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What you didn't miss at Davos

Open source is a bottom-up phenomenon, which is why the analysts have such a hard time tracking it.

The Financial Times has an interesting take on Davos today, viewed through the lens of a recent Roffey Park Institute report on corporate management and its varying views on the world. Roffey noted, for example, that while 82% of board directors believe their companies' leadership is good or excellent, only 52% of middle managers felt the same. Or while 37% of board directors felt that their company's morale was high, just a scant 9% of middle managers agreed.

Where you sit in the organization heavily guides your opinions of what is right and wrong within an organization, largely because it controls the information you see. As Roffey Park's director of research suggests:

Business leaders often end up losing touch with the rest of the organisation. The upward flow of information can be unreliable and intermittent.

Small wonder, then, that so much of the research and analyst community continues to underrepresent the huge gains open source has been making. Such firms invariably glean their findings from what the CIO thinks, yet too often what she thinks is somewhat irrelevant to what the organization below her thinks...and does.

The 20th-century software companies (Oracle, Microsoft, IBM, etc.) continue to make gains by consolidating the industry and, hence, consolidating the sales process for multiple products with one key differentiator. They have become expert at selling to the CIO and at winning existing accounts from competitors.

What they have failed to do is to build net new business, which is increasingly begun at the level of the single developer. Savio is fond of writing about how swimmingly well IBM's business is going, and he also recently noted that open source seems to be doing well, too. There is no magic in this.

It's easily explained by open source largely opening up new markets while IBM and the behemoths service old markets with old products. Only Microsoft consistently opens new market opportunities through its lower price points and easy-to-use software (generally speaking).

As an example, Alfresco has grown to a customer base in two years that exceeds Documentum's customer base over nearly a decade. (We know because we started both companies.) Some of Alfresco's business has come at the expense of Documentum, Interwoven, Vignette, and the other proprietary dinosaurs. It's easy to win when you're 1/10th the cost and have better performance, functionality, and ease of use.

But much of our business is net new business for the software industry. We're taking content management into new opportunities through lower prices and increased flexibilty. This sort of market penetration depends on a freely downloadable product so that customers can find their way to the product, rather than hiring an expensive sales force to sift the market for nuggets/customers.

This is open source's opportunity. To lobotomize the old world, yes, but also to open up a new one. It's what makes open source so rewarding and exciting.

Disclosure: I am an Alfresco employee.