It’s exciting to see the evolution of Open Source evident in findings in our Future of Open Source survey over the past five years. Open Source has now moved beyond the tipping point it reached last year in the private sector and now is mainstream in businesses of all sizes and even in mission-critical applications. In fact Open Source is clearly playing a central role in the cloud and mobile segments and has become a driver of innovative solutions in new spaces like Big Data.
The Pace of Open Source Adoption and What’s Driving It
Fifty-six percent of the survey participants predicted that that Open Source will comprise 50 percent or more of software purchases in five years. This has more than tripled over the last few years. Respondents continue to identify a turbulent economy as a primary reason why Open Source software is attractive. But perhaps more interestingly, they also indicated that avoiding vendor lock-in is a top driver for adopting Open Source solutions.
What this Means for Open Source Vendors
According to the survey (455 respondents, 40 percent of whom were vendors), people think the number-one impact on vendors will be Software as a Service (SaaS), which has a profound impact on revenue sources and business models.
How OSS Vendors will Make Money in the Future
A lot of Open Source vendors used to make their money through custom development; in fact, it was the single biggest source of revenue (26 percent). But when asked how that will change over the next five years, they predicted that it will shrink dramatically to being fourth on the list, dropping to only 17 percent. They believe that SaaS will be the way in which Open Source vendors will make their money. As the figure below shows, they believe that digital services – that is, value-add subscriptions and SaaS – will grow by about 25 percent over the next two years.
This makes perfect sense if you think about the way customers want to consume Software as a Service, and the stronger potential business model of SaaS for Open Source vendors in responding to that need. (For example, Gartner predicts that SaaS will grow from a $10 billion industry today representing just 10 percent of enterprise application spending to double that value by 2015.) Further, SaaS offers a much more flexible and agile approach to productize offerings rather than trying to rebuild a specific solution each time for every customer through professional services.
Accordingly, I think in the Open Source industry as a whole we’ll see companies getting better at putting digital or web services and SaaS capabilities in place over the next two years and moving away from so much dependence on services.
Also in looking at SaaS from another angle, I see Open Source continuing to be a driver in the build-up of the software stacks that enable SaaS and Cloud-based solutions. SaaS and Cloud together and Open Source will thus become synonymous with each other.
Open Source is Driving New Sectors like Mobile
We’ve been tracking it as a fund and survey participants identified Mobile as the sector that will be most disrupted by Open Source over the next five years. For example, it’s notable that the 3,800 new mobile projects in 2010 were for newer platforms.
Clearly developers aren’t targeting legacy platforms like Windows mobile. Ninety-four percent of those new projects were for Apple iOS or Android. Android, you can understand as it’s fundamentally open; but it’s good to know it’s penetrating the iOS stack. We’re investing at the intersection of OSS, Cloud and Mobile in companies like Apperian.
Macro Shifts in Open Source – Innovation in Areas like Big Data
To me, what’s most exciting at a macro level is to see that Open Source is shifting from commoditization to innovation. For example, take the Big Data space. Open Source is the only way to address such a big problem space because you need a body as large as a community, rather than a single vendor, to tackle the problems of Big Data. Hence you see the innovation around Hadoop and the many companies it has spawned like Cloudera, MapR and the plethora of others.
Also, there is a new class of developers who are building on Open Source who are not willing to take the de facto legacy standard of relational databases and SQL as the solution. Through their innovation on frameworks like Spring, Hibernate and Ruby, they’ve learned that, in many instances, the best object relational mappings would benefit more from new innovative non-SQL, or so-called “NoSQL, approaches. In many instances these will be far superior to the traditional legacy approaches that came from closed-source giants like Oracle and others.
