Matt has two statements in his recent posting: “Putting risk back on the vendor, not the customer” that I’m not sure I agree with:

[1] “…if the open source vendor fails to deliver ongoing value, you dump them.”
For this statement to be valid in all cases, there needs to be an alternate vendor that you can move to. As an example, let’s say you start with RHEL, and for whatever reason Red Hat support is not to your liking or cost expectations, what real options do you have?

Some will say, well it’s open source, so you could support yourself. In the case of RHEL, you really couldn’t because of the way RHEL is licensed and updates are made available. But besides, you don’t want to get in the business of providing yourself support for a given OSS product, which is why you went to a vendor to get that support in the first place.

On the other hand if we’re talking about a product like Apache Tomcat, or even Apache Geronimo for that matter, you can go to several vendors for support (i.e. Geronimo support options). This is because there are several interested parties participating in the open source community and the community is not owned/controlled by a single vendor.

[2] “On average, proprietary enterprise vendors spend 5-10x more on sales and marketing than they do on R&D”
I thought that figure was really out there, so I looked at what IBM, Microsoft and Oracle spend. To be complete, I looked at SG&A (i.e. sales, marketing, general and administrative) vs. R&D. I also looked at Red Hat to compare commercial vs. commercial OSS:

For the most recent year/6 months (sorry, I was lazy): [UPDATED on 2006-10-31: to include SG&A as % of Total revenues]

Company SG&A to
SG&A as
% of Total Rev
IBM 3.6x 23% Full year 2005 data
Microsoft 2.1x 31% Fiscal year 2006
Oracle 2.0x 26% Fiscal year 2006
Red Hat 3.1x 54% 6 months Fiscal 2006

So, the 5-10x that the quote mentions is really an outlier. It could be that has to spend so much on SG&A to get recognized in a crowded market. But larger software vendors spend a much lower proportion on SG&A than 5-10x. And as you’ll notice, Red Hat, the perennial OSS company with published financial results, spends 3.1x more on SG&A than on R&D [UPDATED on 2006-10-31: and a whopping 54% of revenues on SG&A compared to traditional vendors.]

While I won’t argue that an OSS project doesn’t spend much, if aything, on SG&A, an OSS vendor, playing in the commercial software world, is going to spend about the same as its commercial counterparts on SG&A as a multipler over R&D spending.

PS: I know the last tow posts have responded to Matt’s posts, but that’s just because he has interesting things to say!