Most open-source licenses allow people to download and use the software for free. That cuts down on the cost of acquiring the software but business customers still require services, ranging from upfront consulting to ongoing support once the software is installed and training for internal staff.
Building an application from open-source software components generally requires more integration work. Proprietary software providers, including Microsoft and Oracle, have engineered their products, such as databases and management tools, to fit together well, which cuts down on initial installation and simplifies the process of introducing updated versions.
SpikeSource and SourceLabs plan to charge a subscription fee for support and maintenance services for Linux, Apache, MySQL, PHP development tools and, in the case of SpikeSource, the JBoss Java application server.
By contrast, Optaros, which announced recently that it landed funding from Charles River Ventures and CEO Bob Gett, is taking a more traditional IT consulting tack to open-source services. The company will provide up-front consulting and application development for specific projects.
To Gett, open-source represents a major shift in computing, similar to major technological changes that have shaken up the industry in the past, namely client/server and Internet computing.
"The world is full of professional services firms and it's become a pretty tough business. However, at the beginning of adoption of a new platform, there's an opportunity to create new companies that are specialised," Gett said.
According to a survey done earlier this year by Forrester Research, about 60 percent of companies have installed or will install some form of open-source software by the end of this year.
Despite the buzz in the technical community among developers and entrepreneurs, actual corporate customers are still assessing where use of open-source software is viable and makes sense, Gett said. Also, corporations may lack the appropriate skills to implement large-scale projects.
"(Open source) needs a corporate face so enterprises can use it in ways they are used to and are comfortable with it," Gett said.
Over time, services companies will likely specialise in certain open-source products and areas, such as applications for specific industries, analysts say. With so many companies chasing open-source revenue from services, Forrester's Giera foresees a surplus of services outfits and consolidation among them in a few years.
Seeking services revenue is not restricted to the open-source crowd. With corporate spending on software restrained, established providers of proprietary software increasingly rely on ongoing revenues, such as maintenance rather than new license sales. In an earnings call earlier this year, Oracle CEO Larry Ellison touted the company's "subscription" maintenance business as "an extremely high-margin business."
This year's model
Professional services firms have had practices for proprietary software -- such as SAP or Oracle software -- for many years. But in open source, most service providers are still relatively young and the market is unsettled, which means that companies that partner today could become competitors in the future.
Continued ...
4%
1%