At the same time, I think it’s also very interesting that Open Source is taking the lead in so-called NewSQL. For many transactional and mission-critical applications, where consistency is so important to data for the reliability of the transactions, SQL is still an incredibly powerful and natural way to program. But as applications scale to enormous levels with cloud and mobile applications accessing services in the cloud, there needs to be some new means to reinvigorate SQL. Hence NewSQL. Here we’re investing in companies like Akiban to complement our NoSQL investment in Couchbase
Either way, I believe Open Source is going to be the driver of new approaches to solving the Big Data problem because the breadth of solutions needed will require the depth of the Open Source community to address the challenge of data expanding at a rate of 50x over the next decade.
The Potential Traps for Open Source
Despite all the positives we’re seeing in the Open Source market, there is a potential negative side. Open Source is not a panacea in and of itself; just because software is written in Open Source, it doesn’t mean it will be better.
Open Source is not immune to the bloatware trap. It killed many legacy software companies and Open Source does not necessarily mean best practice. So we have to be careful as an industry not to fall into the trap of just adding more and more features in the name of progress. This is a trap that stifles innovation as more dollars go to maintenance of bloated codebases.
Fortunately communities tend to self-correct and recognize this and trend toward what I call “leanware.” For example, I always celebrate projects with tight core kernels that are modular and extensible like Drupal.
However more broadly, feature functionality in many instances was not well thought through by vendors in the legacy approach of the closed-source world. We need to look at how Open Source can stay closer to the customer, and in the best of scenarios, the community will be the customer.
What Barriers Remain to Open Source Adoption?
At a macro level, the barriers to Open Source adoption have certainly changed over the years.
Initially, they were things like policy constraints or legal issues; now we’re seeing much more traditional kinds of barriers that we see with any selection of software. According to the survey respondents, the top three barriers to Open Source selection are:
- Lack of internal technical skills
- Unfamiliarity with the Open Source solutions
- Lack of commercial vendor support
Clearly, these could be barriers for any enterprise software selection. We used to see issues about security and licensing as the top barriers.
Next Set of Value Propositions around Open Source
In responding to a survey question on how Open Source impacts the manageability of applications, 53 percent said manageability is better or at least the same with Open source. But as we drilled down further and talked with companies about the survey, they explained that in the past they considered Open Source a complexity – something they worried might infect their own software or something that would be difficult to manage as a component of their overall stack. They explained that’s no longer the case. Open Source software is maturing and is properly packaged and properly delivered.
However, as Open Source gets more widely used, new considerations come into focus such as:
- Once we’ve built the software, how do we deploy it?
- When we’ve deployed it, how do we patch it and update it?
- How can we make it more effective in the rest of the life cycle, moving it from development to operations? (The so-called dev-ops challenge)
Therein lies the path for the next set of value propositions around Open Source. I think cloud will play a role here because of the emergence of Platforms as a Service (PaaS) in the cloud.
The cycle of managing configuration, deployment and updating of traditional software is still an issue. That challenge may never go away unless there is a fundamental shift. The cloud and PaaS represent that shift. Instead of dealing with all the underlying components of the delivery application, companies will deal with everything being packaged as a service, either as infrastructure, as a platform or at the top of the stack as an application.
Cloud computing will embody, or contain or be built on Open Source. We’re very much on that path today. The more cloud accelerates, the more it pulls Open Source. Examples of it are everywhere. Google is built almost entirely on Open Source, as is Amazon Web Services. And there are many examples of pure-play Open Source companies that are addressing the need for interoperability in the cloud by using Open Source. An example of this is how Eucalyptus is building an Amazon-compatible platform on Open Source.
So overall there’s a significant shift occurring, and while I think we’ll continue to see Open Source delivering more value disrupting and commoditizing existing software categories, I expect to see it both enabling new categories like Cloud and, perhaps most excitingly, driving new areas of innovation in areas like Big Data. It’s an exciting time and I look forward to what the year ahead holds for us all.
Results of North Bridge Venture Partners’ fifth annual open source survey, conducted in partnership with The 451 Group, were unveiled at the 2011 Open Source Business Conference in San Francisco. Click here to see a slide presentation of the survey findings including up-and-coming open source companies and some cool open source projects mentioned by survey participants.
Michael J. Skok is a General Partner at North Bridge Venture Partners.