The Open Road

A recent survey suggests that CIOs are loosening the purse strings on IT spending. IT vendors may want to hold off their celebrations, though, because much of the spending appears to be headed for deflationary forces like cloud computing, virtualization, and their kissing cousin, open source.

An economic rebound never looked so dire.

That's unless you're an IT buyer, of course, suggests a new report from Goldman Sachs. In this week's report, titled "A Paradigm Shift for IT: The Cloud," Goldman Sachs said it expects that pent-up IT dollars will flow in the short term to building out next-generation data centers (e.g., cloud computing). But in the long term, less money is expected to find its way into fewer wallets:

After the initial build-out, Cloud Computing could drive some headwinds for the IT industry, as a result of two factors. First, we see virtualization as a deflationary technology. Second, we see IT spending consolidating in the hands of fewer buyers--the Cloud providers, hosting vendors, and large enterprises. These factors will likely dampen IT spending growth due to greater utilization and buyer pricing power.

Even short-term build-outs may prove disappointing, however, as Goldman Sachs expects large enterprises to grow existing virtualization and automation technology adoption in the rollout of private clouds, shifting slowly to an embrace of public clouds over time. The chart below gives some idea as to when cloud computing will hit its stride:

Who wins in this scenario?

According to the report, Red Hat stands to benefit from the cloud-computing craze. ("Red Hat is well positioned for the emerging Cloud Computing ecosystem, largely due to its open source background and current ubiquitous deployments in data centers, including enterprises, as well as in Cloud providers such as Amazon," the report states.)

But the real beneficiaries will be...the same old crew. "[K]ey suppliers for internal Clouds are likely to be those that have the most complete portfolio of hardware, software, and services," including IBM, Hewlett-Packard, Cisco Systems, EMC, and Oracle.

New boss...same as the old boss.

The other beneficiaries are the start-ups that provide critical components of cloud computing, with an emphasis on management tools. Here we may see open-source companies benefit, including Reductive Labs (Puppet project), Cloudera, and the two rising private cloud companies, VMOps and Eucalyptus, among others.

While open source doesn't factor heavily into this particular Goldman Sachs analysis, the firm has before called out open source's role in wringing more value out of fewer IT dollars. Open source is a primary driver of the global reset in IT spending expectations.

With less money flowing into the pockets of fewer vendors, we can expect to see both increased consolidation and fierce competition for the IT spending that remains. Those vendors that can help CIOs do more with less stand to benefit from this shift to low-cost, high-value computing.

And those that can't? Well, let's just say they may pine for the good old days of the global recession.

It boggles the mind, but it's apparently true: nearly half of enterprises think a software purchase is successful if the software is installed/deployed, according to a new study. If ever there was reason to believe there's room for improvement in enterprise IT, and billions of dollars to go with it, this is it.

Working software should be the starting point, not an end point.

According to a study recently released by Neochange, Sandhill Group, and the Technology Services Industry Association (TSIA), 45.3 percent of the 353 IT professionals surveyed call a software purchase successful if "the software is deployed/installed."

No, this isn't enterprise IT's only criterion for software success. After all, 75.4 percent pegged their aspirations a bit higher: "Business benefits realization (cost reduction, revenue generation, etc.)." (Note: respondents could choose more than one answer; hence, the results don't add up to 100 percent.)

But it's scary that the software industry has conditioned IT buyers to expect so little. No one should claim victory on the basis of getting software installed, and we should be hitting close to 100 percent actually getting tangible business value for their software investments.

But then, more than half the survey's respondents admitted to not even measuring success criteria. Could this be a sign that IT executives, like the sign greeting Dante on his descent into Hell, have abandoned all hope of getting real value for their software spend?

Things may be getting better. As reported on Tuesday, Google and Red Hat topped CIO Insight's Vendor Value survey. Times are tight, and enterprises apparently can't afford to call software purchases successful just for running as they should.

