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HolidayBuyer's Guide
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Recession proofing with open source?

Is open source recession-proof? No, but it's very resilient.

The VAR Guy asks an immensely interesting question: Are open-source companies recession-proof? The short answer is 'No,' but as his real question is, "Are open-source companies more resilient to a recession than their proprietary peers?" the answer is a decided 'Maybe.' Why? For one-and-a-half of the reasons he sets out, and then one more:

At first glance, open source companies have the upper hand against their closed-source counterparts during economic slowdowns. Big businesses already are migrating their Unix-based systems to more cost-effective Linux servers. One could argue those migrations will accelerate if corporate IT budgets get cut. And for new projects, IT departments would likely look at open source first because of its initial (and potential long-term) cost advantages over closed-source alternatives.

While I don't buy his (later) argument that open-source companies have lower personnel costs due to distributed, free development (This just doesn't happen that much and, in my experience, open-source developers command salary premia), I do think he's onto something. My own open-source company, Alfresco, has exploded by 400% this year in the midst of rampant economic malaise.

In fact, that may be precisely why we've done so well. But there's another point worth mentioning....

Enterprises expect more of their open-source vendors and, hence, tend to invest more time, resources, and emotional energy into them. This cuts two ways. It means that enterprises are often better equipped to cut the financial purse strings to their open-source vendor if times get bad, as they're savvy with the code and can support themselves, at least for a time. That's the upside for buyers and downside for vendors.

But in my experience, for enterprises that truly tap into the power of open source, they work closely with the open-source vendor such that eliminating the vendor is a bit like eliminating an extension of themselves. It's more like laying off a friend, in other words, than of simply cutting off budget for a proprietary vendor you don't look forward to seeing, anyway.

Which calls to mind another benefit. With open source it's all about delivery of a superior customer experience, with a minimum spent on salespeople sitting across the desk from the IT buyer. It's easy to want to get rid of that experience. It's not so easy to get rid of the lifeline on the other end of the phone who is there to help an enterprise maximize its value from software.

Is open source recession-proof? Of course not. But because it's so heavily focused on efficient delivery of value it will likely be one of the last things to go when a recession hits.