Open Source

Why licensed software is a better option than OSS for midsize companies

The initial purchase price of open source software is definitely appealing, but what about the total cost of ownership? See why one member believes free doesn't necessarily mean cheap.

Given the choice between two products that are identical in functionality, time to market, and quality but different in terms of cost—one free and one not—I would absolutely choose the free option. But the decision between licensed software and open source software (OSS) is not such a choice. OSS rarely offers the same functionality, time to market, and quality. When it does, you should certainly go with it, but more often than not, it doesn't. The reason for this is fairly simple: lack of funds in OSS development shops.

One of the problems with the paid license vs. OSS debate is deep-seated conviction on both sides, especially in the anti-Microsoft camp. As you consider these arguments, I ask you to keep an open mind.

The midsize company
This analysis is focused on a typical midsize company, which is defined as having annual revenues of up to $200 million. Midsize companies are further characterized as being increasingly susceptible to competition. Best business practices dictate that companies in this phase should be focused on growing into global enterprises. Growth means devouring market share by the mouthful, which entails spending money to gain competitive advantage.

Four primary factors—which have been called "the four horsemen"—require consideration when deciding on a solution:
  • Time to market
  • Quality
  • Total cost of ownership (TCO)
  • Flexibility

Time to market
The lack of full-time resources (or the reliance upon voluntary efforts) in an open source project typically results in longer development cycles for the product and subsequent upgrades to reach the market. Time to market is one of the most important considerations in today’s competitive marketplace. These delays, when compared to the option of purchasing available licensed software, result in lost opportunity cost. This opportunity cost increases the real cost of OSS. OSS adopters will typically wait much longer to receive the same functionality offered by licensed software, and that wait can be costly.

Reliance on OSS means greater risk exposure on a couple of fronts, namely quality and documentation. Because OSS projects lack the injection of funds that accompany licensing, many open source developers find themselves unable to afford products to improve quality, such as Parasoft’s Jtest and Compuware’s Boundschecker. The result is that OSS products typically haven't been exposed to the same degree of scalability and performance testing as their licensed software counterparts.

The same lack of funds results in OSS projects that deliver subprofessional documentation. This can usually be remedied if you are prepared to pay for OSS consulting services and/or documentation, but that flies in the face of “free”—which brings me to my next point.

Total cost of ownership
I believe that one of the biggest fallacies surrounding the decision to implement open source software is the notion that OSS is “free.” Of course, you can download the source code free of charge. But what about the cost of support and maintenance? Some pundits argue that the initial purchase cost of software constitutes 20 percent of total cost of ownership, with 80 percent going toward maintenance. In fact, support and maintenance are often available with OSS, but they're certainly not free.

If you do not already have access to developers well versed in OSS platforms and development tools, you will have to retrain your team (good luck finding enterprise-quality training for PHP) or bring in outside guns to make modifications or fix the eventual bug. Furthermore, there is a dearth of experts in OSS compared to experts in licensed software. Chances are you will have to spend a good deal of time and money training staff to support OSS products.

So although a PHP-based open source content management system may be great for a startup, the time necessary to learn and implement such a system might end up costing a midsize company more money in lost opportunity than the initial cost savings could justify. Remember: Opportunity cost can be greater than any licensing fee, and midsize businesses must always consider this as they look to grow.

OSS provides utmost flexibility because developers have full access to the source code. From a developer's perspective, this can be great, but from a business perspective, it introduces a lot of risk. Here’s a hypothetical: What if Oracle was open source? Just because you could modify the source code, should you? Open source flexibility is beneficial only if you absolutely need it. Sometimes you do not want people muddling with the black box. Back to the hypothetical: Oracle works—don’t fix it. In short, open source flexibility may detract from business objectives.

OSS flexibility may also play into your maintenance costs. If you decide to change the source code, you have essentially broken the leash with the OSS provider. It will become increasingly difficult to take advantage of free bug fixes and upgrades. The cost of your modifications will escalate because you now have to maintain much more code, without the help of the OSS provider.

You get what you pay for
OSS definitely has a place in enterprise computing, and for some organizations, such as a startup where upfront licensing fees are prohibitive, it may be the best choice. But although it's hard to generalize, midsize businesses should consider time to market, quality, TCO, and functionality before deciding on a solution. The decision will typically be swayed by one of these horsemen. You should compare each licensed software product to the available OSS options. If your key horsemen for the OSS option match the licensed product, by all means go open source. But if they don't, go licensed.

Let me leave you with one final thought. Suppose you own a midsize business doing $3 million a week. Which database management system do you choose as the back end—MySQL/Postgresql (OSS) or Oracle/SQL Server (licensed)? Could the real cost of OSS be just as simple as sacrificing peace of mind?

On the other hand…
You can read the OSS point of view here.


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