Today's IT Spending and Enterprise FOSS

Making the blog rounds today: points about enterprise software purchasing in response to poor economic conditions. I'm thinking about the relationship to free and open source (FOSS) enterprise systems as well as the pricing and priorities companies are facing in terms of their means for purchasing and implementing things like ERP systems.

Curt Monash's article predicted a rocky September for IT vendors. He didn't pursue a level of granularity that distinguished types of enterprise software but if you look at some of the recent news from both proprietary and open source vendors you get the impression that organizations buying these systems are acting as Monash suggests.

Monash notes that he's revisiting the topic today because of SAP's reporting lower growth than it expected. He groups short- and long-term uncertainty with a short-term cash crunch to reason why corporations may halt their IT purchasing. The end of his article interested me because he mentioned, among other things, that maintenance revenue and professional service revenue as reasons that vendors could still do alright at the end of September.

I can't help but relate this to the press release from open source ERP vendor Compiere today, in which the company reported it had "... 195 percent revenue growth for Q3 2008 compared to Q3 2007, as well as a 59 percent growth in subscribers." Two things are interesting to me here. If you look at what Compiere provides its subscribers, you see that among the additional functionality, it offers a lot of maintenance and professional services. Compiere's partners include "systems integrators, application solution providers and value-added resellers that provide consulting, implementation and customization services" which sounds like a lot of different professional services. This is a relatively typical open source business model. Low to no license costs, but profit from the services.

In any case, none of that is to say that because one company does well and another does not, open source is likely to thrive in a down economy. In fact, reading the post Jay Lyman from the 451 Group wrote about the double-edged sword faced by open source, you get the impression that with all the fanfare open source has been receiving for gaining enterprise acceptance, it will also be on the receiving end of some accompanying economic problems.

Note we do also cover open source enterprise vendors like Compiere and OpenBravo in our evaluation system. We've been working with Compiere since earlier this year to update our research on its products for the latest version, I'll post a follow-up message when that is actually available in our online evaluation center.
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