The End of Enterprise Software: Open Source Finds an Opening

By Wayne Eckerson, Director, TDWI Research

"The enterprise software market is breaking down," proclaimed Mark Madsen at a recent meeting of TDWI's Boston Chapter. "And this opens the door for open source software."

Madsen said the business model for enterprise software vendorshas switched from selling licenses to selling maintenance and support. Maintenance fees now comprise 45 percent of revenues and a lion's share of profitability. This is largely because the softwaremarket has matured and consolidated, leaving customers hostage to a few big companies, Madsen said.

Eager to echo this theme, Brian Gentile, CEO of open source BIvendor Jaspersoft, said the software market is ripe for disruption: "Oracle recently reported it delivered 51 percent margins for the quarter, yet I hear from countless senior executives that they can no longer afford their current software maintenance contracts and are looking for options." Gentile said these executives often report that maintenance costs consume up to 80 percent of their IT budget.

As prices rise, IT executives are scrutinizing exactly what they are getting for their money. Many lament the "feature bloat" of enterprise software. "When I was a BI director," said Madsen, "we used less than 40 percent of the features in our BI tools. And while open source products may not have all the bells and whistles, they pass the 'good enough' test.”

Will Interest Translate into Sales?

Not surprisingly, interest in open source BI tools has skyrocketed as the economy plummeted. Many BI teams are looking for ways to reduce costs while still delivering value. Speaking from the audience, Doug Newton, a data warehousing manager at The Mathworks and a coordinator for TDWI's Boston Chapter, said that open source software makes it really easy to "kick the tires" before committing to a purchase. He told the audience he downloaded open source software from Infobright, among others, and liked what he saw, although his company has yet to start using open source tools.

Evidently, Newton is not alone. Gentile says Jaspersoft averages 250,000 downloads per month for its free community edition and has had 9 million downloads since its inception six years ago."Most aren’t paying us anything… yet," said Gentile. Infobright, an open source columnar database vendor that also presented at the event, has had more than 10,000 downloads, a number that should jump as more people hear about the company.

To date, there has been more tire kicking than usage, but many experts (including myself) predict this will gradually change.The TDWI Boston Chapter surveyed its users and found that 55 percent had yet to deploy open source software. Among those that have implemented open source BI tools, 35 percent have deployed MySQL, 20 percent Pentaho, 10 percent Jaspersoft, 6 percent BIRT, and 6 percent Talend. Their primary reason for deploying open source BI tools is cost (75 percent), followed by quick deployment (30 percent) and unhappiness with incumbent BI tools (14 percent).

Free Isn’t for Everyone

Not all lookers are hooked, though. Open source isn’t for everyone. "Just because it’s free doesn’t mean it’s right for you," Madsen said. It’s important to evaluate open source tools like any other BI tool. "Missing features," "lack of scalability," "need for internal expertise," and "switching costs" are the most common reasons companies pass on open source tools.

Most open source BI vendors are small start-ups, which raises the question of vendor viability. Gentile deflected this issue by pointing to the rich community of developers that surrounds each open source product. "If Jaspersoft were to disappear tomorrow, our code would live on for a very long time because there is a strong developer community that has contributed to the code and is invested in its future."

Leading Adopters

Small companies are leading the charge into open source BI, according to Madsen, but medium and large companies are not far behind. Small companies are deploying open source BI tools on an enterprise basis while large companies are using it in departmental pockets, usually to augment existing BI tools or fill a vacuum where no BI tools exist, Madsen said.

Kevin Haas of Open BI—a BI consultancy that helps companies build applications with open source BI tools—said most of his clients use the free community edition of open source BI products.However, the clients with the biggest applications—those deployed on an enterprise scale—implement the commercial or premium versions of the tools, which offer additional functionality for enterprise deployments as well as support, scheduled release cycles,and indemnity.

While adoption by end-user organizations is growing slowly, uptake by independent software vendors (ISVs) has been sizable. Open source makes it easy for ISVs to enrich their own applications by embedding open source reporting or analytical tools into their products. In fact, Gentile said hundreds of thousands of people are using Jaspersoft without knowing it because it's embedded in other applications. The nascent market for software-as-a-service applications has been a particularly robust market for open source BI vendors.

Inexorable Rise

If the mantra of business today is "faster, better, cheaper," then it's inevitable that companies need to explore alternatives to traditional enterprise software. Currently, open source BI tools offer significant cost savings over established BI vendors. As open source BI tools mature and undercut established players on price and flexibility, we will see an inexorable rise in the adoption of open source BI tools.


Wayne Eckerson is the director of TDWI Research at The DataWarehousing Institute. He is an industry analyst and the author of Performance Dashboards: Measuring, Monitoring, and ManagingYour Business (John Wiley & Sons, 2005). He can be reached at weckerson@tdwi.org.