Is open source a bubble ready to burst?
Published: 07 Nov 2005 15:30 GMT
...of SpikeSource, an open source services provider that landed investment this year. For that reason, she sees the growing interest as a healthy development, rather than a speculative bubble.
"I see serious, well-grounded interest and a realisation that if companies aren't using open source, then they probably aren't managing their business wisely. If that's the case, that means there's a huge demand for open source software and business models," Polese said.
Open source practices are firmly entrenched in the software industry. Alongside tiny start-ups, established providers from IBM to Microsoft are seeking to capitalise on open source products or replicate the collaborative approach used in their development.
But the business model has its limits, said Skok of Matrix Partners.
Skok, who led investment in open source Java software provider JBoss, said he recently passed on funding a business-intelligence start-up. One problem was that it didn't have a sizable open source community behind it.
A strong community of users can contribute bug fixes if the product is developer-oriented or provide feedback on desired features, executives said.
Perhaps more significantly, an active community of users helps sell revenue-generating products and services. By giving away entry-level products, potential customers can try out the software without a long, complex sales process. That dynamic can dramatically lower the cost of sales and marketing for a provider.
SugarCRM, for example, does not employ direct sales people, who are typically highly paid. Instead, the users of its open source product are the primary source of sales leads, chief executive John Roberts said. A smaller sales and marketing budget allows it to divert its resources toward engineering, he added.
There is a drawback. By the same token, open source companies can be slowed if an active group of customers switches to another product, said Winston Damarillo, the chief executive of software developer Mergere.
Other questions
There are questions about other aspects of the open source business
model. For example, if a company relies entirely on services revenue,
it is likely to need to have a high-volume of customers, analysts said.
By contrast, small closed-source providers can get off the ground
serving a small number of customers with expensive products.
"There are many open source business models, and...
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4 comments
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These are not right. Let the minds free.
Microsoft... Recai DEREYURT -
Recai, try to take it easy right!
Open source... volkan günaydın -
Yeah! They do their best to suck your mo... Bill Prowant -
this is childish!!
microsoft is a company that has... Yussef Ennaceur
