Economic downturn = Financial upturn for GroundWork and open source

GroundWork is doing well in the straitened circumstances in which CIOs currently find themselves. Is a recession the best thing to ever happen to open source?

We are or shortly will be in a recession. While perhaps not cause to celebrate, it's also not cause for alarm as the best companies will emerge all the stronger for the experience.

Good open-source companies will be primary beneficiaries of a downturn, as Stephen Elliot of IDC points out with regard to open-source system management vendors like GroundWork:

With economic uncertainty building on IT organizations, we are seeing enterprise IT organizations tightening their belts when it comes to IT budgets and initiatives. As open source management solutions continue to mature and increase their functionality, they will see more opportunities on the enterprise scale.

I single out GroundWork because I had the opportunity to talk with Dave Lilly, CEO of GroundWork, in advance of next week's Open Source Business Conference 2008 (March 25-26, San Francisco), and got the inside scoop on how the company is doing. GroundWork exemplifies the "unfair advantage" that open-source vendors have when IT buyers actually need the software to work at a reasonable price.

Despite the slowdown, things are heating up for GroundWork. GroundWork has seen 58 percent of its subscription revenue coming from distributed deployments within larger enterprises like Academy of Motion Pictures and Sciences, MobiTV, and Siemens. Why? Because GroundWork costs 20 percent of what the proprietary "Big Four" system management vendors cost. 80 percent cost savings in systems management? I'll buy that.

As Lilly pointed out to me, however, this "belt tightening" isn't novel:

It's just more exacerbation of the hand-to-mouth existence most CIOs already face. In the nearly five years since the founding of GroundWork Open Source, it seems that enterprise IT executives have been tightening their belts continuously.

The price and performance of open source solutions are discontinuous with that of commercial software solutions. Thus we have always found that savvy IT executives are willing to go out of their way to ensure that open source is considered as an alternative in most major acquisition decisions.

Because of the cost-value discontinuity I expect the demand for open source solutions to increase as functionality improves regardless of economic conditions, but we'd be happy to assist those IT executives who may be facing some sleepless nights due to recent conditions, as well.

I bet.

GroundWork isn't alone in this. I asked my friend (and MuleSource CEO), Dave Rosenberg, whether a recession is a landmine or an opportunity for open source. Shy person that Dave R. is (not), he didn't mince words:

Open Source companies are insulated to the extent that they eschew the whopping license fees associated with proprietary software. And, to the extent that open source products tend to be designed to "just work" IT shops don't have the added burden of professional services charges from vendors whose software needs extensive customization that only they can do.

Open source companies have an advantage in the market right now as the sales models are based on adoption first, counter to traditional proprietary sales which require you to pay first.

It's a great time to be in open source. When I see people straining to sell and buy homes, I can smell the recession. But when I go to work selling open-source solutions, I can taste prosperity. A downturn separates the wheat from the chaff. Here's hoping for even more open-source "wheat."


Disclosure: I am an advisor to MuleSource.

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About the author

    Matt Asay is chief operating officer at Canonical, the company behind the Ubuntu Linux operating system. Prior to Canonical, Matt was general manager of the Americas division and vice president of business development at Alfresco, an open-source applications company. Matt brings a decade of in-the-trenches open-source business and legal experience to The Open Road, with an emphasis on emerging open-source business strategies and opportunities. He is a member of the CNET Blog Network and is not an employee of CNET. You can follow Matt on Twitter @mjasay.

     

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