Two Predictions for Open Source Software in 2009

Prediction #1: The adoption of open source will accelerate in 2009.

Open source is on a tear. It's being adopted more quickly and more widely than ever before. Evidence: In November, Gartner announced survey results that found that 85% of enterprises are already using open source software, and the remaining 15% plan to start using it soon. (And my guess is, a good portion of that 15% are already using it, but management doesn't know.)

On the Optaros blog, Bruno von Rotz offers a good summary of what's happened in 2008 in the world of open source, and a lot of it is encouraging news for open source vendors (sales growing faster than expected, more rounds of funding, etc.).

With companies in all industries hitting the pause button on spending, open source should prove especially attractive in 2009. If you're a project manager, and you're being asked to do more with less or even with practically nothing, you're likely to take a good, hard look at open source, at least for a pilot project, even if you've had qualms about the maturity or stability of open source products in your area of expertise.

Earlier this month, Gartner analysts advised their clients to prepare two IT budgets: one with a 2% increase in spending, the other with a 20% decrease in spending. If your IT budget really does get slashed by 20% or more, you'll have little choice but to consider software products that offer a basic version for free, and whose paid products have prices that will turn out to be highly negotiable.

Bottom line, then: 2009 will create many new opportunities for open source vendors to get their feet in the door.

Prediction #2: Many open source vendors will continue to struggle, and some well-known vendors will shut down.

Unfortunately, getting your foot in the door is no guarantee of success. Despite the impressive adoption of open source and the continued rounds of funding, many open source vendors are struggling to make money—in some cases, even after receiving many tens of millions of dollars of VC investments. The sad truth is that even some of the well known names in open source—companies with good products and impressively high numbers of downloads—are having trouble converting those downloads and installations into a viable business.

Part of the problem is that the free version of products are often good enough to satisfy customer requirements. If customers don't have to spend money to get features, and if the product is reliable enough (or not mission-critical), customers won't spend money on licensing and support.

Part of the problem is that while the download numbers are growing, the company has yet to find a repeatable sales model for converting downloads to sales; end user requirements are simply too varied to build a profitable business.

Part of the problem also is that free has to compete with cheap (or at least comparatively inexpensive). On the Open NMS blog, Tarus Balog recently pointed out that open source network management products have to compete with low-cost, easy-to-use products like Solar Winds. He's absolutely right. And Solar Winds has been on its own tear for many years, now. Another up-and-coming NMS platform is AdventNet's ManageEngine, which knits together network management and service desk functions into an easy-to-use, highly affordable whole. AdventNet now has tens of thousands of paying customers for its network management products—an enviable achievement from the point of view of many open source vendors. If price is what's driving you to open source, and you're not particularly interested in having access to a product's source code, you may end up choosing one of these highly affordable non-open source alternatives instead.

Another part of the problem with open source companies comes down to simple execution: building what customers really want rather that what the core development team feels comfortable with (especially if the company is VC-backed and has real targets to hit); solving customer problems promptly and effectively through support, documentation, and training; marketing well; etc. Most open source companies are developer-led organizations, and some (decidedly not all, but some) developer-led organizations fall into the trap of expecting their potential community to share the internal team's own predilections and priorities. (If you hear an engineering manager saying something like, "That should be reasonable, it shouldn't be that hard for the customer to figure out," stop the design discussion right there: customers should have to figure out almost nothing.)

A few vendors may find financial salvation by converting or substantially augmenting their open source business with a SaaS business and close deal that are SaaS subscriptions rather than on-premise software licenses. But for other vendors time will eventually run out. Investors will shift new funding other more viable ventures. Staff cuts will paralyze progress. Projects will be left to linger on SourceForge.

This is why I expect 2009 to be a mixed year for open source vendors. It will be a year of unprecedented opportunity for most, and a year of hard reckoning for some.