Blogs are a great platform for people to espouse their passions (not unlike editorials). They are different than traditional news outlets because they may be objective, opinionated, and even wrong. Interestingly enough, each of these behaviors is frequently rewarded equally.

I was reading a blog not long ago in which an executive of an open source company was ranting about how he didn't want to be grouped in with other open source companies that were exploiting the cost advantage of open source. He raised the point that he was there to make excellent software and didn't want any part of the low end of the market. He even invoked the tired argument that comes from ultraconservative critics of open source, "If it's inexpensive, it must just be a cheap knock-off of commercial software." To tell the truth, it was a little shocking. You see open source is about both better economics and better software.

Commercial open source software is a disruptive technology. Clay Christensen documented the phenomenon in his book the Innovator's Dilemma. Disruptive technology causes an upheaval in a mature market by first capturing non-consumption. Open source attracts users because it is typically less expensive, less bulky, and less complex than the established leaders in their software segment. Cost and complexity can prevent a whole group of users from adopting the purely commercial offerings. This is where open source solutions thrive.

As a rule, open source technologies are easy to acquire. Thanks to pervasive, inexpensive Internet access, they are downloadable and licensed in a way that allows anyone to use them. In other words, there is a low barrier to trying the software. In addition, these technologies gain popularity due to word of mouth (blogs, mailing lists, users groups, forums) and liberal licensing terms allow the technologies to spread, making the commercial open source products cheaper to market. This lowers the cost to the supplier, which ideally is passed along to the end consumer. Open source vendors entering this space typically address lower margin niches within the broader market ceded by industry leaders who can't generate the same level of profits they can with their premium customers. It's not uncommon for proprietary vendors to even see a short-term increase in profitability due to focusing on their more established and higher margin customers.

When entering a market these technologies are often less feature-rich than the incumbents. This is not necessarily a criticism. In fact, it can be a strength because successful applications focus on the features that offer a greater value than on solutions with a long list of features that drive the cost of software up. Open source software often succeeds because of its utility.

However, the open source technologies don't typically stay in their part of the market. As they start to enjoy success, these developers hone their products and add features that start becoming attractive to users higher up the food chain. Eventually they address a wider set of needs and capture a larger part of the market. Established vendors can't compete with their innovation cycles or their economics.

For example, there was a time (circa 1996) when Red Hat enjoyed at best a secondary role in many data centers. They were often used to host less mission-critical infrastructure in a fairly new growth segment: Web and e-mail servers. It was remarkable how they rose from an inexpensive value-oriented solution addressing the fringes of the IT infrastructure to a trusted well-respected mainstream operating system. In their earliest days Red Hat co-founder, Bob Young, spent a lot of his time selling T-shirts and CDs, more so than enterprise software subscriptions. In time Oracle and SAP started collaborating with Red Hat and users started hosting databases and other more critical infrastructure on Red Hat Enterprise Linux. Red Hat was very disruptive and remains disruptive to commercial Unix vendors. Another example of disruptors in enterprise software is the open source database. MySQL grew as a reliable no-frills database that was adopted by Web developers (and others) who couldn't afford licensing of the most popular commercial databases but needed a stable database that could handle large numbers of read transactions. The licensing model offered by industry leaders was extremely expensive for Web users and based on a dated seat-licensing model. Companies looking to purchase a MySQL license are often in awe of the fixed price, unlimited server enterprise licensing of MySQL AB's commercial services.

Innovators like MySQL often leverage the success of other established industry leaders to draw comparisons. Zack Urlocker, executive vice president, products at MySQL, recently commented on his blog, The Open Force, about this subject:

Typically, MySQL does not replace the existing legacy databases in organizations. In fact, many of our customers are also users of Oracle, SQL Server and DB2. But they use them in different areas. As Charles Phillips from Oracle said a while back: Oracle and MySQL are both in the transportation business. But Oracle is a 747 and MySQL is a Toyota. Unless you're very rich, a 747 is not a great commuter vehicle. But admittedly, I would not want to drive cross-country for a meeting in New York. So in most companies, there is room for both solutions.

Radically improved economics in itself is a huge innovation - it's what marketing blogger and author Seth Godin terms a purple cow. A purple cow is a product that stands out in a sea of similar products because of some remarkable trait. However, pure price competition is not a great long-term strategy, unless you get an early lead over everyone else in the industry. The key is to continually come up with new innovations rather than to be satisfied to keep milking your cow.

In a traditional closed source model, continual innovation is both difficult and expensive, and can even involve a bit of luck. It requires exceptional insight into your customer needs and market. Open source companies innovate by way of a novel twist. They don't do this on their own; instead they harness the power of a community. Open source software constantly improves because of the ability to tap into a group of passionate users whose collective brain is much larger than the resources of a single company. By allowing a large number of users to adopt their technology, they get feedback and users who criticize, praise, and spread the word about their products. In rare cases they might even have users contribute code to their product, but this is much less common.

This is not to say that a company can't innovate, though it's much more likely that an open source company with a large active community will foster more innovation due to a leveraged effort that's only possible because of a transparent, open forum for discussion of the company's products.

So as an open source user why should you care? The reason I have taken time to lay out this little open source business lesson is to help someone who is evaluating open source software decide which open source technologies are likely not only to save you money in the near term, but have the potential to continue to grow with you in the future. As I look at successful and commercially viable open source software, I ask the following questions:

• Is the commercial open source software significantly useful without the support and services offered by the commercial vendor backing the project?
• Did the software grow organically? Or was it a result of a commercial product re-released under an open source license? It's difficult for any company to successfully restructure their cost structure and development model.
• Does this software challenge the perpetual licensing model? Look for software that offers software-as-a-service where the vendor is obligated to constantly re-win your business.
• Does it have the typical open source traits? A license that allows for redistribution, aggressive release cycles, a transparent development process, and finally a licensing or service model that offers good value in comparison to other commercial solutions.
• Does the open source project show evidence of vitality? For example, an active mailing list, forums, and other evidence of user involvement is a positive sign.

Other Useful Links:

• "Open Source and the commoditization of software," Ian Murdock:
  http://ianmurdock.com/?page_id=222
• "Disruption in the Software Industry," Zack Urlocker:
  www.theopenforce.com/2007/01/disruption_in_t.html
• "Purple Cow," Seth Godin:
  www.sethgodin.com/purple/