Red Hat's chief of European operations, Werner Knoblich, says as much in an interview with The Register:

Microsoft was untouchable until recently, but now everything gets considered, which is one of the reasons [Red Hat's] results have been pretty strong. Clearly a downturn is never good generically, it's a bad thing. But our value proposition resonates pretty well all the same.

In the case of both open source and SaaS, enterprises don't pay a dime until they actually see the software working. Working software is the default. It's not cause for special celebration.

The Neochange, et al, survey also asks, "What is the most important factor for realizing value from enterprise software?" The answer "Gaining user buy-in and ensuring effective usage to deliver business impact" garnered a 71.7 percent vote. That's more easily achieved with open-source software, in particular, which allows enterprises to evaluate and use software long before they opt to purchase support or add-on services/software (if, indeed, they ever elect to do so).

In this way, open source improves upon typical IT success. With more than half of those surveyed reporting "less than 49 percent effective software usage," there's clearly room for a better model to optimize software utilization.

We can do better. We must. About 30 percent of those surveyed look to software to enable "business innovation, revenue generation, and market competitiveness."

Such enterprises are increasingly looking to open source to serve as the foundation for innovation. This probably wasn't the "fundamental economic reset" Microsoft CEO Steve Ballmer had in mind, but it will do. And it's about time.

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For years, Red Hat sat unopposed at the top of the CIO Insight Vendor Value study. In 2008, however, Google pushed Red Hat aside with its low-cost, easy-to-use enterprise applications. This year, Red Hat has come roaring back to share the top ranking with Google.

Could this be a sign of CIOs' restive relationships with traditional vendors and an increasingly insatiable appetite for the cost and ease-of-use advantages of open source and software as a service/cloud computing?

The answer is almost certainly "Yes." It is telling that old-school vendors like IBM (ranked 20th overall), Microsoft (25th), Novell (29th), and Oracle (35th) are so far down the CIOs' list.

It is equally telling, however, that it is with these apparently less-preferred vendors that CIOs spend the vast majority of their IT budgets. Or perhaps that's the point? In other words, CIOs spend with such vendors today because they have to, but given their druthers, they're going to invest more money in Red Hat and Google going forward.

Red Hat and Google are still rounding errors in the overall IT spending picture, but CIOs seem to be signaling an appetite for more. It's not about reducing lock-in and other colorful marketing phrases, either: it's about great, easy-to-use software at a compelling price.

You know, the very thing that Microsoft used to win CIO plaudits for delivering.

From the report:

CIOs are more likely to try software as a service (than traditional, packaged software), which is better understood and simpler to use and requires no upfront investment in hardware or software.

This is the heart of the CIO uprising. And it's why low-cost, high-value companies like Intel (ranked first overall), Cisco/WebEx (ranked sixth and 11th, respectively), and Sun (sixth) are climbing the charts.

For now, however, Google and Red Hat rule the roost in the Software category of CIO Insight's annual study:

Both Red Hat and Google essentially offer the same thing: great software on a subscription basis. While this model often offers lower prices than competitors, it's important to note that "free" is not the value proposition here. (If it were, for example, Red Hat customers would be leaving in droves for Red Hat Enterprise Linux clone, CentOS. They aren't.)

No, the value proposition is customer control via the subscription model that enables less costly ways to buy into the software, and to turn off maintenance costs, if desired.

It's a winning formula, one that more vendors should consider adopting. Today IBM, Microsoft, and Oracle command the majority of IT dollars, but this survey suggests a rebellion is underway. Inertia can only support the traditional vendors for so long.

Postgres for years has lived in the shadow of MySQL's media attention: the "boring" database that quietly goes about its work while its sexy Web 2.0 cousin wins the popularity contest.

Recent data from the Eclipse Foundation, however, suggest that Postgres may be ready to make significant waves in the enterprise, even if it doesn't make headlines.

In a recent letter to European Union's commissioner of competition, former MySQL CEO Marten Mickos stressed that MySQL's target market is the emerging Web database market and that the enterprise IT market was never really a source of strength (or focus).

