Open Source Commentary from Navica's CEO, Bernard Golden

In This Issue

• Open Source in the Post-Proprietary Era

• Funniest Visit to Navica Website in 2005

• Navica News

Open Source in the Post-Proprietary Era

The past few newsletters have focused on the impact open source will have on the existing proprietary software industry as well as how IT organizations will need to modify their skill sets and processes to successfully use open source.

This newsletter turns to what will happen to open source software itself in the post-proprietary era. Open source will achieve great strides as it stands today; based on its success in its current guise it will become part of the product offerings of incumbent vendors, migrate into new territory, and even be used as the basis of new types of business offerings.

As an introduction to the ways open source itself will develop in the post-proprietary era, a review of the conditions we'll see in the era is in order:

• Margins will fall on proprietary software as competition from both open source and other commercial vendors chews away at incumbent vendors.

• In order to keep profits and stock prices up, incumbents will cut costs wherever possible. This includes converting services from free to for-fee as well as the old-fashioned strategy of cutting headcount. Commercial software will begin to resemble the DIY of open source.

• Commercial vendors will flee the infrastructure space as open source invades it. The capital markets will force vendors to move from low-margin offerings. Open source will dominate infrastructure software; any remaining proprietary vendors unable to flee will suffer chronic low profitability.

With that review of the post-proprietary software era, where will open source go as it builds on its current acceptance?

Free Software Becomes an Incumbent Vendor Strategy

Commercial vendors have made some reluctant efforts to blunt the impact of open source in their markets.

For example, BEA offers a product/service package designed to migrate users from Geronimo-based development systems to production BEA implementations. This offering seems like the sort of wishful thinking indulged in by threatened incumbents in every market – the “when you're ready to grow up, we'll be here” sort of thing.

As another example, Oracle recently announced a version of their product, available for free download and use. However, it is limited to a total database size of 4GB, which severely limits its likely uptake. Again, a timid and inadequate response to a looming threat.

However, this is the year that incumbents will truly have to come to terms with open source competition. Simply put, they will have to respond or cede the preponderance of growth in their markets to open source software.

How will they do this? By creating real, fully functional, free offerings. One shouldn't expect them to go whole hog and make their source code available. That's a death threat to their business. More to the point, however, most potential users are not insistent on source code availability; they're just looking for easier, cheaper ways to get their job done.

So what will these offerings look like? Taking Oracle as an example, a potential offering would be something like they've already done, but with a useful configuration. Perhaps a 50 GB database size. Or a product that's free on up to two processors.

Vendors will hate going down this road, but won't have a choice. Better to cultivate potential users with upsell potential than to be stranded with a no-growth user base. The challenge for them, of course, will be to determine where to draw the free line: too low, and users won't be tempted by the offering; too high and the vendor will leave money on the table, not to mention perhaps crippling their business.

Open Source Migrates Into New Territory

It's clear that open source will find a home in the area of traditional infrastructure: databases, application servers, web services, and so on. Over the next year we'll also see open source begin migrate into previously unexplored territory, driven by increased maturity of the development process, funding activities by the investment community, and new strategies by potential open source users.

First, we'll see open source push beyond the frontiers of its traditional home in the IT infrastructure. In the past, because most open source was developed by system administrators or hard core programmers, the products tended to be aimed at a user base similar to the developers. Over the past couple of years we've seen open source push its way up the stack into applications and this trend will grow significantly. To offer one example, a nascent open source web application called WebHuddle offers remote presentation capabilities. Call it a WebEx killer, if you like. WebHuddle certainly doesn't fit the profile of a traditional open source product. It is the creation of a developer who came out of the e-learning software business. Look for more of these products to show up in non-traditional places.

Second, we'll see lots of new companies started that deliver software in an open source fashion. The venture capital community has recognized the exhaustion of the enterprise software model, and has begun to systematically fund open source startups in every existing enterprise software sector. In the past year, we've seen reporting, business intelligence, virtualization, and a host of other areas invaded by VC-backed open source entrants. Look for more of these, in more areas, next year. A question remains for many of these companies as to how they'll build a sustainable, high-margin business, but there's no question the funding tap is freely flowing for open source companies.

Finally, we'll see the rise of a new kind of open source development. Instead of relying on self-organizing development teams or venture-backed startups, these new development organizations will be deliberate cooperatives put together by end user organizations. An early example of this is the Avalanche Technology Cooperative. The past year has seen the founding of a number of open source projects being developed by different governmental agencies – one focused on corrections, another on Help Desk functionality, and a third for human services.

Look for private sector cooperatives focused on verticals to get underway this year. Many verticals are incredibly poorly served by the incumbent vendors. These private sector cooperatives may be formed by end user groups, or may be started by private companies that serve as seed organizations to get the effort going. Either way, galvanized by the examples of successful open source applications, open source verticals will make their entrance this year.

Open Source Enables New Business Visions

One of the most striking things about open source is the way it makes computing far more cost-effective. There are entire segments of the economy underserved in terms of software capability merely because they can't afford enterprise pricing. This is even more true globally. Within developing nations only a thin veneer of companies can afford developed nations-priced software; the rest of the economy suffers with little or no software infrastructure. Open source will change that. The recently announced OLPC project (one Linux-based laptop per child, delivered at a $100 price point, first-year quantity 100 million) shows how open source will make a dramatic impact on these societies.

Open source will allow these underserved organizations to become fully software-enabled. In the next few years there will be a flowering of business-oriented open source applications targeted toward developing nations. It the not-too-distant future, every business throughout the world will have a fully-functional software stack – in other words, there will be a global ubiquitous software infrastructure (USI). Once USI exists, the stage is set for the development and growth of entire new businesses, previously unimaginable.

A glimmer of what USI makes possible is Skype. While it is an end-user oriented application, its growth and the global free communication it made possible offers a vision of what USI enables. An obvious area for new business opportunity is supply chain. It can fairly be said that the supply chain gets broken when it moves into the interior of developing nations; with everyone having access to communicating software supply chains can be connected end to end. This is just one example; it remains to be seen what other applications are made possible by USI. However, it's clear that open source opens up entire new business possibilities

Takeaways

This year will see open source break into the mainstream of IT. Due to its advantages and increasing acceptance, it will become the default market entry method for software. Based on this, it will evolve beyond its current purely technical infrastructure roots. Look for open source to:

• Force incumbent vendors to significantly modify their offerings to deliver much better value for money

• Be created by cooperatives seeking higher-quality, lower-cost vertical solutions

• Allow historically underserved businesses and developing nations to develop software infrastructures as good as enterprises located within the developed world; this will lead to a ubiquitous software infrastructure (USI) that will enable new categories of businesses to flourish

Funniest Visit to Navica Website in 2005

A visit from Microsoft via a Google (!) search with the search term: “open source will ruin software.” A complete Weltanschauung in one brief interaction.

Navica News

You can hear me speak at these upcoming events:

January 26, 7:30 p.m.: BayLISA/Google. BayLISA will hold a special meeting at Google. Presentation topic: “Open Source @ 20: A New Game with New Players." See www.baylisa.org for more information.

March 17, 8:30 a.m.: SDWest, Santa Clara Convention Center. Presentation topic: "Open Source ROI: Achieving the Promise of Open Source." See www.sdexpo.com for more information.

I recently started an open source blog for CIO Magazine. You can see it here.