The Open Source Threat
Most software vendors are unprepared to face the commoditizing threat of open source software. Here's what they need to know to compete.
By Bruce Guptill, Saugatuck Technology
Oct. 19, 2007
Open source adoption is picking up steam - and software vendors need to pay attention. The findings of Saugatuck Technology's new open source study lead us to believe that the majority of established, traditional software vendors are unprepared for the disruptive impact of open source software on their markets and business models. Open source alternatives threaten to both compete against, and commoditize, much of today's current, core business software portfolios.
As a result, traditional software vendors of everything from enterprise applications to tools, face significant erosion of installed bases and new business. Open source software's presence will increase from approximately 10 percent of key enterprise on-premise software in 2007, to between 15 percent and 20 percent by 2010. Most vendors will face significant declines in profitability as well. Open source alternatives might not yet be eating traditional vendors' lunch, but are gaining their just desserts.
Given the current trends of tightening software vendor operating and profit margins, and a relative lack of new development work by many traditional software vendors, this is going to be a significant problem for them - and for their shareholders. Here's what software vendors need to know about the open source phenomenon and what they can do to counter the threat.
Survey Shows Enterprise Adoption Growing
Why is this happening? Open source is a much greater, and more influential, user enterprise presence than most traditional vendors have noticed. Open source software presence can be likened to a condition that people have, but haven't necessarily acknowledged or been made aware of yet. For example, maybe you look in the mirror every day, and notice a few gray hairs peeking through the rest - but a family member who sees you once a year might exclaim how gray you look compared to last Christmas.
Open source's presence is following a similar path, with traditional software vendors playing the part of the graying individual who's aware that things are changing, but not certain of the extent.
Figure 1: User Enterprise Open Source Adoption and Value - 2007
Source: Saugatuck Technology Inc. 2007 User Open Source Survey, n = 200
According to Saugatuck's latest research* with 200 user IT and business executives, open source software currently accounts for as much as 10 percent of user enterprise software worldwide. A quarter of user executives tell Saugatuck that they always consider and evaluate open source alternatives when planning to acquire new systems, applications, databases or software tools. Another 40 percent of executives say they "Frequently" consider open source alternatives for the same. Fifty percent of the 200 executives surveyed tell Saugatuck that open source software is widely used within their enterprises. And 60 per cent state that open source software delivers significant business value to their enterprises.
* Saugatuck 2007 open source user research survey; n=200 user IT and business executives. Results published in October 2007 Saugatuck research report, Open Source: The Next Distruptive IT Influence, available via www.saugatech.com/395order.htm'
As a result, traditional software vendors of everything from enterprise applications to tools, face significant erosion of installed bases and new business. Open source software's presence will increase from approximately 10 percent of key enterprise on-premise software in 2007, to between 15 percent and 20 percent by 2010. Most vendors will face significant declines in profitability as well. Open source alternatives might not yet be eating traditional vendors' lunch, but are gaining their just desserts.
Given the current trends of tightening software vendor operating and profit margins, and a relative lack of new development work by many traditional software vendors, this is going to be a significant problem for them - and for their shareholders. Here's what software vendors need to know about the open source phenomenon and what they can do to counter the threat.
Survey Shows Enterprise Adoption Growing
Why is this happening? Open source is a much greater, and more influential, user enterprise presence than most traditional vendors have noticed. Open source software presence can be likened to a condition that people have, but haven't necessarily acknowledged or been made aware of yet. For example, maybe you look in the mirror every day, and notice a few gray hairs peeking through the rest - but a family member who sees you once a year might exclaim how gray you look compared to last Christmas.
Open source's presence is following a similar path, with traditional software vendors playing the part of the graying individual who's aware that things are changing, but not certain of the extent.
Figure 1: User Enterprise Open Source Adoption and Value - 2007
Source: Saugatuck Technology Inc. 2007 User Open Source Survey, n = 200
According to Saugatuck's latest research* with 200 user IT and business executives, open source software currently accounts for as much as 10 percent of user enterprise software worldwide. A quarter of user executives tell Saugatuck that they always consider and evaluate open source alternatives when planning to acquire new systems, applications, databases or software tools. Another 40 percent of executives say they "Frequently" consider open source alternatives for the same. Fifty percent of the 200 executives surveyed tell Saugatuck that open source software is widely used within their enterprises. And 60 per cent state that open source software delivers significant business value to their enterprises.
* Saugatuck 2007 open source user research survey; n=200 user IT and business executives. Results published in October 2007 Saugatuck research report, Open Source: The Next Distruptive IT Influence, available via www.saugatech.com/395order.htm'
