Over at Sandhill, Guy Smith of Silicon Strategies Marketing wrote an interesting opinion piece, which you should go and read, on the impact of Open Source on Enterprise Software:
“The old ways of the software business are dying but there is still time for even old-fashioned vendors to reposition themselves and compete in the open-source era.”
Guy’s article had some great use of Monty Python quotes (dead collector from The Holy Grail), but he went a little too far in some of his statements. It generated quite some controversy amongst the Enterprise Irregulars, a diverse group of bloggers that I belong to, which include software company executives (including Twinfield, Intalio, Satyam and SAP), entrepreneurs, consultants, analysts and investors who are all interested in the forces at work in the enterprise software industry. In the end we decided to put together a collective response, and I’m delighted to report Sandhill have published it. You can see Dennis Howlett’s contribution, or my thoughts on Page 4, as well as below:
I can understand the need for a doom laden headline to get readers attention, but quotes like “the rumours of the death of enterprise software are premature, but a near-fatal diagnosis is not” or “with little effort a commodity stack can be deployed for 95 percent of all IT buyers” overstate the case. With these dramatic exaggerations, Guy is in danger of turning off some readers before they get to the important messages in his piece. There definitely is a shift going on in Enterprise software and Open Source is an important factor, but like Software as a Service (SaaS) debate, those commentators who talk about these new approaches as being the death of the traditional model go too far, and Guy gets to that conclusion at the end of his piece when he talks about rebirth. It’s important to realise that Open Source, SaaS and the traditional licencing model are just three different delivery models that software developers can chose between, or try combine in a hybrid approach. These come together with the new economics of media and marketing provided by today’s Internet, as well the availability of low cost development resources from India, Eastern Europe and elsewhere to challenge the current Enterprise software cost and maintenance model, and consequently the old order itself.
My company provides a SaaS solution, and I can see plenty of opportunities for coexistence and cooperation between SaaS and Open Source solutions. With companies like SocialText and SugarCRM, OSS is definitely going to make an impact in the Enterprise applications field, in the way it has done lower down the software stack - for example our customer BDO is in the process of implementing 9,000 users of SugarCRM. I can also see evidence of smaller, more nimble software firms adopting the new approach. We partner with a UK company called Software Add-Ons, who are towards the end of the process of changing from developing and selling traditionally licenced software components for CRM to selling services and solutions around an open source product called OpenCRM, which they have based on an early version of SugarCRM. I know Intalio have made this transition, and their numbers are looking good. From a revenue and company valuation point of view these OSS based companies look more like services businesses, but can perform very well. The major Enterprise software firms will need to adapt to the new market conditions, and well known names may fail if they can’t change quick enough, but it’s certainly not the death of traditional Enterprise software.
