Open Source Turns Strategic
Transforming Banks for a Digital Future: The Winners, The Losers, and the Strategies to Beat the Odds
The fear, uncertainty and doubt that has surrounded open source since its inception seems to be dissipating.
A resounding 81 percent of respondents to this month's survey say they have deployed or are considering deploying some sort of open source system or application. Seventy-two percent report plans to expand their
Use of open source within the next 12 months, and 60 percent have replaced legacy systems with Linux, or plan to in the next two years.
At first glance, it looks like open source is kicking the pants off proprietary software. But we're not trumpeting the demise of Microsoft Corp. yet.
Consider this: While cost reduction is the top reason for moving to open systems, only 64 percent of respondents report they are actually realizing savings. What's more, 43 percent report significant hidden costs, including training, consulting and ongoing maintenance.
The figures don't surprise Mario Correa, senior director of software policy at the Business Software Alliance, which lobbies for commercial software companies. "The cost savings issue is hype," he says. "You have to look at the full lifecycle use of the software, including training. So far, it looks like a wash."
John Parkinson, former vice president and chief technologist for the Americas at Capgemini and currently a business technology consultant is also dubious about open source's affordability.
"We haven't been doing this long enough to really know if open source is actually cheaper. The idea of what it will cost over the years is a model, not real data, and there is little evidence that the lifecycle cost of open source is significantly less than that of conventionally developed software."
That's part of the reason why some companies are still waiting to invest in open source. Timothy Koh, manager of strategic HR for the Asia-Pacific division of Caterpillar Inc., the $30 billion construction and mining equipment manufacturer, says the firm is actually moving towardnot away fromproprietary systems because "the cost of migrating from Microsoft and IBM to open source is very high." Although the company is evaluating how open source might be used in the future, "we would like our current investments to pay off before we move away from them," he says.
Michael Tiemann, president of the nonprofit Open Source Initiative and vice president of open source affairs at Red Hat Inc., says companies need to look past the cost question.
"The company that limits its thinking about open source to cost savings is absolutely missing the trick," he says. "Almost all companies have an overall IT cost that's less than 10 percent of overall operations. So even if you could drive the cost down to zero, the biggest impact you would have is 10 percent."
|Who Likes Open Source, and Why?
So if cost isn't the clear benefit, where's the value in open source? Almost two-thirds of our respondents say their use of open source has sparked innovation inside their companies.
But considering that most companies that use open source already think of themselves as innovative, does open source make companies more innovative, or do more innovative companies naturally adopt open source?
According to Eric von Hippel, a professor and head of the innovation and entrepreneurship group at the MIT Sloan School of Management, it's both. "Companies that are more innovative tend to adopt things first, and open source is novel," he says. "So it's causative: You have to be innovative to be an early adopter of open source, and those companies get the advantage of that innovation."
That advantage is being used strategically to get an edge over rivals, according to 64 percent of our respondentsand that may be where the true value of open source is waiting. At the Baylor College of Medicine, in Houston, one of five medical research facilities working on the human genome sequencing project, open source plays a key strategic role in securing necessary research funds from the National Institutes of Health.
"You'd be amazed at how competitive the grant process is," says David Parker, Baylor's systems manager for the Human Genome Sequencing Center. "We are all fighting for a bigger piece of the pie."
Grants are awarded to research facilities that can accomplish the same scientific goal with the smallest budget, says Parker. Baylor's genome center stores roughly 60 terabytes of data, and to process that data through proprietary systems would cost about $250,000 per machine, he says. For the same amount of money, Parker says, "I could buy about 60 Linux cluster nodes, up the processing power by orders of magnitude, and reduce downtime and maintenance costs." That looks good on Baylor's monthly budget reports to the government.
"Our research groups have the flexibility to adopt open source, and that's one of the reasons Baylor ranks highest in the nation in biological research funding," he says. "Without open source, we would be at a disadvantage."
Although 59 percent of respondents feel that open source will be the dominant mode of software development and distribution in ten years, analysts on both sides of the debate agree on at least one thingopen source and proprietary software will coexist. "Proprietary and open source software will share the stage for a long time," says Von Hippel. Will any open source developers produce an application that rivals SAP? "I doubt it," says Parkinson. "But open source is definitely causing the most shakeup in terms of how the software industry thinks about its economics."
Does that mean open source will ultimately raise the bar on the quality of proprietary software? "It already has," says Correa, "and that's one of the best things about the competition between the two models."
Open source usage has spread well beyond Linux.
IT executives are turning to open source to find competitive advantage as well as savings.
Open source is actually helping companies save money, but there are trade-offs.
User reluctance is holding back open source adoption.
Companies will expand their use of Linux, provided major vendors continue to support it.
The outlook for open source looks bright.
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