How California's Open Source Policies Affect Enterprise Software Investments

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Includes: IBM, MSFT, ORCL, SAP
by: Dennis Byron

According to this February 18 report about the use of open source software in the city of San Francisco and in California state government on a website called Governing, the push is on there to save millions, be more transparent, work better together, and otherwise reap all kinds of other kumbaya results from some random pieces of enterprise software technology.

The European Union and the UK in particular has been on this bandwagon to nowhere for years. But the fact that the government that represents 25% of the US population and that acts as a U.S trendsetter in many ways thinks there is some earthshaking impact in a legal device makes it time to revisit the differences between open source software and non-open-source software from an IT investment perspective.

Here is the good news:

1. From an IT investment perspective the difference between licensing enterprise software via one of the dozens of approved (and hundreds of unapproved) open source licenses and licensing enterprise software via another type of license is zip, nada, zero, non-existent from a market dynamics point of view.

Open source software licensing (not always using that term) has been around for five or six decades and has impacted the enterprise software market very little. There are no measurable savings involved in using that licensing method. Even if there were, software represents a small percentage of overall IT expense when compared to systems, storage, personnel, benefits, telecommunications service fees, and so forth.

2. The open source method of licensing software has no special technical or economic advantage. Conversely it is not more costly or less secure as some argue. The primary advantage is--just as the name implies--control of the source code. If the company that wrote the software goes out of business, the user still has right to change or update the functionality it acquired with the license. That doesn't do you a lot of good unless you keep very competent, highly paid computer scientists on staff (or are willing to pay some consultants with those skills) but the advantage is real.

3. And probably most important, even if open source terms and conditions were to eventually take over the software market (from a current place in the low single digits in terms of market share as measured by revenue), the leading proponents of it are the guys you are already investing in: IBM (NYSE:IBM), Microsoft (NASDAQ:MSFT), Oracle (NASDAQ:ORCL), and so forth. SAP (NYSE:SAP) is late to the game --and that's what it is, a marketing game--but I expect it to catch up quickly.

Here is the bad news: The (or a) technology advisor to San Francisco's mayor, Brian Purchia, reportedly describes software licensed in a way other than open source "private," as in

The state (of California) has done a good job in terms of at least saying that open source software should be left on the table, but in San Francisco, we're actually making it a part of the policy. It will be evaluated on an equal field with private software.

Does he contrast private with public as in public safety, or even worse public healthcare? Can mandates be far behind? Here in little Massachusetts, we walked up to that precipice a few years ago and wisely got rid of the policy makers who were suggesting it. Hopefully California will follow suit.