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Enterprises saving millions of dollars with open source

Can companies save big with open source? Of course. The question is whether they can also get superior performance and ease of use. Increasingly, the answer is becoming "yes."

For some reason I didn't catch this the first time I read Optaros' research report ("The Growth of Open Source Software in Organizations"), but I read it on Amit Deshpande's (of SAP's Open Source Research Lab) blog today and was particularly impressed by one finding from the report:

Organizations are saving millions of dollars on IT by using open source software. In 2004, open source software saved large companies (with annual revenue of over $1 billion) an average of $3.3 million. Medium-sized companies (between $50 million and $1 billion in annual revenue) saved an average $1.1 million. Firms with revenues under $50 million saved an average $520,000. Asked to categorize all the benefits (cost savings and other) from open source, most companies said they were moderate or major. Some 70% of large firms are seeing moderate or major benefits from open source. Of the companies under $1 billion in revenue, 59% are seeing major benefits.

I would argue that the cost savings in the larger organizations is even more substantial. As but one anecdotal example, Alfresco recently talked with a prospect where Microsoft had quoted them tens of millions of dollars for a simple intranet application. The same application built with Alfresco would run the prospect $100,000 (and that's if they really, really tried hard to spend the money).

The cost equation will nearly always favor open source. Open source's big task, then, is to ensure that its software is superior (performance, ease of use, etc.) to the proprietary software. At that point, nothing but ignorance will keep a proprietary product entrenched. Ignorance will go a long way, but ultimately intelligence will win.