The Open Road

Even as CIOs accelerate adoption of open source in an effort to trim costs and improve innovation, the world's top system integrators (SIs) have largely played it safe on the sidelines. Accenture, given its close partnership with Microsoft, has perhaps been one of the most conservative SIs when it comes to open source.

Or so it has appeared. Despite a partnership with SpringSource, an open-source infrastructure leader, Accenture's open-source activities have largely gone unnoticed. Even Accenture's Innovation Center for Open Source, a collaboration with Red Hat and other open-source vendors, was more whispered about than promoted.

I caught up with Alex Wied, senior manager at Accenture and head of its Innovation Center for Open Source, and Tony Roby, partner in Accenture's Global Architecture and Core Technologies group, to find out what, exactly, Accenture has been doing with open source, and how the global consulting firm expects to use open source going forward. They collaborated on the answers to my questions below.

Accenture is not the first company that comes to mind when one thinks of open source. After all, you have a joint venture with Microsoft and have been pretty quiet on open source. Is open source alive and well at Accenture? If so, what are the areas of focus for Accenture?

I'm curious to find out why that is the case! Accenture has strong relationships with many leading technology companies--that is what our clients expect.

Open source is growing within both Accenture and our client base. We continue to be substantial users of open source, particularly in custom Java development, and our focus is expanding beyond this space to cover the gamut of open source portals, content management, business intelligence and data management. We also continue to contribute to open-source projects where we expect the results to benefit our clients.

Is open source client-led or Accenture-led? Meaning, are your customers asking for it or are you embracing open-source solutions for your own reasons? If so, what are those reasons? If clients are asking for it, what reasons do they cite?

It's a mixture. There is a tremendous amount of education still to be done regarding open source. We have clients who still have policies not to use open source at all; others who want to use open source wherever possible. But the majority is in between: they are open to using whatever makes most sense from a technical and commercial perspective.

What is clear is that the current economy is driving many who were ambivalent about open source to explore its potential more closely. Regardless of the economic environment, Accenture is a strong open-source advocate and will continue to work with our clients to help them achieve business benefits with it.

Is "vendor lock-in" a serious concern for your clients? If they had to choose between zero cost and 100 percent lock-in or a hefty cost and no lock-in, which would they choose? Or is that even a fair question?

Yes and no. No one wants to be locked in, particularly if that lock in results in ever-increasing expenditure that is disconnected from the value being realized.

But our clients in general look for a balance. "One throat to choke" is high up in the requirements for making major technology investments and is often prioritized over "lock-in." Also, in the context of very large projects, the cost of the software compared to everything else is frequently a small part of the equation.

Nevertheless, we are seeing a noticeable increase in the use of open source, driven largely by the "free" aspect. Few are fooled by the notion of open source being free (as in no cost): lower cost, flexibility and the ability to be supported at modest cost are key drivers of the increased uptake.

Are there particular open-source projects that are of interest to you/Accenture? Which ones, and why?

We do a lot of work with the Spring Framework, so I would say that has historically had the bulk of our interest. That said, we have people active in a number of community projects and we are making increasing use of Alfresco, Liferay, and Talend, to name a few in the technology area.

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While the technology industry has been laying off large numbers of employees, the open-source software industry has been hiring, at least at the executive level.

In the past week, Acquia, Alfresco, Groundwork, and Black Duck have all added executive leadership:

• Acquia - Company founder Dries Buytaert announced Tom Erickson as Acquia's new CEO, replacing Jay Batson in that role. Batson will remain with the company in an as-yet undefined role. Erickson brings to Acquia a wealth of experience, including as CEO of Systinet, which he successfully sold to Mercury Interactive in 2006. Erickson is a great addition to the Acquia team.
• GroundWork - Peter Jackson (no, not that Peter Jackson) has taken the helm at open-source IT management company GroundWork. Jackson joins GroundWork from Intraware, where he had served as CEO, and prior to that was CEO of Dataflex and Granite Systems. Jackson took Intraware public and, all going well, will hope to repeat that feat at GroundWork.
• Alfresco - Bill Robinson, former senior vice president of sales at Witness Systems and vice president of North American sales at Business Objects before that, has joined Alfresco as vice president of the Americas. This one strikes close to home (I was running the Americas for Alfresco up until Friday), and makes me very, very happy, as I will get to focus on our top strategic partners and other key initiatives, and makes my quarter-ends much more pleasant. Just last quarter US sales recorded serious double-digit growth in the midst of a brutal economy, but the numbers are getting large enough that having Robinson helm Alfresco's primary sales geography makes a great deal of sense.
• Black Duck - While not an open-source company, Black Duck's fate is inextricably tied up in open source, and putting Red Hat's former senior vice president of worldwide marketing, Tim Yeaton, in as its new CEO is a major coup. I talked with Yeaton about the role and think he's perfect to help Black Duck recast its message so that it's not mistaken for an open-source FUD vendor.

