Open Source Software: What's Next?

This is a big question; I am going to take a stab at it. It’s no secret that open source has conquered the lower layers of the stack namely the operating system layer with Linux, the App/Web server layer with Apache and JBoss, and of course the DB tier with MySQL and PostgreSQL. Some proprietary vendors have embraced open source to their advantage and sometimes used it to hurt their competitors (like IBM’s commitment to Linux to hurt Microsoft or SAP’s support for MySQL to annoy Oracle) while other vendors have a very hard time finding a new source of revenue such as BEA.

It doesn’t take a genius to figure out that open source’s next crusade will take place. The first obvious area is enterprise applications and some people believe strongly that the second one is IT management. Open source software usually thrives where systems take forever to implement and require big upfront software licensing fees charged by large proprietary vendors making it inaccessible to SMBs. I believe that CRM, ERP and PBX are definitely in this category. In that order there are strong open source projects that are trying to claim market shares namely SugarCRM, Compiere and Asterisk. I could have added the popular Nagios project for the IT management space which extended and supported by companies like GroundWork. Obviously, today these companies are no match for Oracle, SAP, IBM, Microsoft or Cisco but they are gaining ground every day and their popularity is a clear indication of where OSS is going next.

I also believe that the penetration of open source in the enterprise application world might be even faster than its penetration in the underlying layers simply because there is a big market opportunity for services and the open source community will be much more enthusiastic about developing enterprise applications to solve real world (sales automation, HR, billing, supply chain, health records…) problems for themselves and their clients than developing operating systems which can be boring at times.

An interesting debate would be: How can large proprietary vendors continue to make money and grow? My modest and personal answer is that, among other things, they have to invest heavily in R&D to always stay ahead of the curve and change their licensing model. IT buyers are much more educated, they are willing to spend money as long as there is a demonstrable and durable ROI. Salesforce.com is a good example; they offer more functionality than SugarCRM and they don’t charge licensing fees upfront. It’s an affordable monthly fee that customers pay as they go. By the time Siebel realized they had to offer a subscription-based offering, Salesforce.com was already public. It was too late.

This is a topic I would really love to get your opinion on, please post your comments. Do you believe open source is going to be big in the applications space five years from now? How do you see large proprietary vendors make a difference? Do they have to change their licensing model? Do they have to use their domain expertise to deliver services as their software revenues shrink?