Enterprise IT spending is on the decline...Is that why open source is booming?

Could it be that the old software economy's loss is open source's gain?

Network Appliance's latest earnings report is fascinating. Dan Warmenhoven, NetApp's CEO, reported that enterprise spending is on the wane, with the financial services industry allegedly battening down the hatches and sitting out a soft economy.

If true, I suppose this is bad news for NetApp and many other enterprise IT companies (though it doesn't seem to have made a dent in Microsoft or Oracle). For open-source companies? It's manna from heaven. $1 saved on proprietary, pricey IT may well convert into $.50 spent on open-source software...which goes a long way for the new breed of open-source vendors.

But first, Mr. Warmenhoven's commentary:

(The enterprise spending weakness) is led by the financial services sector as you might imagine and they're quite substantial. But other companies are still as well....It was a challenge this year.

There is a variety of other stories outside of financial services, but across the board they're down on a composite sense 4 percent. I don't see any pattern other than the financial services meltdown and I would encourage all of you who are part of the financial services, especially broker-dealer organizations, please keep that among yourself.

Once you start exporting that set of problems to the rest of the economy, everybody is going to go in the tank. It is not a competitive issue. It is strictly financial services is just squeezing down.

Unless, of course, you're with an open-source company, in which case financial services dollars are raining down. My own company counts many of the world's largest financial institutions as customers. I know from talking with peers at MuleSource, SugarCRM, Red Hat/JBoss, and others that their stories are the same: it's never been better to be selling fairly priced, value-driven software.

It just happens to be a bad time to be selling over-priced, complex software. The exceptions to this rule come from Microsoft and Oracle, in particular, because they are actively working on delivering real, integrated value to their customers. They're looking for new ways to create value for customers and so they continue to win.

Everyone else? Not so much.

It will be interesting to see how long the economic malaise will persist, and what will happen when it lifts. I expect to see open-source companies firmly entrench themselves during the downturn, thereby positioning themselves to scoop up the extra cash that will flow in the economy's resurgence.

There's never been a better time to be in open source. Why? When budgets tighten, companies get smarter with their IT budgets. Smart money buys open source.


Disclosure: I run the Americas for Alfresco and am an advisor to MuleSource, SugarCRM, and several other open-source companies that are cleaning up financially.

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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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