The Open Road

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.

My post on Tuesday suggesting that Oracle, IBM, Cisco Systems, and Microsoft are the last remaining big (software) ecosystem vendors caused a stir. "But what about EMC, Hewlett-Packard, SAP, Adobe Systems, Symantec, and...X?" came the flustered responses.

HP's public-relations firm even took the time to send me this plug for HP's software business:

IT management software is critical for enterprises to keep up with the continuous pace of technology change and growing business requirements. As the leading IT management software vendor (according to Gartner, Forrester, and IDC), HP's software solutions helps customers manage IT like a supply chain that is aligned to the needs of the business, and makes sure they spend money on all the right things that will deliver the most value to the business.

Let's assume that's true. It still doesn't answer the underlying premise of my original post: identifying the most relevant, broad-based software vendors in the market, the ones with hefty ambitions and product portfolios to complement them.

HP has a strong IT management portfolio, as well as some content management software, among other software assets. But it doesn't come close to approximating the breadth and depth of what I deem the Big Four ecosystem players. Nor does EMC or Symantec.

Having $1 billion in software sales doesn't make you a Big Four, disruptive-software vendor. Vision and ambition also factor in.

With this in mind, the big software vendors that are dramatically changing the face of software include Oracle, IBM, Cisco, and Microsoft. Other software vendors may be relevant in their markets (who could discount SAP in the enterprise resource-planning market, even despite its earnings disappointment?), but they aren't changing the face of the software landscape.

Except, perhaps, Red Hat, which today lacks in the size, depth, and breadth categories but arguably makes up for these in the ambition department. Or, on that score, perhaps Google and Salesforce.com should make their way onto the list?

However you assemble the list, it's clear that it grows smaller by the day. Within a year, I think that we'll see SAP in the hands of one of the Big Four (Microsoft, perhaps?), and we may even see Red Hat factoring into an ecosystem vendor's product strategy, rather than crafting a go-it-alone open-source story.

Which vendors are most relevant to you? If you disagree with my list, please let me know why. Who should be on the list that isn't, and who should be off?

Follow me on Twitter @mjasay.

Enterprise software is coming down to four big choices: Cisco Systems or IBM or Oracle or Microsoft.

Hewlett-Packard? HP is doing very well in hardware, but it lacks the overarching software strategy that fuels these other four.

Even as the industry consolidates into these big ecosystem vendors, it's becoming ripe for a new kind of hegemonic, all-out war.

It's a fun time to be in the industry. For one thing, it's fascinating to watch (and, in some cases, assist) each of the Big Four to use open source as a strategic club with which to pummel their neighbors. Open source, thy name is capitalism.

But open source is just one part of it. The bigger part is conflicting product-level competition. Microsoft dominates the desktop and uses it as a "home base" from which to compete in other markets. Cisco spreads the power of the network into a wide variety of complementary businesses. Oracle uses the database as the center of the enterprise-computing universe, but surrounds it with a host of exceptional software.

And IBM? Well, IBM enriches its massive software business with integrated hardware and services that no one has yet been able to match.

Each, of course, is starting to infiltrate the others' safety zone with new initiatives. IBM, as announced on Monday, is pairing up with Brocade to go after Cisco's core networking market. Cisco, for its part, is stepping on just about everybody's toes with collaboration initiatives that veer toward Microsoft's SharePoint, even while it adds a server line to compete with IBM.

Oracle announced the acquisition of Sun Microsystems to help give it a leg up on IBM and Microsoft through Java, Sun's hardware lines, and MySQL. Microsoft, for its part, is expanding into everyone else's markets with the ubiquitous SharePoint.

This is only the beginning. The question is, "The beginning of what?" In some ways, this dramatic industry consolidation reduces customer choice. But in other ways, it enhances it.

Given the centrality of software to this enterprise cage match, it also begs the question, "When will SAP join the fray?" Last week, I spent time at the Open Forum Europe conference, where I repeatedly heard the question raised, "When will Europe produce a dominant software company?"

SAP's strength in enterprise resource planning, or ERP, software could serve as a nice complement to one of the Big Four's product lines--or as a beachhead for the assembly and deployment of an additional, independent software ecosystem.

Red Hat could do the same, fostering an open-source ecosystem to rival that of the Big Four, mostly proprietary software vendors. While the company has shown little ambition beyond infrastructure software, there are hints of a growing interest to sell (and build?) solutions. Red Hat's recent channel expansion through Synnex suggests that it may be toe-dipping its way toward a larger vision of being the hub of the open-source "wheel."

Given this waxing and waning of competition in enterprise software, I suppose that the real question is, "On which ecosystem are you betting your business?" Enterprise IT is a study in heterogeneity, but for how long?

Follow me on Twitter @mjasay.

Despite strong earnings, SAP recently announced that it would cut 6.7 percent of its workforce, or 3,000 positions, according to CNET. While the company reported an 8 percent increase in year-over-year revenue, SAP sees a stalling economy blocking the road before it.

Why not give open source a try?

SAP has invested in a wide range of open-source companies, including MySQL, Red Hat, Alfresco (my company), JasperSoft, and others, but it has never ventured far into actual open-source development and distribution, its MaxDB work with MySQL and its contribution to Eclipse serving as the exceptions that prove the rule.

