Open Source Adoption Continues Unabated

Even though revenue is lagging adoption of open source software, like demographic information that tells you there will be x-number of 65-year-olds in 20 years, the number of companies using open source software (OSS) is predictive of things to come, according to a new study by research house IDC.

“The other thing that we’re seeing now is both the quality of and the demand for the higher levels of open source software … is happening as well,” said Matt Lawton, program director for Open Source Software Business Models at IDC. “So it’s still early stage, but looking at the SugarCRM’s of the world and Compiere, for example for ERP, those are applications that are starting to get some traction.”

The market for “stand-alone OSS” (OSS that has a revenue model associated with it like SUSE Linux or RedHat) is in a significant growth stage, a new study from IDC reveals. Adoption of OSS, and in particular commercial adoption of OSS, include increased customer interest in OSS as customers realize that OSS provides them with more choice and leverage with proprietary software vendors.

In addition, more financial backing from venture capitalists, more comfort with subscription revenue as a business model, and increased interest in OSS within larger enterprise organizations are helping to accelerate the OSS adoption rate.

The important takeaways from the study, said Lawton, are as follows:

Enterprises, not SMBs, are the ones using the most OSS.

Cost savings continue to be the biggest driver of adoption.

Worldwide revenue from standalone open source software reached $1.8 billion in 2006. “$1.8 billion is a number that throws it out there that a variety of businesses are making money from OSS,” he said. “RedHat is an important one but it’s not the only one.”

OSS revenue will reach $5.8 billion in 2011, representing a compound annual growth rate (CAGR) of 26% from 2006 to 2011.

And, even though IDC advises software vendors advised to consider several factors when evaluating how best to leverage open source software as a business opportunity “(OSS) still only less than one percent of the total spending on software. So it’s important to put that into context; that revenue from OSS right now is still not that significant,” said Lawton.

But …

“[T]he revenue understates the impact that OSS is having on the software industry and that’s because the unpaid adoption where there is no revenue associated with it is extending to all layers of the software stack.”