There are some other executive appointments, but they're not yet public so I'll defer from pre-announcing them here. There are also others - like Greg Schott's appointment as CEO of MuleSource - that have already been covered on this blog.

It's good to see how dynamic open-source business remains, and that the open-source world is attracting the best and brightest of the proprietary software world.

Follow me on Twitter at mjasay.

Jeffrey Hammond, principal analyst at Forrester, just Twittered something that is about to hit the traditional software world like a ton of bricks:

Just got off the phone with a client who's been mandated to use [open-source software] because licensing costs are killing them.

Call it the beginning of the end, if you like, but it's coming. The last few decades of software have been an aberration, built upon the historical accident that is digitization. Or, rather, not the accident of digitization, but rather that for a relatively brief period of time, we've made believe that digital goods can be treated like physical property. Companies like IBM, Microsoft, Oracle, and SAP have made billions in the process.

Guess what? Party's over. Ultimately, every software business will transition to a maintenance business, where software is charged on a subscription basis and looks suspiciously like services revenue, because buyers now realize that software products that can be developed and distributed cheaply should also be sold cheaply.

In fact, the transition to maintenance revenue is already well under way. Oracle, a paragon of the traditional software industry, already makes most of its revenue through maintenance. Its peers are much the same.

The next phase in the transition comes as IT buyers start to question the value of the maintenance contracts they sign with software vendors. Oh, wait. That phase has already begun, as reflected in the recent uproar over Oracle's and SAP's attempts to raise maintenance pricing without actually delivering much value for the base maintenance cost or the price uplift.

Next phase? We're already there, too. It's called open source, and it forces software vendors to provide ongoing value to justify CIOs spending money with them. Red Hat has led this shift, but it's a movement that is accelerating as open source permeates all areas of the software stack, from applications like Openbravo (ERP) and MindTouch (collaboration) to core infrastructure like Lucid Imagination (search) and MySQL (database).

In the past few weeks I've had a range of Fortune 500 companies choose Alfresco to replace Documentum, Oracle (Stellent), IBM FileNet, Vignette, and more. In those same weeks I've heard from peers at other open-source companies that they've been actively replacing HP, IBM, Tibco, Oracle, etc. in customer deployments, too.

In fact, the only enterprise software vendor that has remained somewhat impervious from open-source encroachment is Microsoft, as it has been lowering prices and improving ease-of-use in its technology for some time. But Microsoft, too, will have to face the open-source music, as Microsoft CEO Steve Ballmer has noted recently.

As enterprises get squeezed by the recession, they're going to squeeze their vendors for cost savings. At some point, those vendors' cost structures and business models won't support the squeeze, and the business will go to open-source vendors.

It's already under way.

Disclosure: I am an adviser to Lucid Imagination, Openbravo, and MindTouch, and an employee of Alfresco.

You can follow me on Twitter at mjasay.

Investment bank Goldman Sachs just released its "Americas: 2009 Software Outlook" report, and it promises near-term pain for an already struggling technology industry:

The worst of the IT-spending slowdown likely remains in front of us, as we start the clock on slashed 2009 budgets. We forecast 0 percent revenue growth for our group, below consensus at 5 percent, and 1 percent earnings growth, below Street at 2 percent.

(Credit: Goldman Sachs)

In other words, things are going to get worse before they get better.

For Goldman, this means that it is recommending stocks that it believes enterprise customers will buy into: defensive/large-cap stocks like Microsoft and Oracle, as well as companies that suggest "strong cost-cutting discipline and mission-critical product sets" like BMC, CA, and Symantec. Why? Because these are the safe bets, among other reasons:

We expect the "Big 5" software companies (Microsoft, Oracle, SAP, Symantec, CA) to benefit from more defensive revenue streams due to critical nature of functions, "stickier" maintenance, stronger negotiating leverage, and a likely spending consolidation to larger vendors. Hence, we assume 0 percent growth for this group in 2009.

The other reason called out in the report is that recessionary pressures will push CIOs to consolidate their IT spending into the big "ecosystem" vendors, rather than buying best of breed. If true, this will likely hurt open source, even as its lower costs help.

Even so, I'm looking at a sales pipeline for Alfresco Software, my employer, that is three times anything we've seen in the past, which suggests to me that the recession may be very good for open source, though more data (and time) is necessary to prove out this thesis.

Interestingly, Goldman sees Salesforce.com getting a lower share of IT spending in 2009, and it has slapped a "Sell" rating on its stock. I suspect that Goldman may be off in this, given that SaaS is a great way to adopt IT, at a measured pace with diminished risk. But the point is well-taken on spending with established vendors, though this may ultimately benefit Salesforce.com, as it's the biggest player in SaaS.

