Open source, Web 2.0 gain appeal as IT budgets shrink

San Antonio-based CPS Energy, the largest municipality-owned gas and electric company in the country, needed to get a better grip on its budget and its budgeting process. Since CPS Energy was an enterprise SAP user, more SAP AG software was the obvious and lowest-risk way for CIO Christopher Barron to go.

Instead, he opted for software from a far lesser-known vendor at a far lower price -- about four times less.

Similarly, CIO Jamie Kutzer had considered buying "a big-name intranet package" from a top-tier software vendor as the tool to drive online collaboration across Allied Building Products Corp.'s 200 branches.

"But it was just too costly, too big -- and frankly, I don't know if we were ready for the big leap," Kutzer says. "So we're using smaller, lighter and cheaper technologies from companies that I had never heard of but that my Web services team knew about. They provide a much, much lower cost of entry."

As the ongoing recession continues to choke IT capital spending, buying integrated software from big-name vendors is on the way out -- fast. What's in is "IT lite," which includes Web 2.0 technologies and services that are cheaper and easier to implement, mix and match. It also includes software from no-name, up-and-coming vendors; open-source tools and applications; and an ever-widening variety of tools for mapping, chat and more that are available for free on the Internet.

The trend makes perfect sense in a form-follows-function kind of way, says Vinnie Mirchandani, a former Gartner Inc. software analyst and founder of Deal Architect Inc., a consulting firm that helps large corporate enterprises evaluate software and negotiate contracts.
Status of Web 2.0 Technologies

* Implementing/implemented: 47%
* Interested/considering: 25%
* Piloting: 13%
* Not interested/don't know: 16%

Base: 735 North American companies; percentages don't add up to 100 because of rounding.

Source: Forrester Research Inc., 2008

"If you and I can buy storage at 10 cents a gigabyte, why are corporations paying [a] hundred times as much?" Mirchandani wrote in a recent blog post. "If at any given time, millions of consumers are talking to each other around the world on Skype for free, why are mobile companies charging you exorbitant roaming fees? If anyone can call the Geek Squad and get a one-time PC repair visit, why is your desktop outsourcer not charging you on a per-usage basis, rather than some monthly charge?

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