Open source reshaping the services market
Published: 10 Jan 2005 19:15 GMT
Over time, services companies are likely to specialise in certain open source products and areas, such as applications for specific industries, analysts say. With so many companies chasing open source revenue from services, Forrester's Giera foresees a surplus of services outfits and consolidation among them in a few years time.
Seeking services revenue is not restricted to the open source crowd. With corporate spending on software restrained, established providers of proprietary software increasingly rely on ongoing revenues, such as maintenance rather than new licence sales. In an earnings call earlier this year, Oracle CEO Larry Ellison touted the company's "subscription" maintenance business as "an extremely high-margin business."
This year's model
Professional services firms have had practices for proprietary software -- such as SAP or Oracle software -- for many years. But in open source, most service providers are still relatively young and the market is unsettled, which means that companies that partner today could become competitors in the future.
In the meantime, though, upstart open source companies are expanding their services and partnering with established professional services firms.
Last month open source database MySQL launched two service offerings through which the company's consultants work on-site with customers for a few days at a fixed price to tackle common problems. The new services for performance tuning and migrating from other databases are in response to business customers looking to beef up their internal skills in open source, said Zack Urlocker, vice president of marketing at MySQL.
SpikeSource, which focuses its services on ongoing maintenance and administration, is partnering with systems integrators for applications development, including offshore outsourcer Cognisant. Many offshore systems integrators are developing open source services practices, Polese said.
"We're going to see medium-size and larger systems integrators develop open source practices because it's a top-level agenda for CIOs who want to wring more from their budgets," Urlocker said. "But CIOs don't want to be on the bleeding edge adopting technology without having expertise."
Like MySQL, open source Java server software company JBoss provides support services for the software written primarily by its employees. That model stands in contrast to other services firms that may service a range of different products.
JBoss founder and CEO Marc Fleury said that his company's support structure will ultimately give it an advantage over others crowding into the field. He said scaling up its support offerings so that the company can handle many clients with large-scale applications is one of the biggest challenges the company faces.
"Customers want to know their provider is viable," Fleury said. "Getting support directly from the vendor who wrote the software is a better model... What's the credibility [of others]?"
Because of the belief in the potential legal problems associated with open source software, enlisting a service provider for open source projects may be more important than in the proprietary world because of risk, said Forrester's Giera.
Apart from potential intellectual property issues, open source can pose risks from version incompatibilities among different products, training, security and the like. Enlisting a third-party provider is a time-proven method for mitigating risk, she said. The buzz of activity also underscores how software providers, ranging from Red Hat to IBM, will need to compete increasingly on the quality of their services, rather than on a checklist of software features.
"One of the biggest frustrations on the part of IT with the vendor-dominated industry is that you had over-engineered products with so many features stuffed into them that 80 percent of them were not used," Polese said. "With open source, you strip down the code and use exactly what you need."
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