IDC survey proves open-source software as viable business model

Matt Lawton, program director, Software Business Strategies at IDC, sent over a few choice tidbits from their survey of open-source software (OSS) vendors, covering their experience selling OSS in 2007.

• The majority of average company revenue (63 percent) is from software products, with 30 percent from services; revenue from hardware and the resale of third-party products and services is negligible. These vendors are truly software vendors.
• The majority of revenue from OSS (59 percent on average) is from subscriptions. In fact, 10 of 21 respondents generated 100 percent of their OSS revenue from subscriptions.

I was definitely pleased (and a bit surprised) to see that the subscription model has become so successful. This also proves the professional services provide a nice uptick but are not the core revenue stream.

• Almost 80 percent of OSS revenue on average is generated directly by the vendor as opposed to selling through partners.
• The average OSS revenue from Windows-based products (35 percent) is less than OSS revenue from Linux-based products (54 percent), which is not reflective of the installed base in mainstream enterprises.
• On average, revenue from North America represents 62 percent of total OSS revenue, while Europe represents 23 percent.
• Financial services and the public sector represent the top two vertical sectors by revenue for the respondents, with 34 percent and 20 percent of total OSS revenue on average, respectively.

On the last two bullets, this shows that there is a huge available market outside the U.S. and that financial services and government remain great opportunities for open source.