The only positive in a recession is that we'll see a serious separation of wheat from chaff in IT vendors. I continue to believe that open source will do well through the downturn (indeed, Goldman calls out Red Hat as a winner in the downturn, able to withstand downward pricing pressure), as well as SaaS, though I also concede to Goldman's point that a large portion of IT budgets will find their way to the industry's dominant vendors.

CFO Magazine is running a great story about the cost savings available from open-source software. This is a topic that you'll hear open-source vendors crow about, but it's somewhat rare to actually get a CFO on the record about her benefits from open source, so it's notable.

Open source is gaining at proprietary software's expense.

(Credit: Gartner)

Recent Gartner research suggests that over 27 percent of enterprises will deploy open-source software in 2009. (Note: the remaining 63 percent will, too, but Gartner must have asked the CIO, and the CIO is the last to know.) That's up from 25 percent in 2008, while the share of proprietary software deployed will actually go down.

That is perhaps the scariest data point for proprietary vendors who have to grapple with former safe havens like InterContinental Hotel Group, which CFO Magazine notes is adopting Red Hat, Alfresco, SugarCRM, and MySQL, among other open-source products, for its mission-critical systems going forward.

Against this backdrop CFO Magazine calls out the benefits of open source in a tight economy:

One of the initial raps against [open source] was that, while the idea of free and continuously modified software had a certain appeal, it also inspired a certain terror; what business would hitch its technological star to software that was pulled off the Web and unsupported by a major vendor? Who knew what lurked in the code, or how easily that code might be cracked into?

Today, the recession and its attendant impact on IT budgets have prompted companies to live with a certain level of anxiety. And, as well, years of experience by those on the cutting edge have shown that many applications within the [open-source] world may now be ready for prime time. Vendors do in fact play a role in supporting [open source], and while their fees have been rising, overall cost of ownership is still substantially lower; often that vendor support feels more like a security blanket than a shakedown.

This isn't a Payless Shoe Store commercial, either ("You could pay more, but why?"), promoting goods of generally less quality. Open source has hit its stride, and often the open-source competition is actually better for enterprise requirements than the proprietary alternative. For example, if an enterprise is running Web applications, it would be daft to not at least consider using the leading Web database: MySQL.

Better software, lower price. What's not to love?

If you're a CFO, there's much to love in open source. If you compete with open source, well, perhaps you won't be so enamored. Sorry about that. Competition has returned to software.

Disclosure: I am an Alfresco employee, and an adviser to SugarCRM.

OStatic's Sam Dean speculates that 2009 could be the year of open source mergers and acquisitions, what with the super-low valuations of Sun, Novell, and Red Hat. He may be right, though we might also see these (and others) snapping up the low-hanging fruit of even smaller open-source companies in an attempt to unify a growing open-source ecosystem under one corporate roof.

As I fell asleep last night, however, a different thought struck me: do Eclipse and Mozilla suggest an entirely new form of M&A for open source?

Yesterday I suggested that creating an OpenOffice foundation might be the best way to resolve its alleged management problems. Indeed, as I've argued before, foundations around open-source projects may well be one of the best ways to grow open-source projects' relevance and influence.

Could this be a more efficient way to provide industry benefit without trampling on developers' benefits? Consider the alternatives.

The increasingly normal (commercial) route goes as follows: Project X is started by a developer in her spare time. Project X grows due to great code and solid leadership. VCs notice this growth and invest in a company (Company X) around the project (e.g., Acquia for Drupal, Digium for Asterisk, etc.). Company X competes with IBM et al. but IBM et al. wish that Company X would go away. In some cases, IBM et al. acquire Company X, and capture its value for themselves, leaving the rest of the industry and, often, the project, a bit moribund.

What would happen, however, if the industry had a mechanism for allowing interested corporate parties to provide an exit for Project X's (or Company X's) core team? Instead of selling to one company, in other words, Project or Company X would sell to the industry, as it were, and would become Foundation X, with its value would becoming industry property.

There would be huge benefits to the industry with such an approach, and solid returns for the developers at the open-source project. The problem, of course, is coordinating the resources necessary to purchase an exit. Given corporate gamesmanship, this is likely to prove intractable.

It's too bad. My own company has had large corporate interests approach Alfresco to change how we operate to make us more of an industry standard, but at our expense, not theirs. I imagine, too, that projects like JBoss and MySQL would have made amazing foundations, but I doubt their founders (and their investors) would have been willing to forgo their $350 million and $1 billion paychecks, respectively.

It's not enough to demand that Sun turn OpenOffice into a foundation, or to howl at the gates for IBM to open source its Notes and Domino products. We can't rely on big companies to spend money to develop assets, and then release them out of charity.

