Last week I suggested that open source still has work to do to penetrate the SMB (small to medium-sized business) market. Immediately various open-source companies started contacting me, either corroborating my contention or contradicting it.
Untangle is in the latter camp.
Untangle's active deployments skyrocket with open source
Untangle CEO Bob Walters talked with me in 2008 and indicated the company's switch to open source had paid serious dividends. As I learned in this follow-up email, the momentum has accelerated, as shown in the graph at right, and it's apparently all coming from the hard-to-reach SMB market.
Untangle sells software that allows small businesses to securely connect their local networks (LAN's) to the Internet. In other words, Untangle is a "secure network gateway" company, as Bob describes it. The company has now open sourced roughly 90 percent of its code, which is given away free of cost, and then charges for advanced features, similar to the business models used by SugarCRM, Zimbra, and others.
That move to open source has proved beneficial, as can be seen in how deployments have soared since Untangle open sourced its code. But I still wanted to know how Untangle successfully reaches the SMB market, particularly in light of the fact that Untangle doesn't build appliances which might make the software easier to adopt than a download-and-install-it-yourself model.
Open source has helped turn Untangle's customers into a self-reinforcing community:
Nothing sells like free during a recession. And those 18,000 active Untangle sites become both spokespeople for and prospective customers of ours. It's then our job to put highly-useful complementary commercial products in front of them.
Well over 99 percent of our customers have fewer than 100 employees. These include accounting firms, professional services firms, retail franchises, and small government agencies/offices. We are also popular for schools, especially private middle and high schools. (These can sometimes exceed the 100-user mark.)
Fine, but how do you reach such a scattered, tight-fisted market?
... Read moreEating dinner with Larry Augustin in London this weekend, we fell to talking about open source's relevance to the SMB (small- and medium-sized business) market. Augustin is currently CEO of SugarCRM, a company with over 5,000 customers, many of them SMBs.
But SugarCRM is the exception to the rule. Open source has long been billed as a savior for the SMB market, but the reality is that open-source adoption has largely been an enterprise IT phenomenon, despite other exceptions like KnowledgeTree, which recently updated its product suite to further appeal to this market.
Why aren't more SMBs adopting open source? Following recent Forrester data, Savio Rodrigues of IBM points out that many SMBs still cling to the perception that open source is not secure and is overly complex.
In many cases, it's not perception. While it's tough to generalize about open source at this point in its history, it's absolutely the case that some open source is complex, some open source is not secure, etc. Much open-source software mimics the enterprise software world it strives to leave behind.
Dell is trying to overcome these concerns by selling prepackaged open-source applications, and I would assume we'll see more companies following Dell's lead.
While some big vendors like Cisco already have significant SMB focus, others, like Oracle, SAP, etc., could use an open-source runway to the SMB market. Unfortunately, as noted, open-source vendors haven't necessarily penetrated the SMB market any better than the proprietary vendors have.
This suggests a strategy for open-source vendors, one that could lead to a big exit: figure out how to pitch to the SMB market, then sell to those big, proprietary vendors that need an entree to SMBs. The new hybrid model for open-source vendors might well be to make the "enterprise" version the one that is easiest to administer and use.
First, however, open-source vendors need to start making software easier to use, and not emulate all the wrong behaviors of the proprietary past. Fortunately, the way to make software easier for SMBs and to monetize it might actually be cloud-based computing.
How fortunate.
Disclosure: I am an advisor to SugarCRM.
Follow me on Twitter @mjasay.
IBM has been busy this past week at LinuxWorld, releasing some of its supercomputing code as open source, plus partnering up with Novell to battle Microsoft's Small Business Server and with Canonical/Ubuntu, Novell, Red Hat, and others to go after Microsoft's hold on the desktop:
The company said its HPC Open Source Software Stack, which includes IBM's Extreme Cluster Administration Toolkit, was its first ever contribution of open source code for supercomputing....
IBM also said it would work with Canonical/Ubuntu, Novell and Red Hat and a number of hardware partners it did not name to deliver in 2009 "Microsoft-free" PCs with Lotus Notes and Symphony. The company said integration between Linux and Microsoft desktops and the proliferation of client computing devices such as the Smartphone would provide the opportunity to finally make a noticeable dent in Microsoft's stranglehold on the desktop.
It remains to be seen whether smaller companies will want IBM's Lotus software. When I was with a start-up that used it I found it to be clunky, and our IT department (that is, "Jim") found it cumbersome, causing us to dump it for Exchange).
But I like the direction. Google and others are pushing new paradigms for desktop computing, but IBM still has billions at stake in wrenching Microsoft out of enterprises, both small and large. IBM has the heft to give Microsoft a run for its money on the traditional desktop. It's one thing to have Novell, Red Hat, and Canonical/Ubuntu pushing the Linux desktop, but it's quite another when IBM gets into the fray. IBM is just as biased but the move brings a brand that commands respect beyond Linux. This should matter.
A more natural, near-term fit, however, is IBM's supercomputing move. IBM is huge in high-performance computing. Any contributions it makes should be welcome...unless you're HP or another competitor seeing IBM seed the market with its own free and open-source tools.
All in all, a great set of moves by IBM.
eCommerce News lists 10 technologies that are "ballyhooed technology trends [but]... are worth ignoring, at least for this year." Some of the points made are correct for the audience (Small to medium-sized businesses, or SMBs) addressed by the article, like this point on virtualization:
...[W]e small businesses don't need to run Microsoft Outlook in a virtual world. We can barely get it to work right in the real world. This technology needs more time before it makes sense for small business.
But at least one other is way off, like the admonition not to use Software as a Service. What could possibly be better for an SMB than not having to install software?
This leads me to its suggestion that open source is not ready for SMB prime time:
... Read moreDave Rosenberg has a great take on Microsoft's new "Open Value Subscription" for small to medium-sized businesses. The premise is that SMBs can plug into the Microsoft mothership for lower prices and less worry. His take? OVS is NOTA (none of the above):
- There is nothing open about the code or the contract as you have to use the software for a set period of time
- The value isn't really there as there is no cost-benefit
- It's not really a subscription as "lease-like" means it's a perpetual license--you just absorb the cost over time instead of upfront
- If you already bought all the Microsoft software you might get a discount if you buy this muck too
But hey! Other than the fact that it doesn't do anything that it purports to do, it's great!
Microsoft has tried subscriptions before, but it always ends up jacking up its pricing through subscriptions rather than lowering them, as open source tends to do.
It's not surprising to see The 451 Group's findings that the small-to-medium-sized business market doesn't promise untold riches to open-source vendors. The SMB market is difficult to crack regardless of one's licensing and marketing approach. Several of open source's primary benefits - and particularly the ability to modify code to suit one's requirements - fit large companies well and SMBs almost not at all.
SAP is trying to penetrate the market with low-cost SaaS. Red Hat has knitted together open-source solutions in RHX to pave the way to open source applications for SMBs. But the reigning king of SMB - Microsoft - continues to dominate with low-cost, well-integrated, and easy to use software that a vast array of resellers knows how to implement.
Some key findings from the report, which surveyed 50+ open-source vendors:
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