a widely open product (core and extensions) and an attractive but not mandatory services portfolio on top. Ideally the product is able to attract a large community and the processes and procedures applied ensure a high standard for  software quality and a manageable release frequency. It is obvious however that with such an approach growth and expected multiples are less attractive for investors than IP and product centric companies. We have even observed that a number of companies have moved away from the ideal scenario after they received VC funding and are now protecting and monetizing more and more of their IP. Which, in some cases, makes them a less attractive choice for enterprises.

The continuous struggle on how to make money with something that is perceived as being free will continue. We most likely will see new models and trials and sort of “thanks” to the current economic conditions we well probably also see more humble approaches that may actually please enterprises much better than some of the marketing oriented open source misuses that we have observed in the market.

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There’s a pretty stable definition out there what Open Source software is all about and what license models should allow for and what not. Despite of that Enterprises seem not to care too much about this.

For many enterprise using Open Source support and services are more important than the true nature of software, it seems. Often the prefer the commercially licensed product with the attached subscriptions to be on the safe side. But this can mean that the software they use isn’t Open Source at all and that changes and modifications they do might not even belong them.

A lot of Open Source software today is consumed as Software as a Services (SaaS). In this case nobody  cares whether the software that is the basis of the application is Open Source or not. And this makes sense, because in this case a service is purchased not a software.

Many customers also buy appliances instead of  software and hardware separately. Again, nobody needs to worry about what’s in the box, it’s purchased as an integral product.

And, when Enterprises buy commercial software products, a lot of it today is assembled from Open Source components. But there is no need to care about this as what companies buy is the packaged software.

So, four cases, but only in one of them the nature of the software is critical. There hasn’t been enough push back from Enterprises to force commercial open source companies to come up with Open Source compliant commercial license models. Some of the problems can be resolved in individual negotiations, but that’s cumbersome. So, what would be preferrable are license models that allow the commercial software company to make money while protecting as much of the Open Source nature of the base software. Let’s see what new models we’ll see over the next months and years.

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 I just reviewed the list of the most active projects on Sourceforge.net during March 2009. It’s quite telling.

Of the top 12 five of the projects are business solutions. You find the usual suspects like OpenBravo ERP or ADempiere, but there are also less known representatives of this category such as PostBooks ERP, WebERP or OrangeHRM. For the other seven projects it can be said that it’s the usual mix of tools, gaming components and frameworks.

Here’s the list of the top 12 projects:

1. Notepad++ (editor, tool)
2. Openbravo ERP (business solution, ERP)
3. ADempiere ERP Business Suite (business solution, ERP/CRM)
4. ZK - Simply Ajax and Mobile (Ajax Java framework)
5. Zenoss Core - Enterprise IT Monitoring (Infrastructure, monitoring tool)
6. MediaInfo (tool/component, reads meta data from multimedia files)
7. PostBooks ERP, accounting, CRM by xTuple (business solution, ERP/CRM package)
8. Mumble (tool/component for gaming)
9. phpMyAdmin (infrastructure, tool to manage MySQL databases)
10. ffdshow tryouts (tool/component to view multimedia files)
11. webERP web-based ERP  Accounting (business solution)
12. OrangeHRM - Human Resource Management (business solution)

Activity isn’t the best indicator for Enterprise Readiness, but it certainly displays the traction of a project and to a certain extent the ability to survive. So it’s a good idea to look at the activity ranking of software deployed in enterprise IT.

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