Postgres is the opposite.

Postgres is an enterprise Java database, more suitable for carrying corporate data than the Web's consumer data. According to a 2009 survey by the Eclipse Foundation, MySQL (27.7 percent) and Oracle (27.3 percent) were the top-two databases used by those surveyed, with Postgres registering a respectable but still distant 9.9 percent.

Given that Oracle database users are far more likely to use Java as their programming language to develop server-centric applications, while MySQL users are three times more likely to use PHP as their primary language (17.4 percent of those surveyed use it, versus 5.4 percent for all users) to builde RIA/Web applications, Postgres is clearly more Oracle than MySQL.

Granted, the Eclipse community is traditionally Java-centric, so it's not surprising that Java would be prominent among its developers. But it's also the case that enterprise IT remains a Java/.Net market, and in such a market Postgres could be poised to boom if it can muster sufficient marketing to make its message heard.

This is where EnterpriseDB comes in.

The MySQL community would not be as well-developed as it is without MySQL, the company. MySQL AB has funded the overwhelming majority of MySQL database development, but it has also provided the marketing muscle to make a name for the Web database.

Postgres has traditionally been a standalone, organic open-source project with little concerted corporate involvement. EnterpriseDB has started to change that, but for too long wrongly fixated on competing with MySQL, a database that serves a different market and different developers. The company also spent too much time talking about Oracle migration technology, rather than focusing on why Postgres is a great database.

That may be changing.

Postgres just released version 8.4 of the venerable database. In EnterpriseDB's discussion of the release, there's no mention of Oracle, MySQL, or any other competitor. Instead, EnterpriseDB seems to be focusing more on its commitment to Postgres development, adding significant enterprise hardening through its open-source Postgres Plus distribution.

It's a welcome change, and one that could position Postgres to take a bigger share of the enterprise Java database market--not because it's cheaper than Oracle or more open than MySQL but because it's a great database in its own right.

That's the right messaging for EnterpriseDB...and Postgres.

Open source is used to playing underdog to incumbent proprietary vendors. What will happen when open source dominates, rather than commoditizes, markets?

I ask because several open-source projects are not far from owning dominant market share in their respective markets. Mozilla's Asa Dotzler reports that Firefox is "on track to easily reach 25 percent of global usage by the end of the year." That may not sound like much, but given that Microsoft has been losing five percentage points of browser market share each year while Firefox gains five percentage points, and it's not hard to imagine Firefox surpassing IE's market share by early 2013.

Firefox isn't alone. Indeed, the Apache Web Server already dominates the Web server market, even despite new entrants to the market, as Glyn Moody highlights.

Linux, for its part, is still only 13.8 percent of the paid server market, while Windows Server still claims 38.1 percent market share, according to IDC. It has a long way to go, but in some markets like cloud computing and the growing Web 2.0 market, it plays a more authoritative role.

So, what happens when these and other open-source projects dominate their respective markets? Will it change how we market open source? Will it mean more research and development dollars must be invested?

Traditionally, open source has done a fantastic job of commoditizing expensive, well-understood markets. While I believe open source can innovate, particularly with companies behind open-source projects, it's still an open question as to whether the financial returns from open-source sales can pay for the heavy R&D and marketing costs that are generally required to create new products and new markets.

Open source has been better at business-model innovation than product innovation, though there are some notable exceptions.

Forget innovation for a minute, however: what will we do when Microsoft, Oracle, etc. are the runners-up, not the market leaders? Microsoft is a convenient (if inaccurate) proxy for all things that are bad in the software world for open sourcerors, but imagine the shift in thinking required to compete when, for example, Firefox has 80 percent market share and IE owns less than 20 percent. Who will we blame for our problems when our straw men are gone?

Perhaps none of this matters, however, as we could see dominant community-led open-source projects fork themselves long before they reach critical, market-dominating mass. It's not hard to imagine splinter groups forming within big open-source projects to take them in different directions, even as Joomla did with Mambo, Ubuntu did with Debian, etc.

