The Widening Value Gap Between Open Source and Commercial Software

Disruption driven by both supply and demand

In a recent Network World  article, Red Hat CEO Jim Whitehurst slammed commercial software for being too expensive, failing to address user needs, and worst of all, shoveling all the risk associated with implementing new systems onto CIOs.

His charges are dead on. I agree that commercial vendors seem more interested in feature wars than what customers actually want, and that the commercial software sales model depends on high maintenance fees, expensive upgrades, and vendor lock-in. I am sympathetic with Whitehurst's criticism, that "there has been no change in product quality demonstrated in the past 30 years."

Whitehurst goes on to reason that while open source vendors are essentially selling services and support to help customers quickly derive value from the functionality customers themselves have likely had an important hand in shaping, commercial software vendors simply sell functionality and force IT departments to take on the risk of figuring out how to turn that functionality into business value. This where he really nails it: 'The software and hardware are already paid for before the service they are running is actually offered." This is one of the great ironies of open source: new functionality is added on the merits, as judged by world-class technologists. The market can then take it or leave it.

I believe the value gap between commercial and open source software is continuing to widen because of the maturation of the open source supply chain. On the supply side, the liberal licensing policy has created a true meritocracy where all ideas are given a shot but only those ideas that are the most useful to the most users survive the collaborative process.

On the demand side, the industry is experiencing a complete shift in perspective as companies recognize that open source software involves far lower risk than commercial software because of lower start-up costs and because the software they choose is backed by thousands of developers putting it through the paces, making it even stronger and more viable and useful. And now, commercial complements, such as 24/7 support, regular release schedules, ease of use layers and streamlined APIs are making open source software projects no more risky than commercially licensed software -- truly enterprise grade. These complements deliver the advantages of commercial software, with far less baggage.

Finally, time is clearly on the side of open source. Enterprises have learned from experience and are savvier. They've been burned too often by commercial software not delivering on its promises, and they've become increasingly adept at vetting open source projects to ensure they meet their rigorous standards and will deliver business value quickly.

I contend we are in the stage of what history will record as the rise of open source to software dominance. Whether proprietary vendors can navigate the new market dynamics remains to be seen.