Even so, there must be some way to make foundations into a profitable exit for development teams. As an industry, we'd be the richer for having more foundations, if only we could figure out how to help developers become richer in the process and to coordinate the corporate resources necessary to make it feasible.

While 2008 has been a bleak year for the financial markets and the global economy, it has been very kind to open source, at least based on market share. A review of Net Applications data suggests that there has never been a better time for open source; however, as Google Trends data suggests, it's no longer enough to rest on one's open-source laurels.

• Number of projects. In terms of sheer numbers of open-source projects, as well as traffic to those projects, open source was on a tear in 2008, with SourceForge alone increasing its hosted projects by 10 percent.
• Browsers. Firefox has cracked 20 percent of the market, while Google Chrome has topped 1 percent. Internet Explorer has dropped month over month for nearly 12 straight months in 2008. As IE falls toward 50 percent market share we will, as Glyn Moody suggests, get a taste of real browser competition again.
• Operating systems. Windows, too, has been on a slide, though at 89 percent of the market, it's hardly in a weak position right now. Linux and Mac have both gained at its expense, with the latter taking a real bite (over 1 percent) out of the Redmond giant. But for Mac and Linux, the real market to watch isn't the desktop, but rather the mobile (or nearly mobile) market, where Mac and Linux have real consumer advantages.
• Commercialization. 2008 saw Red Hat and Novell Linux (and JBoss, in the case of Red Hat) revenue jump dramatically, as Sun also saw Open Storage and MySQL revenue climb significantly. But the real story may be in private data. My own company doubled its sales (again), while I know from conversations with executives at SugarCRM, MindTouch, JasperSoft, and other open-source vendors that their sales were on a tear, too. Separately, we're still talking about relatively small amounts of money (under $50 million), but collectively...? Commercial open source is coming into its own.
• General interest. Intriguingly, "open source" as a search term has been on the decline for years, as shown below, but I think this is a positive development. In light of the above, I read this decline to suggest that people are less interested in generic open source and more demanding of specific open-source projects. Does Hadoop meet my needs, in other words, not is it open source? This is a sign of maturity, not weakness. It's a sign of open source going mainstream, as Sun's Zack Urlocker suggests.

"Open Source" search on the decline

(Credit: Google Trends)

It has been a banner year for open source, just as it has been since at least 2000. I suspect that 2009 will be much the same...only better.

Over the Christmas break, I've watched one of the basic powers of open source in action. Two employees from my Alfresco team did something that is largely impossible in the proprietary world:

They wrote integrations to third-party open-source software, the Apache Hadoop and Drupal projects. No contracts changed hands. No NDAs. Just code.

Open source, of course, is a great way to get one's code in the hands of would-be customers, and then sell them support or other add-on services or software. But it's also a fantastic way to collaborate with would-be partners. Not a single lawyer need get involved until the code is working, and then only to divvy up responsibilities and revenue, if you so choose.

Try the above integrations between two proprietary companies. First you get contacts from both companies (probably the executives, depending on the size of the company, because who has authority to make that kind of a decision?) to start talking about the integration. Then, before any real work happens, the lawyers need to get involved. (While at Novell, I had one of the most distressing experiences in my life trying to negotiate a partnership with Siebel. It's not an experience I'd wish on my worst enemy, much less a partner.) Further work will then need to be done to define the integration, marketing teams will need to get involved to define the go-to-market strategies and whatnot. And so on, until eventually code actually gets written, a year or so later.

With open source, you just need one guy and a week or two of downtime over Christmas. With proprietary software, you need a small army. Which do you think is the more efficient model?

To get a glimpse of the changing face of open source, look no further than InfoWorld's "Future of Open Source" roundtable. Some of the thoughts expressed by various leaders in the open-source community are insightful, but that's not the real story.

No, the real story is who InfoWorld chose to profile.

Sure, you get the obligatory Bruce Perens and Eric Raymond call-outs, because these are two of the guys that formed the foundation of open source upon which the rest of us build. But they're the only throwbacks to the "good ol' days" of open source, back when open source was suspiciously anti-corporate (until Raymond and an elite group dubbed "free software" "open source").

Today? Nearly everyone on InfoWorld's list is corporate.

The companies represented include big companies (IBM, Microsoft, Google), small companies (Alfresco, Digium, Hyperic, EnterpriseDB), and in-between companies (MySQL/Sun).

It's perhaps this last one that demonstrates the profound change open source has made over the past three to four years. MySQL was and is a community favorite, but at a cost of $1 billion it has demonstrated the corporate value of open source and, indeed, has begun to alter its business model to ensure that it balances its free (developer) community with its paid (enterprise) community.

Dave Rosenberg writes that 2009 will be the year when open source becomes paid software, but I think we're already there. We've been there for at least two years, in fact. We just didn't know it.

InfoWorld's roundtable, however, makes it abundantly clear: open source is corporate, and that's a compliment, not a slight.