CTO Blog
It is fair to say that Open Source has had a major impact on the software industry. If I attempt to take a balanced view then I would say that different circumstances in terms of what we want to use software for, has also played a major part, and has led us to have at least five recognisably different models; Software as a Service or SaaS; Application Service Provider, ASP; Business Process Outsourcing, BPO; Application Maintenance, AM; and traditional license. The quick witted will immediately seize on the principle differences being ownership and maintenance in the way the software is provisioned.
I would also want to point out that we have seen a striking change in why, and who, wants the software, and for how long. An enterprise application is very different from single user collaboration as an example, just as Software to enable an ‘Open Standard’ is very different from software being used for a unique competitive advantage in say Intelligent Enterprises, (one step up from Business Information). At the end of the day for every thing there is a value proposition as to who will pay for what and why, and in the case of Software that’s the big argument still raging between the existing industry giants and the new Open Source providers.
I don’t want to detract from Open Source, but it’s good to remember that one of the leaders; Red Hat still only reported their latest revenues as $118mn in Q1 this year. Not yet enough to shake those big vendors, but neither is it a case for complacency, this is a time of shifts, and if nothing else, there seems to be strong agreement from big and small that Software as a Service, SaaS, is the real growth area.
So back to the question, ‘can you have Open Source Consultancy?’ In so far as there are several boutique consultancies that have a different business model for charging then the answer is yes. It’s also yes in terms of them making the work they have carried out freely available for download, but it’s no in terms of working for free, instead they mostly seem to have changed to a subscription model, more Consultancy as a Service, CaaS. The client provides a yearly retainer and calls in the CaaS as, and when needed, to handle an issue drawing on the retainer until it is all used up, then normal billing takes over.
So here is the real question: is this really based on being able to access a small chosen pool of consultants, a non scalable model by the way, or is it a genuinely new business model? I think the former, but have pretty well guaranteed that I will get a heap of posts from those involved saying it’s the latter. I am fine with this as that’s what a Blog is all about; active and interactive discussion and I really want to understand this point. Bring on the posts but please make them thought provoking!
About the author
Capgemini Global Chief Technology Officer, Andy is a member of the Capgemini Group management board and advises on all aspects of technology-driven market changes, together with being a member of the Policy Board for the British Computer Society. Andy is the author of many white papers, and the co-author three books that have charted the current changes in technology and its use by business starting in 2006 with ‘Mashup Corporations’ detailing how enterprises could make use of Web 2.0 to develop new go to market propositions. This was followed in May 2008 by Mesh Collaboration focussing on the impact of Web 2.0 on the enterprise front office and its working techniques, then in 2010 “Enterprise Cloud Computing: A Strategy Guide for Business and Technology leaders” co-authored with well-known academic Peter Fingar and one of the leading authorities on business process, John Pyke. The book describes the wider business implications of Cloud Computing with the promise of on-demand business innovation. It looks at how businesses trade differently on the web using mash-ups but also the challenges in managing more frequent change through social tools, and what happens when cloud comes into play in fully fledged operations. Andy was voted one of the top 25 most influential CTOs in the world in 2009 by InfoWorld and is grateful to readers of Computing Weekly who voted the Capgemini CTOblog the best Blog for Business Managers and CIOs each year for the last three years.
First, good question to ask. Regarding Redhat’s rev of $118, that is fairly irrelevant number when considering open source’s impact on traditional vendors. Rather I think it’s more important to see the hockey-stick like revenue growth of many new commercial open source vendors and the acquisitions of open source companies with ridiculous multiples like Xen, JBoss, Gluecode, Sleepycat, etc. The big vendors -are- paying attention.
Back to the original question, CaaS as you call it, is really nothing new, in traditional consulting that’s a retainer, or more commonly an SLA. At the end of the day, open source is a technology that needs evaluation, deployment, customization, and support, just like any other, with a few added twists. The only reason we haven’t seen more large SI’s is because they follow the market, not lead, and so far the boutique’s have been able to handle much of the demand, but that is changing. I believe it is EDS that has a person called a “MySQL Capability Practice Manager”, and when someone invests that much in putting together a title they’re beginning to take it seriously.
