News Analysis

The art of the open source deal

Mark Brunelli, News Editor

NEWTON, Mass. -- Open source software (OSS) vendors may have the advantage of being viewed as the proverbial Davy in the face of proprietary Goliaths, but don't let that wholesome image fool you.

Open source vendors are just as concerned with making money as any proprietary behemoth, according to attendees and analysts at the Open Source Business Conference (OSBC). And as with proprietary vendors, companies going into negotiations with open source firms will want to be well prepared.

Finding the right open source business applications and getting the best all-around support deal means knowing what questions to ask and how much leverage you have, said the attendees, many of whom have done business with open source applications vendors, such as SugarCRM and SleepyCat Software.

"The perception used to be that open source means free and it doesn't cost anything and so on and so fourth," said conference speaker Stephen O'Grady, principal analyst with Denver-based RedMonk. "But I think it's important to understand that these are companies and these companies do make money."

More live coverage of the Open Source Business Conference:

Open source software and the innovation evolution

Microsoft: Open source not that open

SleepyCat CEO: Oracle deal an attempt to disrupt MySQL

SugarCRM CEO: Thank you, Larry Ellison

EnterpriseDB CEO gunning for Oracle

Open source pitchmen face tough sell at OSBC

Open source startup takes on content management market

Plenty of news heading into Open Source Business Conference

CIOs explore open source options

OSBC director: Linux, open source profitable, stable and on the minds of CIOs

Ask about the license model

OSS vendors are primarily in the business of selling support for open source applications. But when potential customers sit down to hear sales pitches from these companies, they'll often hear about how great the application is in terms of features and functionality, O'Grady explained.

Features and functionality are great, O'Grady said, but the real issue to discuss at these meetings is how that vendor differentiates itself from proprietary vendors -- and other open source vendors for that matter -- in terms of support programs and, more importantly, license models.

For example, O'Grady said, customers talking to open source e-mail vendors should ask, point blank, how that vendor's license is different from licenses offered by Microsoft or Notes.

He said these types of questions are very important because license models tend to vary greatly. While some companies look to monetize support services per user or per instance, others charge for support on an upfront basis.

"They're all going to be trying to differentiate on a product basis," he said. "But the role of a lot of open source providers is to sit down and try to differentiate themselves on a licensing basis."

Gauge the strength of the community

Open source support vendors will brag about the size and scope of their community of code contributors, but don't take their word for it, said Rob Lackey, chief information officer of BZ Productions in Coventry, R.I.

Lackey, who has done business with open source database vendor MySQL and SugarCRM, said it's important to dig deeper and find out exactly how many of those community members are actively working to improve the application in question.

The CIO explained that a strong community of developers means fast bug fixes, frequent enhancements and better overall security.

"The primary consideration when selecting an open source company has to be the strength of their community and how much their business model is focused around that community," Lackey said.

Remember size equals leverage

Barry Strasnik, CIO of the financial services giant CityStreet, understands the meaning of buying power.

When Strasnik goes in to negotiate with an open source vendor, he tells them straight out that they can either give him a good deal, or he'll just download the application for free and hire someone in India to support it.

"It's amazing that some open source vendors still want to license support by the number of CPUs," said Strasnik, whose 500-person strong IT team makes use of JBoss, Apache and Linux. "No. No. No. You're going to give me an enterprise-wide license of support and I'm going to promise that I'll only have two people call you [when help is needed]."

What about long-term costs?

Open source firms like to tout the low costs associated open source. But they're usually just referring to the cost of the software itself.

Conference attendees reminded that buyers should always be thinking and asking about the long-term costs of migration, support, maintenance and training.

"Getting from point A to point B is a challenge," said RedMonk's O'Grady. "[Ask how the provider] offset that cost with lower ongoing costs, better functionality and so on."

BZ Productions' Lackey said it's especially important to ask about training for highly specialized business applications like customer relationship management.

"You definitely have to look at it from cradle to the grave," he said.


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