The Open Source Opportunity

Just like there is silver lining to the dark cloud, those dealing with open source are seeing an opportunity in this time of slowdown.

Snigdha Karjatkar May 15th 2009

Just when partners and vendors are complaining of slowdown affecting their revenues and profits, those dealing with open source software have a different story to share. They are all gung-ho about it as the customers are considering open source seriously. Just like there is silver lining to the dark cloud, those dealing with open source are seeing an opportunity in this time of slowdown to aggressively promote open source solutions (OSS), which fits the need of this hour brilliantly, with its low cost and high performance.

Up in the Downturn

India has always been on par with the rest of the world as far as the utility of the open source technology is concerned in the mainstream. Indian markets have always been exploring and using it actively. Sandeep Menon, Country Manager, Novell India, believes, “Linux business has remained untouched substantially from the wrath of the slowdown. It would not be an overstatement if we say it has in fact benefited by the downturn.”

Explaining the reason behind the sudden awareness and liking for the emerging open source solutions, Menon says, “Earlier, CIOs had the luxury of being risk-averse. It was often the comfort zone with the vendor agreements that made them not too keen on taking a different route. But times have changed and with times, things have changed. The budget constraint has made them reconsider their approach towards the concept of open source solutions. CIOs are now giving a patient hearing to our solutions and are convinced that it is not merely cost-effective but it also satiates their requirements.”

Substantiating the claim, Asheesh Raina, Principal Research Analyst at Gartner, points out “Yes, definitely the slowdown has come across as an opportunity for the open source, at least for a short term. There is lot of opportunity for using open source solutions, predominantly in the small and medium-sized organizations. Right from the operating systems to matured applications like servers or infrastructure-level software, there is plenty to adopt onto.”

“Yes, the economic slowdown is forcing IT managers to think out of the box and come out with alternative solutions. Open source solutions offer a compelling value proposition. Today, there is an OSS technology for practically every software category such as enterprise resource planning, customer relationship management, business intelligence, middleware, database, and business process management. Red Hat itself offers an alternative for high availability and load balancing, virtualization, clustered file system, middleware, security, and management software requirements. Think of the money the enterprises can save if they decide to go in for an open source option. And to add to it, in no less measure is savings on anti-virus software,” says Tirthankar Mitra, Head – Channel SI & OEM Business, INDIA & SAARC, Red Hat.

Its not just vendors and research analysts, but even the solution providers too share the same story. Delhi-based Varad Gupta of Keen and Able believes that the market has evolved from its nascent stage. Narrating his experience, Gupta shares, “We indeed are flooded with large amount of inquiries. Earlier, it was we who would approach customers but today we see a reverse trend. It is the customer who is seeking out to us. There is substantial number of customers seriously weighing the options of adopting open source.”

He recollects, “I remember the time when we used to approach the customers and explain the flexibility that open source offers to them. It was very difficult to convince the customers that it is to their benefit that one can customize according to their needs. Moreover, customers were worried who would provide support for the same.”
Even today the cost is the primary motivating factor for people to adopt open source. He says, “Cost has always been the factor that was drawing people to open source solutions. But things are looking positive nowand, today, in the decision making, cost is still the predominant factor but at the same time features and flexibility are equally acknowledged.”

With the downturn, what has remarkably changed is the approach and perception towards open source. People are spending time to listen to open source. They have been actively participating in the seminars and discussions on open source, which was earlier not so frequent.
“Earlier, it was a straight no- no, but now people are willing to listen. With the current market pressures, adoption is growing for sure,” says Gupta. He further adds, “Adoption on the government side has made a positive impact on the market. With major portals running on open source components it is easy to convince the customer.”

Shubham Nagar, CEO, Infoaxon, also shares a similar and recent experience. He says, “Sometime ago, we had implemented a BI solution with a customer on pilot basis but thereafter it went cold. But couple of days ago, the customer came back to us. They are now interested in implementing open source in a completely different domain and straight away want to close the deal.”

According to Nagar of Infoaxon, a lot of these customers have gone through the initial learning curve in the earlier interaction and now with the downturn, they are coming back with specific requirements.

Even he cannot stop echoing the same sentiment, which Gupta of Keen and Able shared earlier. He says, “We are also experiencing that customers are very warm and at least give us a patient hearing which earlier was impossible.”

