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Not much SMB dollars today for open-source vendors, the 451 Group finds

The SMB market is a tough nut to crack, which is why open-source vendors should stick with low-hanging enterprise fruit for now.

It's not surprising to see The 451 Group's findings that the small-to-medium-sized business market doesn't promise untold riches to open-source vendors. The SMB market is difficult to crack regardless of one's licensing and marketing approach. Several of open source's primary benefits - and particularly the ability to modify code to suit one's requirements - fit large companies well and SMBs almost not at all.

SAP is trying to penetrate the market with low-cost SaaS. Red Hat has knitted together open-source solutions in RHX to pave the way to open source applications for SMBs. But the reigning king of SMB - Microsoft - continues to dominate with low-cost, well-integrated, and easy to use software that a vast array of resellers knows how to implement.

Some key findings from the report, which surveyed 50+ open-source vendors:

  • 73.8% of open-source vendors surveyed believe that SMB revenue will account for <50% of total revenue, with wide disparity in how much the surveyed vendors feel will come from the SMB market;

  • Open-source vendors are split on whether SMB will account for a significant increase in business in the future, 47.5% saying that it will and 34.4% saying it won't.

  • The overwhelming majority of open-source vendors (72.1%) are taking a direct approach to selling into the SMB market, despite citing "Lack of expertise" (36.1%) and "Lack of awareness of open source options" (24.6%) as the key inhibitors to SMB adoption.

...which leads me to believe that open-source vendors are very naive about our near-term prospects in SMB. If the problem is SMB expertise and awareness, a direct model is the wrong way to go, especially since no open-source vendor beyond Red Hat or Novell has the marketing resources to make enough noise for SMBs to hear. Microsoft wins in SMB, in part, because it has a killer channel.

Some commercial open-source projects have started with an SMB focus and then "graduate" into the enterprise. But I believe that most commercial open-source projects would be wise to hit the enterprise first, starting with departmental implementations (the "SMB of enterprise," as it were). Large enterprises have the budget and inclination to seek out open source. SMBs simply do not.

It's not a question of whether the SMB market will embrace open source. It's a question of when. For most open-source vendors, that question should be answered, "Later."