The antidote to this is the open-source foundation. Among the examples of strong open-source projects that haven't forked--Eclipse, Apache Web Server, Mozilla Firefox--foundations have been critical to keeping these together. Linux, for its part, has been forked many times, but its core is held together by the Linux Foundation.

I believe the key to attaining dominant market share, and to preventing forks, is the open-source foundation. Over time, I suspect we'll see more "open-source companies" separate themselves into foundations, to manage the code, and corporations, to manage the monetization. This may be the only way to both liberate and dominate at the same time.

Given the vast and growing number of open-source projects, one would assume its quality had gone down as quantity went up. In fact, the inverse is true, suggests a new report from Coverity, which spent the past three years analyzing more than 11 billion lines lines of code from 280 open-source projects. This is crucial given open source's increased importance to the software industry as a whole, and not merely self-styled "open-source companies."

Among other findings, Coverity's report reveals a 16-percent reduction in static analysis defect density. While Coverity's analysis doesn't cover all or even most open-source projects, which number in the hundreds of thousands, it does tell us a great deal about the quality of the more successful projects like Linux, Firefox, Samba, and PHP.

Each of these projects is growing, and on average their quality is getting better. That's a feat of which few commercial software products can boast.

Such vendors are, however, taking notice. SAP, for example, despite its billions in sales, is trawling for sales leads on open-source start-up Openbravo's SourceForge.net project page.

SAP and other traditional software vendors aren't stupid. They can see a significant customer shift to subscription-based open-source offerings. Customers are increasingly looking for ways to lower costs and boost productivity through open source, as David Buckholtz, vice president of Enterprise Technology and Quality at Sony Pictures Entertainment, told the LinuxCon crowd Tuesday in a panel I moderated. Buckholtz suggested that what started out as a small experiment to replace BEA WebLogic, became a major shift to using open-source technology all over SPE, both to cut costs and improve product quality.

No, not all open-source software is fantastic, and undoubtedly even some of the commercial open-source software offerings are weak. The best open-source projects, as Intel's Dirk Hohndel pointed out in his LinuxCon keynote, are those with strong execution and vision. Just like in the proprietary software world.

Coverity's analysis, however, suggests that open-source software may have the upper hand on its proprietary peers. Open-source quality is almost certainly a direct result of open-source transparency, something Red Hat CEO Jim Whitehurst suggested at Red Hat Summit recently when he opined, "If we all had to walk around naked we'd all spend more time in the gym."

An open-source project will only be as good as the developers who work on it, but those developers have a strong motivation to make the code secure, robust, and high performance. The code is "naked," as it were. The source code is open.

Customers and competitors are noticing.

Disclosure: SAP Ventures is an investor in Alfresco, my employer, and I am an adviser to Openbravo.

Red Hat is generally credited as the industry's leading open-source company, but it's a distinction that is as meaningless as it is incorrect. While Red Hat's revenue directly derives from the open-source software it develops and distributes, other companies like Sun, IBM, and Google actually write and contribute far more open-source code. It may be time to stop talking about open-source companies and get back to the importance of open-source code.

Open source is increasingly the foundation upon which software and Web companies depend. MySpace made waves on Tuesday by open sourcing Qizmt, a distributed computation framework (running on Windows Server, intriguingly) that currently powers MySpace's "People you may know" feature. But MySpace, as VentureBeat notes, was simply playing catch-up to Facebook's recent open sourcing of Tornado.

Neither move is an attempt to score brownie points with the "in" crowd. Both moves are motivated by self-interest, self-interest that increasingly requires inviting developer communities to embrace and extend one's Web services/software through open source.

It's also a way to improve software quality. By embracing open-source projects as a foundation for a company's software, and then extending it through its own open-source projects, the collective quality of open source is strong and growing, as Accenture's Kit Plummer notes.

It's this enlightened self-interest and the quality is engenders that has turned open source into essential infrastructure for virtually all commercial software, and which means Red Hat and other pure-play open-source companies are no longer the center of the open-source universe.

