Open Source is being looked at as a kind of communal catalyst for innovation and creativity, some others see it as a wildly destructive trend that threatens to undermine the economic viability of the entire software industry. WHAT IS IT?

To date, Open Source projects have largely been focused on broad horizontal platforms within infrastructure software. These projects have been so numerous and so successful that many pundits now talk about building applications on top of the all-Open Source LAMP (Linux , Apache , MySQL , Php /Python /Perl ) stack. And that stack continues to get bigger as Open Source projects start migrating to more complex infrastructure platforms.

Big question - Will Open Source start to become a major factor in the enterprise applications space.

YES, There is no doubt that the next frontier for open source software development is the applications space.

Historically Open Source efforts in the applications space have been confined to niche applications in the academic space, Now more and more there are numerous efforts underway to try and create enterprise-ready Open Source applications,such as SugarCRM .

In the recent Open Source Business Conference in San Francisco, Larry Augustin, CEO of Medsphere, talked about four successful models, each representing a different application category: sugarCRM , Compiere , Asterisk , and VistA (the technology his company first deployed to the private sector) and looked at what they had in common to come up with six rules that identify a ripe opportunity for open source:

• Look at heavy applications that are traditionally a big expense and take years to implement. These include, CRM, ERP, PBX, and EHR (electronic health records).
• The presence of big proprietary traditional competitors with big upfront software licensing fees that make it hard to get started.
• A large, enthusiastic free user base so you don't have to spend a lot of time educating them and the market about what you are doing, giving you sales leverage.
• An enthusiastic developer ecosystem--you have a community of people that participate in some way.
• There is a big enterprise market opportunity: for healthcare, the market is to grow to $25B IT market by 2007.
• You have a big under-penetrated SMB market opportunity.

Augustin also went on to talk about two drivers for the next wave of open source.

The first is developer interest. He said that applications give fodder for the next generation of developers looking for a new challenge. "They're not going to build Linux again," he said. The second reason is that the traditional enterprise software model is broken (long sales cycles, expensive, inaccessible to SMBs, etc.). He said that 76% of new license revenue today goes to sales marketing, pointing out the irony that vendors are charging customers to convince them to buy their software.

He than goes on to talk about the Open Source Enterprise Application Business Model, Providers of open source enterprise applications stand a good chance to compete against established vendors as although they might lack the revenues from software licenses they also save on the development process as the developer community helps with building and maintaining the application.

More importantly however, open source providers don't have to do pilot projects at customer sites. Interested users can download the software and test it in their own time and on their own terms. This results in shorter sales cycles and allows for a smaller sales and marketing budget.

Points from his slide on the business model are:

• Reduce sales and marketing costs
  
  • Free try before you buy model
  • No expensive pilot
  • No evangelical sale: potential customers are already users
  • Sell enterprise software more like we sell small business software
  • Let the user come to us!
• Reduce development costs
  
  • Still do most of the development work
  • Leverage Open Source for testing, edge cases, interfaces, etc.
• Open Source results in a fundamental business model advantage

You can access the presentation here

Prashanth RaiSource 1Source 2