Matt Aslett’s post yesterday is one that will surely attract attention and possibly eggs from commercial open source proponents. However, I believe he’ll be proven correct. Aslett concludes with the following statement, which is backed up by data earlier in the post:
“If open source is to become more relevant to mainstream enterprise users then the focus has to shift from decreasing cost to enabling business practices and increasing revenue generation opportunities.”
I completely agree.
Our friend Matt Asay comments:
“Speaking of “who you ask is important,” have you considered that Savio has a vested interest in prospective buyers not fixating on cost? He works for a company that sells incredibly expensive software!”
Two things. First, what I blog on InfoWorld and my personal blog are my own views. I use my experience at IBM to provide color to these views, not to advance an IBM or WebSphere “agenda”. If I were tasked with the latter, I’d be looking for a raise!
Every piece of financial analysis I’ve done leads me to conclude that a mature open source vendor’s financial ratios are no different than their closed source competition. Yes, a startup open source vendor can keep costs down and pass on the savings through lower priced products. However, this cost advantage is not sustainable.
What happens when the $50k/server/year price point isn’t sufficient to market and sell the product, to invest in R&D, to invest in employees and to generate a sufficient ROI for investors? Well, you’ll increase the price to $60k/server/year. That works if your brand isn’t associated with “low cost”. By fixating on cost, when open source products can deliver additional benefits, open source vendors are simply trading short-term gains for long-term challenges.
Second, IBM software prices range from $0 to tens of thousands of dollars. Just because a product is $5k, $50k or $500k does not make it “incredibly expensive”. No customer would pay $20 for a software product that only saves them $1.75 in costs or only helps drive $3.25 in revenue. Prices are only sustainable when the business value being received is higher than the cash outlay.
Near and dear to my heart, the WebSphere Application Server (WAS) family has two very “low” priced products. If you want a no cost, unsupported product, we’ve got WAS CE. If you’re looking for an enterprise tested, fully JEE 5 compliant application server with broad programming model support, 24×7 support and a minimum 5 years of service from GA, plus a 3 year service extension available, we offer WAS Express for $2,305 in the US. If you compare that price to a 24×7 support subscription from an OSS competitor I think you’ll be pleasantly surprised. Oh, and if you’re looking at a large scale deployment with tens or hundreds of servers underpinning core business applications, our TCO story versus open source competition is insanely positive.
If anything, I have a vested interest in convincing open source vendors and prospective buyers to fixate on cost! But that’s not how I roll…my mom taught me better.