Open Source in the Enterprise: A Better Way

By David Brunton (dbrunton@plusthree.com)

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The main reason for the continued tolerance of software licensing fees for enterprise software is this: few have found a better way. While organizations are willing to pay a fair price for good technology, licensing fees for the portion of technology that gives the least competitive advantage in an organization will cease to be a competitive business model within the next five years.

The business model for deploying technology in organizations is straightforward. First, determine the business problem. Find some existing technology that approximates a solution to the problem. Customize the technology until the resulting solves the problem more completely.

There are exceptions to this process. For software that is highly commoditized (word processors, email programs, web browsers) and deployed at the edges of the network (on people's personal computers or mobile devices), it's usually easiest to go to the store, buy a copy off the shelf, and install it with very little customization. On the other extreme, there are occasionally problems that call for technology created from scratch. The latter option is expensive.

Barring either of these exceptions, an organization will usually begin the technology deployment process with a specific problem in mind. Sometimes it takes a few conversations to sort out the nature of this problem, but a good problem should boil down to something simple: make more money, spend less money, jump an externally imposed regulatory hurdle, or expand the organization's mission in some meaningful way. People have different ways of describing these problems — in terms of profit, productivity, fundraising, mission statements, etc., but the basic patterns persist. Once the problem is clear, describing an ideal solution typically starts with a statement like "we can't keep going on like this," or "what a great opportunity," or "those #*%$ regulators." Turning this first statement into a product specification ("spec") or a request for proposal ("RFP") can be a long process, but once it is complete, the question has been asked, and answering that question begins in earnest.

Salespeople likely will come through and make pronouncements about existing technology, describing all the ways that smarter-than-Einstein engineers can customize the technology to meet or exceed the ideal solution described by an RFP. Eventually, when pressed, they will attach a price to this solution, which will be comprised of four kinds of fees: customization, support, third-party costs, and software licensing fees. Customization fees encapsulate the hours spent installing, integrating, extending, and customizing the software to do what it must for the organization. Installation and integration fees cover the costs of deploying software within an organization. Suport fees encapsulate the hours spent fixing bugs or talking on the telephone when something is not working or not intuitive. Third-party cost are spent with other vendors to complete a project. But software licensing fees?

Software licensing fees are typically charged for the portion of a technology solution that provides the least competitive advantage. The part that is shared with all the other clients of the vendor in question. Software without any customization.

Enter Open Source Software

Companies that deploy Open Source Software share development and support costs with everyone else in the community of users — including such notables as Google, Amazon, and eBay. The core technologies are mature, scalable, reliable, and secure. There is a continual public audit for the code. And there are no licensing fees. Organizations are not likely to see the end of installation, integration, extension, and support costs any time soon. But licensing fees for uncustomized enterprise technology are already being forced downward, and will soon be forced out entirely. While companies who charged these fees may remember them with nostalgia, few others will. Least of all those who found a better way.

For more information on this article, or on Open Source Software solutions for organizations, please contact David Brunton (dbrunton@plusthree.com).