Open Source Stealing Market Share

Validation is a wonderful thing.

In our recent

Silicon Strategies Marketing white paper titled "Is IT Software Doomed"
?,
we analyzed the shifting sands of the IT software market.  In this paper,
we noted that Open Source is encroaching on the application layer and that
traditional vendors are slowly reacting to the threat.

Now comes word that

Open Source solutions are taking measurable market share
, and the situation
is slated to grow worse. IDC estimates that Open Source holds a good 7% of IT
software revenue.  Their projections (suspect as all linear curve
projections are) call for 15% of IT software budgets to go to Open Source four
years from now.

The interesting aspect in this report is that the percentage of IT software
spending is less than the percentage of software deployment.  Many Open
Source solutions are available for free, or for nominal support charges that are
typically far less expensive that licensing and support costs of traditional
packages.  Linux is a perfect example — most enterprises using Linux do
not pay a license or support fee for all the servers on which they run the
operating system.

Thus there are many deployments of Open Source that do not register as
"sales" per se, and the functional market share is under-reported by IDC. 
If we assume a mere 50% ratio, where by for every two licensed deployments there
is one free deployment, then the current functional market share for Open
Source solutions has broken the 10% barrier.

That’s better than Apple has ever dreamed of for OS X, oh these many years.

Normally I decry predictions made by analyst as they rely on linear
projections from past trends.  These typically overstate future sales and
deployments because they project from the highest growth phases for a market —
namely the

Early Majority phase
.  Thus their future projections are skewed too
high.

But in this case, IDC may be shooting too low.

Adoption of IT software is based on several criteria:

Many Open Source applications have thrived by serving the low- and
mid-markets, providing a whole product that fulfills the limited needs of
smaller organizations.  But as time passes, as their market success is
established, and as their development communities grow, the feature sets of Open
Source solutions expand to address more market segments and larger enterprises. 
Thus, the addressable market for Open Source solutions expands as time goes on.

The end result is that in a few years large enterprises will evaluate Open
Source applications as replacements for existing suites, or as
peer-level alternatives
to new deployments.  IDC’s linear projections
may be low given the larger slice of the pie Open Source applications can
acquire in the future.

Where does that leave the traditional, license-based vendors?  In a
tough spot.  Some vendors may need to fundamentally change their
development and licensing models to stay afloat, or develop entirely new
products.  I suspect they will also lean ever more heavily on

intellectual property
(IP) rights to forestall Open Source competitors.


Speak up! What are your thoughts?

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