I read Gartner’s report “Predicts 2009: The Evolving Open-Source Software Model” before the holiday break, but decided not to blog about one of Mark Driver’s predictions.  But, now that Paula Rooney has blogged it, I no longer have to wear the “bearer of bad news” hat ;-)

I suspect you’d all agree with Mark’s view that:

“As open source becomes increasing ubiquitous, new patterns are emerging that will have a profound effect on adopter IT strategies and on the model itself.”

However, here’s the prediction that will likely meet with resistance:

“Through 2013, 50% of mainstream IT projects using open-source software (OSS) will not achieve cost savings over closed-source alternatives.”

Mark suggests ways to guard against the aforementioned issue, and goes on to suggest that cost alone should not be reason enough to reject open source.  I mention this as you may want to throw eggs at the report.  Read the report or contact Mark for more info.

I’m convinced that Mark will be proved correct in spirit, (maybe not 50% of mainstream projects!).  I say this because I’ve seen his prediction play out already in the past year and a half.  This is why I’ve been saying that a vendor that offers both open source and closed source products is positioned for success.  Both types of products have their pros and cons.  It’s best to pick the right product based on the project needs rather than viewing the product as a hammer, and all projects as nails.  MySQL understand this with their Toytoa vs. 747 positioning.

In 2008 IBM paid an independent 3rd party to compare the total cost of ownership (TCO) for using WebSphere Application Server Network Deployment (WAS ND) vs. a leading open source JEE application server for a large scale deployment.  The company found that the cost of administering and managing the open source product for a deployment of this size far outweighed the upfront license cost savings.  Similar findings were reached in favor of WAS ND in terms of performance and hardware usage.  Clearly, the open source product could have a better TCO on a smaller deployment topology.  This is why WebSphere offers WAS Community Edition, WAS Express and WAS Base.  This spectrum of choice allows customers to right-size project needs with product capabilities and TCO.

I’ve written about my fear of open source riding on the coattails of “lower cost”.  The current economic environment will result in companies considering the use of open source for a variety of projects in 2009.  They’ll do so because of the “lower cost” value proposition that most open source vendors seem to be including in their current marketing.  But what happens when some open source projects don’t meet the TCO test?

To me, cost is just one benefit of open source, and it’s the one benefit that may go away as open source vendors adopt more and more of the traditional software business model.

Not unexpectedly, Gartner has trimmed its 2009 Global IT budget forecast from 5.8% growth to 2.3% growth.

For comparison, the IMF reported the following GDP Growth in their October 2008 report (see pg. 22 of 321):

2006: 5.1%
2007: 5.0%
2008 projection: 3.9%
2009 projection: 3.0%

Maybe it’s yesterday’s (Canadian) Thanksgiving Tofukery, but I’m quite unnerved by Gartner’s 2009 forecast. My experience has been that Gartner (and IDC) estimates IT spending at rates higher than GPD growth.  I tried to find proof of this press release. The best I could do was this Gartner release from Oct. 2007, claiming that 2007 IT spending would grow 8.0%.  At 8.0%, the IT market would have grown 50%+ faster than the 2007 GDP rate reported by the IMF.

Adding 0.7% to the Gartner 2009 growth forecast, to set IT market growth equal to GDP growth, adds $21 Billion (0.7% of $3 Trillion) back into the IT market.  I started to think about what could be driving this $21 Billion gap.

In round numbers, IT spending by the Banking, Insurance & Financial Markets sector is approximately 25%-35% of worldwide IT spending.  At 20% (to be safe), the financial sector represents $600 Billion (20% of $3 Trillion) in IT market spending.  Note that $21B is only 3.5% of what the financial industry spends on IT.  With the various mergers and bankruptcies impacting the financial sector, one could make the case that the $21B gap between Gartner’s IT market growth prediction and GDP growth is largely driven by fewer customers in the financial sector.

However, I would guess that more than 3.5% of financial sector spending on IT has vanished (especially as a result of mergers).  If this is true, other sectors are spending more on IT than in the past, or the 2.3% IT market growth estimate is too high.

What do you think?