Few partners also believe that people have started looking at open source as a bankable alternative. According to partners and analysts, open source solutions have become mature enough to map the 90 percent functionality of other platforms at almost 10 percent of the cost and the training for the migration is not much.
Kolkata-based Aman Gopal of MASS has a slightly different take on the surge in the demand. He says, “I don’t feel it is out of the blue that things have changed. We have seen the demand for open source steadily growing over the last couple of years. But yes, we are experiencing a sudden rise in inquiries in the last quarter.”

One of the important reasons that IT heads are pushing their internal users to migrate to open source platforms is to cut down the cost of renewing licenses that the organizations are incurring. Open source has a simple and single license priced at a reasonable cost. Partners advocate that open source offers far more secure and manageable environment, which people are realizing and moving towards it.

Gopal adds, “Ultimately, the combination of slowdown, the inability to spend more on the ever-upgrading license versions and the awareness about the open source that offers latest technology is driving the growth for the open source solutions.”

Technology in Demand

Technology in Demand

Research Analyst, Raina says, “The basic demarcation is at the technology level as some of the open source technologies are already extremely mature while some are yet to mature. For instance, middleware and application server offerings are mature, and enterprises are using these technologies for mission-critical applications along with the basic operating system. Also, that is the case where high-performance computing is required for data crunching or weather forecasting.”

“Unfortunately, the same level of confidence cannot be iterated for business intelligence and business process management offerings. There is still lot of room for maturity and the market is equally cautious in demanding these solutions,” Raina adds.

Talking about the sectors that are opening up to the solutions, Raina says, “There is no apparent trend in it but education can benefit most by taking it seriously. Since, for them, there is no requirement of any critical and confidential transaction, it allows them to bank on open source.”

Menon believes, “Market is exploding and it is exploding in multiple directions at a rapid pace. We have to grab this opportunity but, at the same time, decide the areas that we have to focus on.” He further adds, “There is tremendous opportunity in the mission-critical applications space, and we have seen acceptance for applications like ERP. Nothing can be as mission- critical as ERP for the organizations.”

Surprisingly, this is the case of slowly and steadily inching towards the goal. The move and demand for mission-critical applications like ERP has been experienced for more than a year and half. Menon says, “We have lot of project implementations with mission-critical apps running on open source. CIOs are convinced that one gets the same efficiency with the cost coming down heavily.”

Customers are looking at infrastructure solutions and operating platforms, which deliver richer content allied services and are more versatile. Data center hosting, disaster recovery, mailing & messaging solutions, storage solutions, and backup solutions are still finding good demand. On the applications side, due to recurring high cost of support, the customers and service providers are relooking at their hosting infrastructure. They are looking at open source solutions as there is no vendor lock-in. Since it is open standards-based, it can be hosted on commodity hardware and the long-term maintenance of these applications does not supersede the initial reason for procuring them.

“We are also witnessing more migration-level opportunities, as the market is changing some of its expensive-to-maintain applications and also prefers to run new applications on open source solutions. Some of the applications that are still finding good demand in the market are ERP for SMBs, manufacturing, retail, B2B, and B2C portals for providing an e-bay kind of an experience to internal and external stakeholders and CRM applications for service industries that are looking at improving customer response times,” says Mitra.

Nagar of Infoaxon feels, “Virtualization technology is surfacing as the key driver of growth in open source. The technology doubles up the advantage of maximum output with the same infrastructure at a minimum cost. We foresee business intelligence and business reporting areas as the next big things.”

According to vendors and analysts, the public sector has always been positive but now it is much more upfront in adopting open source. The other sector responding positively is BFSI. The new and upcoming banks are curious in adopting open source instead of going the tried and tested ways. Also, media companies are opening up to the platform.

Gopal adds, “We are seeing growing demand for Linux desktops as well. Mail solutions were already popular and the latest to join the popularity list is security solutions, especially UTM boxes. In the end, it is the Linux environment as a whole that is offering a lot of alternative to the customers.”

The corporate that have been migrating their legacy applications to open source platforms are looking at the one-time cost involved in the migration and support, and thereafter the expense of the license support is scalable as per the need. Majority of the partners firmly believe that most of the high-end mission-critical applications run on open source as it provides with better, stable, and robust computing abilities.

