When CIO Daniel Chan was first prompted to use open-source software, cost savings weren't top of mind. He was mainly interested in how open source would enable his IT group at the New York State Office of Temporary and Disability Assistance to put ideas into action more quickly. In his government office, the procurement process lasts anywhere from 12 to 18 months. "It makes it impossible to do anything creative," Chan says.
With open-source software, it took just a few months for Chan's team to get the tools it needed to build a new self-service benefits system -- just in time for the flurry of activity that occurred during te economic freefall. Even though the agency purchased a support contract for the technology, there were no licensing terms and conditions to negotiate, which cut way back on the involvement of the procurement and legal offices.
And the benefits kept coming. As use of the system escalated, Chan's team not only kept up with the increasing volume, but also was able to help transfer the technology to three other states in a month's time, since there was no commercial license involved. "We were able to get people to come in and help quickly because there was a large pool of developers to draw from," Chan says.
With that success, Chan is now looking at migrating from the agency's current Unix platform to Linux -- and this time, cost savings are at the fore. "We'll easily see three to five times in savings by moving to open systems," he says. "Instead of $5 million to do a technology refresh, it will be $1 million or less."
In fact, in an exclusive Computerworld survey of 143 IT professionals, 80% of the respondents cited cost savings as the No. 1 benefit of open-source software, and 61% said open source has become more accepted in enterprises over the past few years. Open-source software "has transformed over the last decade from this unknown, risky thing that hippies and garage developers do, to the basis for a market in the billions of dollars," says Jay Lyman, an analyst at The 451 Group. "It's come of age, and it's just assumed to deliver cost savings."
But the close association of open source and cost savings can lead users to overlook other benefits of open source -- and the challenges that might come with it, including the need to manage cultural change, risk and expectations.
"There's a lot to live up to," Lyman says. "If people discover that it costs more than they thought, you do hear horror stories." What's more, the decision to use open source has -- until recently -- been more low-level than strategic, according to Forrester Research Inc. So while there's executive awareness of the cost advantages, other benefits, potential risks and structural changes required to take full advantage of open source are less well understood.
Not always 'open'
One of the reasons why costs can be higher than expected is because companies often opt to purchase a license for the software rather than using the free-of-charge community version. Some vendors operate on a "dual-license" business model, in which customers can buy a license to get access to the vendor's support team or to extra features and extensions for the core software, such as management tools.
According to Mark Driver, an analyst at Gartner Inc., the overwhelming majority of commercial open-source efforts today are based on a dual-license model. Customers should know, he says, that with this option, "the open-source-ness of the product comes into question." While open-source software licenses cost less than commercial software licenses, they include terms and conditions that restrict your use and lock you into a vendor. "We're seeing pushback from users who say, 'I went to open source to avoid these commitments,' as well as those who just want a piece of software that works well and is cheap," Driver says.
Lyman points out that larger enterprises often have the development resources to work with community versions of open-source applications, but even they might find reasons to purchase a license, such as a need for service-level agreements.
Not so for NPC International Inc., which operates more than 1,150 Pizza Hut restaurants worldwide. Five years ago, it used very little open-source software, whereas today it tries diligently to avoid commercially licensed software if there's an alternative, says Jon Brisbin, portal webmaster at NPC. The franchisee started migrating to open source when it converted its point-of-sale system from dBase to PostgreSQL; that deployment has grown to 10,000 installations.
On the other hand, says James Sims, CIO at Save Mart Supermarkets, buying an enterprise license from Ingres Corp. was a financially sound decision. Save Mart uses several open-source applications, including PostgreSQL, Apache Lucene, Red Hat Linux, MySQL and Xymon, and it runs its payroll and time-and-attendance systems on an Ingres- and SUSE Linux-based system. It started out using the public domain version of Ingres but experienced challenges that were related to the software's inability to effectively use a database for a company of Save Mart's size. Sims turned to Ingres for support, which led to a contractual agreement. While the costs are comparable to what he'd pay a commercial database company, "we get incredible support -- more than they should provide," he says.
Similarly, Bassim Hamadeh, founder of custom educational publishing firm University Readers Inc., purchased a license for SugarCRM three years ago, after using the community version for a couple of years. "Our IT manager read about Sugar 2.0, installed it, and within a week, we were using it," he says. At approximately $350 per user per year, he says the price is 20% to 25% that of a system like Salesforce.com, and it enables the company to use additional features such as a robust reporting tool, a workflow system and automated triggers.