The Linux kernel is comprised of 11.5 million lines of code, of which Red Hat is responsible for roughly 12 percent (measured in terms of lines of code changed). Even if we add in JBoss Application Server (another 2 million lines of code or so) and other Red Hat projects, we're still left with far less open-source code from Red Hat than from others.

Take Sun, for example. Sun is the primary developer behind Java (more than 6.5 million lines of code), Solaris (over 2 million lines of code), OpenOffice (approximately 10 million lines of code), and other open-source projects.

Or IBM, with 12.5 million lines of code contributed to Eclipse alone, not to mention Linux (6.3 percent of total contributions), Geronimo, and a wide variety of other open-source projects.

Google, however, is the most interesting company of all, as it's not a software company, per se. I asked Chris DiBona, Google's open source and public sector program manager, about Google's open-source contributions. His response:

Conservatively, we've released about 14 million lines of code. Android tops 10 million lines of code, and then you have Chrome (2 million lines of code), GWT (300,000 lines of code), and about a project released every week over the last five years. Then you have a couple hundred Googlers patching on a weekly or monthly basis.

While DiBona was quick to suggest that Google doesn't claim the crown for Open Source Top Contributor ("We'd say we're 'among' the largest [contributors]"), it almost certainly is the world's largest open-source code contributor, especially when one considers its other open-source activities, including hosting perhaps the world's largest repository for open-source projects, with more than 250,000 hosted projects, at least 40,000 of which are actively contributed, not to mention its Summer of Code. After all, lines of code, while useful, is not necessarily the best measure of the value of open-source contributions.

In fact, Patrick Finch of the Mozilla Foundation speculates that Google's best open-source contribution may have nothing to do with writing new code at all:

Google's biggest contribution to open source is arguably not code, but proving that you can scale Linux on whitebox hardware.

It's a great point, and one that underscores the fact that the "open-source company" distinction is somewhat useless. Google doesn't call itself an open-source company, and rightly so. Open source is simply part of its strategy for distributing software that will help it sell more advertising.

Sun attempted to turn itself into an open-source company, but once Oracle completes its acquisition of Sun, Oracle certainly won't take on that label. Not because it's a bad label, but because it's simply not a useful one anymore.

We are all open-source companies now. Which also means that none of us are. Open source is simply a way that we enable some aspect of our businesses, whether we're Red Hat or Microsoft or Google or Facebook.

And given that Web companies like Google don't need to directly monetize open source, we may actually see far more open-source code emerge from these Web companies than we ever have or ever will from traditional "open-source software companies" like Red Hat, MySQL, or Pentaho.

Virtualization may offer a significant advantage to Linux in the decade-old debate over Linux vs. Windows total cost of ownership (TCO). A new Gabriel Consulting Group survey (PDF) of mostly mixed-environment (that is, Windows and Linux) enterprises reveals significantly higher adoption of virtualization technology, with all the cost savings that go with it: less money spent on hardware and licensing fees.

It's an interesting conclusion, but leads to an even more interesting question: why don't Windows administrators take advantage of virtualization to the same extent as Linux administrators? The answer--licensing cost and complexity--is something that Microsoft has the ability, but not the interest, to change.

According to the survey, enterprises that predominantly use Linux virtualize roughly 30 percent more than those that prefer Windows, and heavier virtualization users do so much more aggressively on Linux systems than on Windows:

The survey's author reports that "Linux users have clearly both adopted virtualization at a greater rate and embraced it to a greater extent than customers who have standardized on Microsoft operating systems," but why?

Perhaps the primary reason is that Microsoft didn't really start to promote virtualization until long after the Linux crowd. This isn't surprising: Microsoft has much to lose from virtualization. The fewer Windows server licenses an enterprise has to buy, the worse it is for Microsoft.

