The open-source industry is worth $60 billion

Customers make the open-source industry worth $60 billion. It's not about vendors.

John Powell, CEO of Alfresco, has declared that the open-source industry is worth $60 billion, not necessarily because of its vendors' collective revenue, but rather because of the value of the cost savings for customers.

That's the right way to think about software: From the customer's perspective.

Open source is now the world's largest software industry....You measure it in the savings people are making in licence fees....Licence fees don't add any value to the product and are purely a transfer of wealth from consumers to software vendors.

Subscription-based business models are ideal for customers because they focus the vendor on delivering constant, consistent value. License-based businesses? Not so much.

As a case in point, Alfresco (Disclosure: I work for Alfresco) just closed a deal with a large US federal agency. The project is worth over $50 million, with Alfresco at the core. But if all of that $50 million were going into my pocket it would be a success for Alfresco and a failure for the customer. Why?

Because as it stands, most of that money is going to integrators to customize our software (and others' - it involves a few big proprietary vendors, too) to fine-tune it to the agency's needs. Our proprietary competition on the deal started the bidding at $2.5 million, and would have cost multiples of that to get it do what the agency actually needed, as the agency determined.

So, we shaved costs off the project, and allowed the agency to divert funds from license costs to system integrators to ensure a close fit. Perfect.

Open source tends to be less costly because of its $0.00 acquisition cost, but also because it is more easily customized and integrated with other systems, including proprietary ones. Open source, open APIs, open standards. They tend to travel together.

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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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