Attack of the Alternatives, What about Commercial Open Source Software?

This month’s cover story for VAR Business touts the Attack of the Alternatives.  The premise is certain companies are gaining or having success in the shadows of the market leaders because they are offering a greater value then the market giants:

Just ask Matt Medeiros, president and CEO of SonicWall Inc., and Jack Domme, COO of Hitachi Data Systems. Both have competed for years against two of the biggest, baddest wolves (Medeiros against Cisco Systems (NSDQ: CSCO) Inc.; Domme against EMC Corp (NYSE:EMC).).And both have led their companies to big sales and profit gains by providing more value for customers and more margin for their partners.

The story got me thinking of all the open source alternatives to proprietary market leaders. In the article, Sonicwall and Hitachi are beating their competition by providing greater value (at what seems to be at the cost of lower margins) but I think that cost competitiveness is very hard to sustain. Ironically they just aren’t following the lead of their proprietary brethren in raising and complicating their pricing structure. 

In contrast you have open source vendors that are beating their competition but they are doing so by being disruptive in ways drastically different than Sonicwall and Hitachi. They are adhering to Clay Christensen’s model of disruptive innovation. The model is that usually defined by new technologies entering the market in the low quality use and then moving up through to the most demanding use. They typically start out a much lower price point and gain momentum and increase as the product matures. Linux is a superb example. In early use Linux was often used as the operating system for less mission-critical applications like web and file servers. Today mission critical applications like those from Oracle and SAP are hosted on Linux. 

Open Source Value, No Secret Sauce

The no so secret sauce of enterprise open source there’s a common set of themes that include interaction with a community of users some paying usually many more who don’t. It probably sounds counterintuitive but these are some of the traits of successful commercial open source projects. 

• Transparency – Sharing plans and incorporating users feedback into the product development life cycle (i.e. polling users on features, making road map publicly available, sharing bug and feature tracking databases).
• Collaborative Development – Most people immediately jump to he conclusion that open source companies turn over their core development to a loose affiliation of users. What happens in practice most often is companies develop a core platform that’s pluggable and then users add their plug-ins (SugarCRM’s SugarForge is an excellent example). Some companies like MySQL don’t accept core development contributions but their product is embedded in thousands of other projects. Projects like myPHPadmin thrive as part of their ecosystem. 
• Free Distribution – This allows OSS companies to grow rapidly. Having software included as part of the repositories for Linux distributions or on their installation disks is a highly leveraged advantage in growing a companies brand and easing adoption by making installation easy. 
• Software-as-a-Service – When you make a big upfront investment it immediately obligates you to see an acceptable return on investment (ROI). Unfortunately when you plunk down a huge enterprise licensing fee you are usually looking at a long term marriage or at least until you get the seven year itch. In the SaaS model typically the vendor has to re-earn your business during a much shorter subscription period. In addition, the upfront investment being smaller makes it easier to adopt.  

Enterprise Open Source Alternatives

Here’s a list of some of the commercially supported enterprise applications that are both disruptive and oriented towards providing greater value for their users. It should be noted that I am not saying that everyone one of these solutions is the ultimate replacement for current enterprise solutions they all live at various points along the disruptive innovation curve as pictured above. 

This is far from a complete list please let me know if you have other suggestions. For a more complete directory I suggest OSalt.com which identifies open source alternatives to commercial software. 

Technorati Tags: Alternatives, commercial, Disruptive Innovation, Enterprise, Hitachi, Open Source, OSAlt, SaaS, Software-as-a-Service, SonicWall, VAR Business