Manoj Garg of Taashee, a Hyderabad-based solution provider, says, “Our task has reduced as the client is already aware of the technology and its benefits. There are several solutions such as CRM, which are less expensive and equally efficient. On the server side, there is huge demand for JBoss, which is driving the business big time for us.”

He also reiterates, “Most of the mission-critical servers are run on Unix, which provides immense stability and unparallel security. Most of the research organizations and government organizations like railways, ISRO, and some banks run their applications on open source.”

Gupta of Keen and Able points out, “Today, any security product has an open source component built into it. Any firewall, spam filtering box has an open source component to it. What can be more critical than security?” he questions.

He further adds, “It is just that end users are not made aware of the fact of the presence of the open source component by vendors because of their own personal benefits in the long run.”

Mitra quotes in detail examples of the sectors that have been loyal fans of open source. He says, “Government is one of the strongest verticals that is still adopting OSS. Telecom companies— many of which have moved most of their VAS offerings to the open source platforms — and of course retail, which has invested heavily on backoffice applications and front ends like portals, are classic cases of OSS users.”

Menon, who shares the vendors’ perspective, says, “There is a demand from the BFSI sector. But a lot is desired as, although branch automation has already shifted to open source, there are more opportunities. And a whole new gamut of opportunities are awaited in the e-governance sector.”

Gupta of Keen and Able feels the traditional sectors are also convinced of the open source. He says, “We are seeing lot of demand from manufacturing and BFSI. In fact, BFSI has been quite receptive to the idea of open source. Telecom, as we all know, is an old story.”

He says, “Especially with the downturn in the financial sector, it is forcing them to have a look at open source. As for manufacturing, which is moving from its legacy operation to newer versions, cost plays a key role again.”

Nuts and Bolts
Nagar of Infoaxon raises a crucial point about the profit margins for the partners and vendors even after open source solutions are widely adopted. He says, “Dialogue is indeed maturing. CIOs are wondering whether open source will work for their business. One has to demonstrate open source and package it properly to sell more solutions. Anything to do with content management and knowledge management is very much demand.”

But, at the same time, increasing adoption of open source does not necessarily mean an increase in revenue for partners and vendors. They will have to devise and learn to monetize the opportunity, which will only then benefit them. “Increase in open source need not mean increase in revenue for partners and vendors. They have to learn to monetize it,” warns Nagar.

Gopal says, “Although we have been seeing movements in the last couple of years, there is lot of maturity yet to be attained. But with the vendors’ support, it is far more feasible to achieve that to serve the customer better.”

Garg points out that the critical aspect is of reaching out to the customers. He says, “The biggest challenge that we are facing is that people are interested but don’t know where to get open source solutions. Seeing is believing. Perhaps, with more marketing efforts, the scenario might change. Both partners and vendors are working in this direction.”

Even vendors are supporting this belief. Mitra substantiates, “Channel partners are going back to the drawing board and are also tweaking their business model to look at services in a big manner. They are also investing more in the market coverage, enhancing competencies, and product marketing.”

Channel partners are setting up helpdesks, support, and post-sales professional services queues. They are also tapping revenues through services like health check, performance fine-tuning, and infrastructure-led services.

The vendor-partner relationship is crucial like in any other business. Menon reiterates, “We have a huge channel focus. Besides the regular efforts like putting in separate funds for channel enablement, we decided to give away our services business to partners. Both services and training have been sacrificed to the partners. We had a consulting business, which was profitable. But we took the difficult decision of slowly giving it to the partners. This is important for the ecosystem if it is services based.”

Way to Sunshine
Open source solutions in India has come a long way since being considered as a cheap or free alternative to proprietary software. It has moved from the periphery of IT infrastructure to today being deployed in the heart of mission-critical applications and systems. Open source software is today being considered, evaluated, and selected for being a cutting edge, versatile solution, which is robust and highly secure than just for its cost advantages and open standards. It has become a true alternative.

India is among the more evolved countries in its understanding and acceptance of open source. The government has played a leading role in documenting and institutionalizing the long-term benefits of open source through policy decisions and deploying it in its IT projects.

The slowdown has indirectly provided the needed boost to the customer demand and attention to the open source. It is for the partners and vendors to hit the iron when it is hot to gain maximum momentum. Emerging strongly out of these tough times will only fuel the belief of the survival of the strongest.