A few years ago, SAP went so far as to downplay open source's significance at the Open Source Business Conference in a keynote, talking up the need for everyone to jump on the SAP bandwagon and forget the open-source toy.

SAP could arguably use that "toy" right now. Forget source code: SAP needs a more efficient way to get its software in the hands of prospective buyers. Especially in a tight economy, it can't afford to hire an expensive sales force to pan for customer gold.

Its open-source competitors in software for enterprise resource planning may have a ways to go before offering stiff competition to the Germany-based giant, but CIO.com proclaims 2009 as the year of open-source ERP. SAP must be hoping that it's not right.

Adopting open source is not a matter of giving away source code for the love and praise of "community." It's a hard-headed capitalist tool for improving software quality and software distribution. SAP could use both, but especially the latter in this market.

So here's a challenge to SAP: by all means, keep investing in open-source companies, but please also start to invest in SAP as an open-source company. You might find that doing so is just the tonic required to boost sales.

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.

Dennis Howlett at ZDNet reports that SAP is reversing its earlier maintenance price hike, at least in Germany and Austria. While it appears that SAP was prodded into the move due to legal reasons, I imagine that the customer backlash in such a bleak economy might have prodded SAP to reverse course, anyway:

This is a major victory for SAP customers who, despite SAP management's protestations to the contrary have continued to lobby for reconsideration of SAP's maintenance package pricing. According to the FT, some 50-60% of SAP customers in Germany and Austria were deeply unhappy with the measures, citing economic pressures contributing to difficulty in justifying what was already a tough budgetary sell. Computerwoche confirms that SAP had only managed to persuade 25% of its customers to changeover from standard to enterprise support.

The pricing changes won't kick in until 2010, but by then I suspect we'll see the same policy find its way to other markets beyond Germany and Austria. Maybe SAP and its ilk don't have quite the level of pricing power we thought?

SAP is a great company, but were it able to increase prices at will we'd have serious cause for concern.

Disclosure: SAP Ventures is an investor in my company, Alfresco.

There's nothing like a price hike in the midst of a recessionary economy to raise customer ire, as well as expectations as to what they're getting for their fees. SAP, perhaps more than any other vendor, is feeling that right now. By raising its maintenance pricing from 17 percent to 22 percent, with no perceived increase in actual value delivered, SAP has firmly placed itself on the hot seat, as CIO.com reports:

(Of) 203 customers Forrester interviewed, a whopping 85 percent expressed minimal utilization of (SAP's) Support offerings. In addition, SAP customers told Forrester that they just weren't seeing the innovation in product offerings from SAP that should have resulted from the collective billions they've been paying in maintenance dollars over the years.

Indeed, as the article goes on to suggest, SAP should have been lowering its maintenance pricing over the past few years, given that its actual costs of support have gone down. Fat chance.

This is why we need competition in the ERP (enterprise resource planning) market. Oracle brings this to SAP's doorstep, but these are mostly two birds of a feather. Neither has any interest in lowering customer costs because both have an incentive to raise prices on customers that have little ability to move to other offerings.

It would therefore be ideal to see Microsoft and open source move into ERP in a more concerted way. Microsoft is a proprietary software company but it does tend to lower prices when it enters a market. Open source, for its part, would put both pricing and innovation pressure on a market that has been content to collect monopoly rents for far too long.

The problem in ERP is that it's so mission critical that few enterprises are willing to take a calculated risk on competing solutions in order to save money. For this reason, perhaps enterprises are getting exactly what they deserve, after all. No risk, no reward.

Disclosure: SAP Ventures is an investor in my company.

There is a deep, rich irony to an internal SAP directive to immediately halt all new IT purchases, a directive revealed by the Wall Street Journal on Wednesday. SAP's co-CEOs sent out an e-mail with the following instructions:

We will review all planned investments in IT equipment, hardware, software, facilities, and company cars, as well as internal IT projects. Do not order any new equipment at this time.

CIO.com's Thomas Wailgum wonders if SAP expects its customers to do the same, even as it raises maintenance pricing and it and other vendors talk up IT as a way to innovate through a downturn. He's got a point.

Of course, SAP is simply trying to be prudent through a downturn, instituting a hiring freeze and ordering "Any non-customer-facing travel already booked should be canceled immediately, even if this incurs penalties." But its own fiscal prudence may inspire its customers to do the same, which can't be good for SAP.

I had a very frustrating experience this morning. I decided to start editing an internal team wiki and ran into a significant roadblock: To edit the wiki, I first needed to learn "wikiml." What is wikiml? I'm glad you asked. It's a wiki markup language so that wikis look more like Web pages/documents, and not like a stream of undifferentiated text.

There's just one problem: Wikiml. Who wants to learn a markup language just so you can collaborate with colleagues? It's not that the markup language is particularly difficult (here's a cheat sheet for reference), but requiring the learning of a new language is a step backward, not forward, in terms of ease of use.

Wikis may be more powerful than a Microsoft Word document, but if they're not at least as easy, then they're simply not going to get used. Period. Google gets this: Google Docs is actually easier to use than Microsoft Word.

The Bible has this great counsel in Mark 2:27:

The Sabbath was made for man, not man for the Sabbath.

The idea is that Biblical commandments were not designed to inhibit people, but to enable and improve them. Sometimes we let the letter of a law impede the spirit and end up cramping our capabilities. Is there a correlation to software?