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This article describes a concept which could impact a variety of companies and industries. The article lists companies that could benefit or be harmed by the trend. To see what companies and articles reference this concept page, click here.

Open source software differs from traditional commercial software because it is generally free of charge, or in some cases offered for a minimal fee. The term "open source" means that the software's source code, or its basic architecture, is open for anyone to see and use. For development, open source software relies on a community of contributors, some of whom are volunteers and some of whom are employed by technology companies. These contributors provide public access to any source code modifications they make or suggest. Any individual can contribute any code in any area they prefer, though there is generally a pyramid management structure that ensures that aspects of the software are developed in a modularized fashion and determines which code/modules are eventually included in future versions of the software.

With a large body of developers and a modularized product, open source software has been championed as a way to build better quality software faster and at a lower cost than the traditional proprietary software development model.

The most well-know open source software is Linux, which is an operating system named after its creator, Linus Torvalds. Although there are many other open source initiatives underway apart from Linux, there are only a few that have gained widespread adoption at the enterprise level. These others include Mysql databases, Apache web servers, and the Mozilla Internet browser.

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A number of companies have been built around an open source business model, where they license their software for free or very inexpensively, but derive their revenues from support and training services. Because many of these companies can vastly undercut competitors in price, they are growing as acceptance of the open source philosophy also grows at the enterprise level. The winners in the open source game are these rapidly growing open source companies and those enterprises that can save substantially by buying open source software. Losers in this field are obviously those companies that offer proprietary software that is passed up at the enterprise level for lower cost open source software.

[edit] Open Source Winners

Red Hat (RHT) and Novell (NOVL) are the two largest Linux vendors, but Red Hat dominates the field with approximately 65% of the total Linux server shipments in 2006. These companies each market their own versions of Linux, which they test for reliability and ensure interoperability with a variety of popular applications. With analysts predicting that Linux OS servers will continue to gain market share in the future, these companies are poised for success. It should also be noticed that Novell recently forged a partnership with rival Microsoft that included a reseller agreement that sees Microsoft distributing subscriptions to Novell's SUSE Linux software, joint research and development operations, royalty payments from Novell to Microsoft, and an agreement from Microsoft not to file patent-infringement charges.

Yahoo! (YHOO) and Google (GOOG) were the two most visited websites in June 2007 (Media Metrix). Popular websites like these generally own or collocate large server farms that handle all of their web traffic. The ability to maintain hundreds of servers using inexpensive open source software is a huge cost saver for these companies because they don't have to pay per-server license fees.

Equinix (EQIX) and SAVVIS (SVVS) are two large providers of collocation, hosting, and data center services. These services require the use of hundreds of servers, and thus these companies similarly benefit from inexpensive open source server technology.

Akamai Technologies (AKAM) employs over 15,000 servers to help deliver website content faster throughout the world. They too save money in maintaining open source servers.

[edit] Traditional Losers Jump on Bandwagon

Microsoft (MSFT), Oracle, International Business Machines (IBM), and Sun Microsystems (SUNW) have been the main losers throughout the expansion of open source popularity, but all of these companies recently took steps to mitigate those losses by moving into the open source arena (see Drivers section). Although moving towards open source is a positive step in the long run, those that do embrace the open source philosophy will ultimately cannibalize some of their software license revenue in the short term. Microsoft currently dominates the OS server market, but has seen its market share decline directly due to Linux growth. Sun's Unix server sales have also seen declines, which actually led them to make their once-proprietary Solaris OS open-source. IBM made a splashy strategic shift to Linux a while back, but they and Oracle face steep competition from MySQL databases in certain segments, especially among websites. Microsoft's ubiquitous Internet Explore browser, the target of many browser attacks among hackers, has the most to lose with the growing uptake of Mozilla's Internet browser.

[edit] Open Source Drivers

[edit] Proprietary Software Companies Offering Open Source Support

Companies like Oracle are trying to win back customers they lost to open source software by offering support services for Linux as well as selling their proprietary software. Microsoft's recent deal with Novell also points to feeling among proprietary software vendors that they can't beat the open source movement, so they might as well enter the competition for support and training revenue. Now that proprietary software vendors are supporting open source software, enterprise adoption should grow at a faster rate.

[edit] Trust in Open Source Reliability Among Enterprise Sector

Because the source code for open source software is transparent and built in part by volunteers, enterprise IT planners are often hesitant to use it fearing security issues and a lack of support if the software experiences problems. Thus, companies with large IT departments and in-house developers that can fix internal problems on their own are generally the early adopters of open-source. Companies like Red Hat (RHT) and Novell (NOVL), because they guarantee support for their Linux solutions, are slowly but surely convincing wary enterprises to take the open source plunge.

[edit] Patent Infringement Lawsuits

Microsoft (MSFT) and other large proprietary software vendors have sued open source software companies for patent infringement in the past, and while Microsoft has recently agreed not to sue Novell for for patent infringement for the time being, the risk is still out there and affects open-source adoption among companies wary of being involved in future law suits.

[edit] Government policies in favor of Open Source software

There is a trend towards governments around the world encouraging the use of free or Open Source software (so called 'FOSS policies'). These either mandate the consideration or use of Free / Open Source software, or the use of open standards for document file formats, in preference to closed proprietory standards. See: FOSS Government Policy

[edit] Footnotes

1. ↑ http://static.flickr.com/24/52111325_a35766b33d.jpg
2. ↑ http:http://www.synaq.com/view.php?p%5BNULL%5D%5BIGcontent_categoryID%5D=2&p%5BNULL%5D%5BIGcontent_menuID%5D=20
3. ↑ www.mysql.com/why-mysql/marketshare/
4. ↑ www.mysql.com/why-mysql/marketshare/
5. ↑ http://news.netcraft.com/archives/2006/09/05/september_2006_web_server_survey.html