January 10, 2005 4:00 AM PST

Open source reshaping services market

The open-source movement has already rewritten the rules for how software is licensed and used. Now the computer services market is changing to keep up.

With the number of open-source products on the rise, there has been a surge in services offerings--such as consulting and support--designed specifically for open-source software like Linux, the Apache Web server and MySQL database.

Big companies looking for help in assembling new systems based on unfamiliar open-source programs are fueling a race among providers--some new, some holdovers from the dot-com boom and long before--to become the trusted name in open-source services.

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What's new:
The growing interest in Linux, Apache, MySQL and other software is prompting new and long-established services firms to specialize in open source.

Bottom line:
Corporate customers will have more providers to choose from for installing and maintaining open-source software. The rise of open source services also reflects how software distributors are increasingly competing on the services they provide, rather than on software features.

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Analysts expect the market to come to a head in 2005. "Open source won't be about the software at all--it will be about the services," said Julie Giera, an analyst with Forrester Research. "The recognition will dawn on people that this is a services play, not a software play."

Sensing that opportunity, a number of companies specializing in open-source services have sprouted up in the past year. The former CEO of professional services outfit Viant--which flourished briefly, then crashed during the dot-com bust of the late 1990s--last month launched a company called Optaros, which will provide IT consulting for open-source software. SpikeSource, a new company specializing in ongoing support and certification of open-source components, last month launched a beta program for its maintenance services. A competitor to SpikeSource, called SourceLabs, formed last year.

"More and more, the emphasis is going from the bits to the services wrapped around those bits," said Kim Polese, an industry veteran who helped develop the Java programming language and who is now CEO of SpikeSource.

Established professional services firms are raising the stakes as well. IBM and Hewlett-Packard, for example, are expanding their services offerings for open-source components.

Industry executives and analysts expect to see a flourishing of services for open-source software, with vendors tackling up-front consulting and installation to ongoing support and maintenance. As providers chase services-related dollars, corporate customers will have more options to experiment or expand their use of open-source software.

"There are opportunities for newer companies to try to latch onto the success of some of the biggest names in open-source projects and gain some brand recognition," said Stephen O'Grady, an analyst at RedMonk.

New faces
Open-source software, especially the Linux operating system and Apache Web server, are commonly used in businesses already. Now, the palette of software available with an open-source license is extending to browsers, infrastructure software, desktop software, development tools and even packaged applications.

Most open-source licenses allow people to download and use the software for free. That cuts down on the cost of acquiring the software but business customers still require services, ranging from upfront consulting to ongoing support once the software is installed and training for internal staff.

Building an application from open-source software components generally requires more integration work. Proprietary software providers, including Microsoft and Oracle, have engineered their products, such as databases and management tools, to fit together well, which cuts down on initial installation and simplifies the process of introducing updated versions.

SpikeSource and SourceLabs plan to charge a subscription fee for support and maintenance services for Linux, Apache, MySQL, PHP development tools and, in the case of SpikeSource, the JBoss Java application server.

By contrast, Optaros, which announced last week that it landed funding from Charles River Ventures and CEO Bob Gett, is taking a more traditional IT consulting tack to open-source services. The company will provide up-front consulting and application development for specific projects.

To Gett, open-source represents a major shift in computing, similar to major technological changes that have shaken up the industry in the past, namely client/server and Internet computing.

"The world is full of professional services firms and it's become a pretty tough business. However, at the beginning of adoption of a new platform, there's an opportunity to create new companies that are specialized," Gett said.

According to a survey done earlier this year by Forrester Research, about 60 percent of companies have installed or will install some form of open-source software by the end of this year.

Despite the buzz in the technical community among developers and entrepreneurs, actual corporate customers are still assessing

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