Andrew Aitken – Olliance Group
i can accept the ‘influencer’ arguement on this – after all look at the impact of Salesforce.com on the SaaS market. The ‘influencer’ has a disproportionate impact as it causes people to stop and think about a previously accepted situation.
btw my previous experience of this type of so called open source model consulting on a retainer was in the specialised skill are for making staff available for support purposes as and when needed
Andy ,
This is a topic I am quite passionate about and hence putting a one liner would not have done justice.
Check out my thoughts at
http://www.gandalf-lab.com/blog/2007/09/open-source-and-consulting.html
some excellent thoughts in your blog piece and urge others to read it. the thought on blurring the line between products and services is particularly interesting. thanks for the contribution!
Conventional wisdom would dictate that Open source is almost free to install but expensive to maintain and would therefore require more consultancy. That’s the line MS toes in it’s ad campaign.
Probaby SaaS will expedite consumption of Open Source service. If not to end clients then to SIs.
As for $118 million I wonder how Redhat is positioning itself. Being known as free software producer I believe is not a great asset for charging premium consultancy rates. That might be depressing their revenues.
The more i think about this the more i come to the conclusion that all of these elements are part of a major change in what we want to use, with whom, and how as part of the change to what ever Enterprise 2.0 really will come to mean.
I suspect that the challenge is to stop trying to match up these new ways with what we know today, and that we need to ‘build it and let them come’ to see how it finally shapes up.
Mixed Source Consultancy
Tap the open source development community directly for enterprise support for your clients.
1) Hire engineers globally to make quality hardware ( and let them use the internet as the distributed, digital enterprise it has turned out to be — stop geolocking positions on campuses ).
2) Open source your software and make it available on your quality hardware.
3) Make your open source software available on your competitor’s quality hardware ( as you innovate and make yours better ).
4) Make your competitor’s open source software available on your quality hardware.
5) Make your open source available as software as service ( while remembering to give back to the open source development community ).
6) Provide both remote and on-site professional staff to help extend the software for your clients at reasonable rates. Ask your customers if they’d care to partner and sell the tweaks as a value-add edition.
9) Explain to institutional investors why company resources should be targeted at the engineers, professional staff and enterprise support folks first.
10) Hope institutional investors aren’t so clueless as to miss the paradigm shift. If you happen to have your retirment funds with them, you might take it upon yourself to help educate them.
Ed ,
You are selling the SUNW (now JAVA) story.
http://blogs.sun.com/jonathan
Note that Jonathan is playing a big gamble. The strategy is not yet proven. If NASDAQ:JAVA shows revenue improvement over the next year , I would consider this strategy to be a proven model. At this point of time a lot of people are watching JAVA from the sidelines.
As of today NASDAQ:JAVA revenue is flat for more than an year and JAVA has shown better profitability by cost cutting – not rising revenue
What I am waiting for:
1. Does SUN end up monetizing Solaris via converting its “RELATIONSHIPS” from Solaris use
to hardware sales
2. OR is Solaris Support revenue a selfsustaining business in itself.
My bets at this point of time: SUN will benefit from relationship’s it builds as a result
of giving solaris free to (students , startup , enterprises) . The Software insurance
policy model of Solaris support is probably not going to make the solaris business self sustaining.
open source products will end up being enablers for some other revenue stream. It could be hardware sales OR more importantly for this forum – it could be Services Sale
a good thoughtfull post. interesting that Sun are still very much pushing their ‘leadership’ in hardware even though this change has taken place
I recently came across your blog and have been reading along. I thought I would leave my first comment. I dont know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often.
Alena
http://www.sunscreenstips.com
Hi Alena
well its always nice to hear that people are enjoying the posts, so thanks for the feedback
regards andy
The challenge in all open source is who owns the consequences as opposed to the traditional model that is based on who owns the intellectual property.
however necessity is a huge driver of change so we may well see these issues either accepted or addressed and the shift to wider use underway