December 17, 2008, 7:28 PM — In the last major economic downturn, Linux established itself as a widely-accepted enterprise operating system, benefiting a lively ecosystem of vendors such as Red Hat and Novell. The return of tough economic times puts the open source alternative again front and center, this time with focus on databases and higher-level software applications.
I believe we've entered another era for open-source companies of all stripes. IT decision makers need to fight the financial crisis and they need a more efficient solution for critical enterprise system and IT needs.
As IT costs grow and the economic crisis puts pressure on global IT budgets, open source becomes irresistibly attractive to developers and IT decision makers who are being asked to do more with a whole lot less. Meanwhile, proprietary vendors react by increasing license fees by 15 percent to 45 percent, they continue to lock-in their customers, and they take away independence regarding choice and flexibility across the enterprise technology infrastructure.
That's why open-source solutions are more attractive than ever.
During the last economic downturn in 2001-2002, open-source usage and adoption was on an upward curve. Red Hat, for example, began winning large customer accounts that are now the backbone of their customer base. CIOs and CTOs were on the lookout for innovative ways to save costs both from a technology and people perspective, and open source was a great solution. Just like it is today.
Red Hat began to see the fruits of their labor in late 2002; the company grew revenue 14 percent for the year and that growth improved to 38 percent and 58 percent in 2003 and 2004 respectively. Given the timing of subscription revenues and long sales cycles, it is not hard to conclude that during the 2001-2002 economic downturn, large corporations made the decision to switch to open-source technologies. It also explains why Novell paid $200 million for Suse Linux in late 2003, which at the time, was roughly 20 times its revenues.
Just as in the last downturn, every IT decision maker today is faced with increased license and spiraling support costs for complex proprietary solutions. But business demands critical new capabilities at lower costs. Now is the time for IT leaders to make a loud and clear choice: accept the extraordinary expense and "lock-in" of proprietary vendors, or take advantage of open-source's cost-effectiveness and freedom.
With freedom also comes faster innovation.
My experience at the New York Stock Exchange (NYSE) was that we could innovate more rapidly with open source through rapid technical collaboration and by eliminating the long legal and contractual delays of the proprietary software model.
An open-source user who has worked with both Linux and Ingres agrees. Alan Nidiffer, VP and CIO at C&K Market, a West Coast grocery chain, recently explained why open source offers more innovation and faster development times. According to Nidiffer, the set release schedules of traditional software companies slow down innovation, whereas open-source improvements come at any time. He notes that innovative features can even come from software developers outside of his company; they have fresh ideas on how to continuously improve the applications.
Open source now provides a complete stack of enterprise-grade software backed by excellent support, and rivals the technological strength of traditional proprietary vendor offerings. Successful implementations for mission-critical workloads continue to dismiss concerns about support, security and reliability. As more customers share their open source success stories, first-time open source users now have powerful innovators and role models to follow.
For example, I met recently with a customer who processes more than $100 billion a day in fund transfers for 160 banks using an open source stack that includes the Ingres database and Red Hat's JBoss application server. Meanwhile, customers from diverse industries spanning airlines (Lufthansa) and manufacturing (PPG Industries) to grocery store chains (C&K Market) and government agencies (National Center for Missing & Exploited Children) are embracing open-source solutions to manage millions of pieces of information critical to run and maintain their businesses, and even save lives. These companies trust open source to do the jobs that must get done, and appreciate the accompanying cost savings, innovation and freedom.
These pioneering companies are choosing to forgo proprietary solutions and adopt open source stacks from companies such as Alfresco, JasperSoft and Ingres, from core database systems to emerging open-source stacks that support enterprise content management, document management, transaction processing and business intelligence.
According to a recent report from Forrester Research, companies can save as much as 25 percent of their database costs by switching to open-source databases and have the potential of an additional 25 percent savings in hardware costs by using open source on commodity servers. C&K Markets' Nidiffer says his company has saved nearly 20 percent using the Ingres open-source database.
In the coming months and years, I predict that many companies will experience open source benefits, including greater innovation and much lower costs, while delivering the enterprise performance that companies require.
More than 10,000 of our worldwide customers, in sectors ranging from financial services through manufacturing and distribution to the public sector, prove this equation each day.
It is a new time for open source to show its true value as the alternative choice to companies that will be hit hard by the financial crisis.