Last week Ray Lane, former Oracle President and now Open-Source proponent at Kleiner Perkins Caufield & Byers, eulogized the shrink-wrap box delivery model. Lane said that the software business is at a “crossroads, with an economic model no longer sustainable”.
Lane is a founder of SpikeSource, a provider of ‘business-ready’ Open Source products for enterprise users. The SpikeSource business model is to take top-tier Open Source project software, build and certify software ’stacks’ consisting of different combinations of Open Source components, and to then provide product support and updates for the stacks. Lane’s comments are a little ironic since SpikeSource monetizes Open Source by layering a per-user pricing support model on top of the Open Source components.
The Open Source and SaaS movements certainly have the attention of traditional software vendors, but software revenues are still heavily weighted towards traditional delivery model incumbants. Microsoft, Oracle and SAP alone account for 75% of software revenues. 2006 sales for Microsoft were $54.9 billion, $18.6 billion for Oracle, and $13.6 billion for SAP.
But what is telling is the growth rates of these companies. In 2006, Microsoft sales were up 11.5% from the year before, Oracle’s were up 9.5%, and SAP’s were up 10.3%. Not bad. But some Open Source company growth patterns have been stellar.
JBoss saw revenue growth of 150% in 2005 and 350% in 2006. MySQL revenues are doubling, and companies like JasperSoft and SugarCRM are seeing revenues double quarter over quarter. But then the best Open Source performers are in the millions of dollars, not billions.
Enterprises have become much more accepting of the Open Source model. In a February 2007 Gartner report, a survey of 800 IT professionals found that 87% of the respondents already use Open Source. The study also found a trend that as companies deploy more Open Source products, the more likely those companies are to take on vendor support contracts for those products.
Lane sees the change of the software delivery model as positive, giving companies more options, ranging from Open Source, SaaS, and cheap outsourcing from China and India. He envisions a new paradigm emerging that he calls the “Personal Enterprise”: software with enterprise capabilities that are powered by collaborative Web2.0 capabilities modeled after the success of consumer applications.