Microsoft has now jumped into the virtualization market with both feet, giving its Hyper-V product away for free...but not really. Indeed, it is the pricing strategy Microsoft has for its servers that may go furthest in explaining its lack of appeal to Windows users, as noted in Gabriel Consulting Group's report:

There are also licensing differences that bear directly on comparative costs. With Microsoft, users who don't have volume agreements or who haven't purchased the more expensive Enterprise or Datacenter editions will have to purchase licenses for every system and each of the virtual machines running on those systems. Linux, on the other hand, can be essentially free, meaning that companies can deploy it on multiple systems or in virtual machines at no cost.

While the survey also lists the benefits of source code access to Linux administrators, I suspect that this is of minimal value to the big majority of Linux adopters. Very few will care to "get intimate with the code," to use the report's language, preferring instead to stick to the more tangible (and easily accessed) cost savings from Linux virtualization.

There are other benefits to those who primarily adopt, or standardize on, Linux, as the report suggests:

• 77 percent of survey respondents reported greater hardware utilization rates through Linux virtualization, versus 56 percent of Windows users.
• Those who standardize on Linux find Linux virtualization much more manageable (62 percent) than Windows administrators who standardize on Windows virtualization (48 percent). More telling, four times as many Windows standardizers (23 percent) find Windows virtualization hard to manage than the Linux standardizers, only 6 percent of whom find Linux virtualization hard to manage.
• Linux translates into higher server utilization and, hence, less power consumption and more physical space: 59 percent of Linux administrators disagreed with the "We are rapidly running out of data center electrical capacity" statement, compared to 38 percent of Windows administrators. When presented with the statement "We are rapidly running out of data center floor space", 60 percent of Linux administrators disagreed versus 45 percent of Windows administrators.

While enterprises could realize even bigger cost savings by simply using free Linux versus paid Windows, most enterprises will buy commercial support for Linux through Red Hat, Novell, or Canonical. Even factoring in this cost, however, Linux seems to lend itself more readily to virtualization and, hence, to cost savings that result therefrom.

Microsoft has it in its power to turn the tide relative to Linux's superior virtualization TCO, and it probably has little to do with the cost of Windows Server, and certainly not with the cost of its Hyper-V virtualization technology, which is now $0.00.

Rather, it's likely a matter of simplifying its famously Byzantine pricing, and making Windows Server licensing friendlier to virtualization. For example, Microsoft doesn't allow migration of its products to a new physical server more than once every 90 days. This may ensure customers buy licenses with fewer restrictions, but it also appears to mean they simply buy fewer Microsoft licenses, period.

Given that commercial Linux isn't free, Microsoft doesn't need to make Windows free to make its Hyper-V virtualization more competitive with Linux virtualization. Simplification, it seems, would go quite far toward the goal of making Windows virtualization more palatable.

Linux users are known for being a somewhat finicky lot. Despite broader application support for Windows and a better user experience in Mac OS X, Linux "desktop" users swear by the open-source operating system (and sometimes swear at its competitors).

It's therefore somewhat telling that Linux users overwhelmingly choose Google as their preferred search engine, according to data released today by Chitika, an online advertising network. Chitika analyzed data from 163 million searches across its advertising network between July 30 and August 16, and came up with the following:

Despite the concerns about Google and privacy and despite Microsoft's rising relevance in search through its Bing "decision engine," Google wins over Linux users 94.61 percent of the time. While it's not surprising that Linux users would shun a Microsoft-sponsored search engine, it is surprising that they so heavily congregate around just one search engine.

After all, this is the crowd that has created (literally) thousands of Linux distributions. For a community so devoted to choice, it's telling that such a disparate community would unify on Google search. Perhaps Yahoo's apparent willingness to prostrate itself before Microsoft has turned off the Linux crowd, but there are other alternatives.

Open source, after all, is all about alternatives. There are open-source alternatives to Google Analytics (Piwik, Open-Tube, etc.), Google Search Appliance (Lucene/Solr), Google Docs (OpenGoo), Google Earth (World Wind), and more.

But for search, the Linux contingent of the open-source community seems settled on Google.

Follow me on Twitter @mjasay.