Open Source: Why BusinessWeek is Wrong And Compiere Is Right
Aug. 20th, 2008 by The VAR Guy
BusinessWeek says open source companies are struggling to monetize their products and show growth. But new channel strategies from companies like Compiere — an open source ERP and CRM application provider — could prove BusinessWeek wrong. Here’s why.
The BusinessWeek article makes some valid points about big established companies (Oracle, HP, Intel, IBM, etc.) benefiting more than Red Hat and Novell from Linux-driven hardware, applications and storage sales. And truth be told, there aren’t many pure play open source companies making a ton of money.
However, BusinessWeek overlooked a few key points:
- Novell: BusinessWeek says they’re under-performing closed source companies. But Novell has been in transition for years — moving away from its NetWare business, and pushing into the open source, identity management and security markets. Novell’s SUSE Linux business has actually been growing well, though.
- Think Applications, Not Linux: Savvy open source solutions providers can generate $10 or more in consulting fees for every dollar customers spend on open source software. That’s why Red Hat is emphasizing JBoss middleware engagements rather than commodity desktop Linux sales.
- You Need An IT Channel: Open source companies are used to developing online communities that foster collaboration between programmers. Wonderful. Now here’s the problem: Most open source companies don’t understand how to build similar communities for VARs, integrators and all the other folks who will actually sell, service and support all of those open source applications.
Cashing In On Open Source
Those open source channel efforts are just starting now. Compiere, for instance, says it has lined up 14 new channel partners spanning 13 countries in North and South America, Europe and Asia/Pacific. The new Authorized Partners will:
“localize, resell, implement and support Compiere’s award-winning open source ERP and CRM solution in countries throughout North and South America, Europe, Africa and Asia/Pacific. Compiere provides global partners and customers with an easy to deploy, adaptable open source ERP and CRM business solutions that dramatically lower acquisition and deployment costs compared to older, proprietary technology.”
Here Come the Open Source VARs
Compiere isn’t the first open source company to push into the channel. As The VAR Guy has previously reported:
- More than 250 channel partners now support Digium — promoter of Asterisk, the open source IP PBX platform. And Digium has also signed up its first global distribution partner, to help accelerate Asterisk’s worldwide growth.
- GroundWork Open Source, which specializes in system and network management software, has named Alan Cooke as VP of its global field and channel operations. GroundWork in October 2007 announced expanded partner initiatives and is starting to pull HP OpenView partners in its direction.
- Openbravo, which specializes in open source ERP (enterprise resource planning) and POS (point of sale) solutions, launched a global partner program in April, and hosted its first US partner event in June.
- Untangle’s partner program for MSPs continues to grow rapidly and the company is signing partnerships with MSP platform providers like N-able. Untangle focuses on network security solutions built around open source.
No Free Lunch
Open source’s biggest problem is clear: The media and IT managers spend too much time hyping “free’ or “cheap” open source options, rather than describing the business value of open source applications. Open source isn’t about low costs. It’s about freedom, flexibility, scalability, reliability and innovation. Oh, and the lower costs are a nice bonus.
That’s why progressive VARs are checking out open source applications. Compiere’s 14 new Authorized Partners include:
- Vienna Solutions, Germany, India and United Arab Emirates
- Partners Associates Spa, Italy
- Bluestone, Australia
- Engyn I.T, Australia
- Pentathlon, Philippines
- AccLogic Business Systems, Canada
- Intelestream, United States
- Levementum, United States
- Xforty, United States
- I.T. Co., Russia
- Erpas, Lithuania
- SABSS, Mauritius
- Softquest, Nigeria
- Tagz Fly, Jamaica
The VAR Guy will be watching a few of those partners closely over the next few months. Hopefully, they’ll prove that the open source application market represents a lucrative business opportunity.
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Tags: Compiere | Digium Asterisk | GroundWork Open Source | Open Source CRM | Open source ERP | Openbravo | Untangle
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Digium is the one open source company best positioned to prove BusinessWeek wrong.
Well, I think there are much more open source companies and they make plenty of money on it. Accenture, IBM, Bearing Point – they all develop applications needing significant opens source prodcuts to make and sell their products (eclipse, jboss, netbeans, glassfish, etc). Look at IBM selling Linux for the Mainframe vs zOS to breath new air into the mf architecture …
Open source is not only there for redhat to make money out of it, thats just one aspects. Even take the Fortune 500 Corporations who run serious portions of their systems with and on open source. How much money the make out of using open source?
In summary you would see the open source market/industry making XX BN USD
@Axel: The VAR Guy agrees … lots of folks are spending money directly (or indirectly) on open source. BusinessWeek raised an interesting point, tho, suggesting that traditional companies (IBM, Oracle) are benefiting most from open source-related sales. The VAR Guy agrees. However, he doesn’t believe BusinessWeek’s thesis that Red Hat faces a growth challenge. They company will grow, and grow. And grow.
@Asterisk Fan: Agreed, Digium and Asterisk are super-hot.
If you’re looking for another model of success in the Commercial Open Source domain, look no further than SugarCRM. A key differentiator in Sugar’s model, relative to some of the other players out there, is their agressive and opprtunistic tactic relative to squeezing as much value out of the product as possible. They offer training progams, a SAAS model, pre-loaded appliances…and perhaps most importantly, they tout interoperability and alliances with other Open Source players…like Jaspersoft. Furthermore they provide a greenhouse for other providers. Why is this important – because it attracts enterprises..and enterprises recognize the need for change management, integration, training, strategy, etc (and they ARE willing to pay for software). All of these provide “typical” opportunities to generate revenue.
There are other good examples as well – Alfresco, Mule, etc.
*** I’m working with one of the VARs in your list (Levementum)…and its committed (re: betting on) the steady growth of Open Source in the Entetprise. We’ve partnered with both Compiere and SugarCRM.
I completely agree with the statement above.
“Open source isn’t about low costs. It’s about freedom, flexibility, scalability, reliability and innovation. Oh, and the lower costs are a nice bonus.”
While companies do save significant money avoiding license fees with open source, the biggest advantages are freedom, flexibility and scalability. Idalica has scores of customers that approach us because of the difficulty if not impossibility to make their proprietary ERP do what they need.