Open-Source Developers Close In on Proprietary Vendors

By John Pallatto  |  Posted 2005-04-05 Print this article Print

Open-source vendors of enterprise application software will have competitive advantages over established proprietary license vendors, especially in the SMB field, says Larry Augustin, CEO of Medsphere Systems, during the Open Source Business Conference.

SAN FRANCISCO—Long-established producers of enterprise application software will have to contend with a rising tide of vigorous competition from open-source software developers, according to Larry Augustin, CEO of Medsphere Systems Corp., a maker of open-source electronic medical records management software. Open-source software developers are poised to become a "fundamental disruptor of the enterprise software model" because they will provide compelling economic advantages over vendors of proprietary software applications, said Augustin, speaking at the Open Source Business Conference here Tuesday.
Companies such as SugarCRM Inc., which markets customer relationship management software; ComPiere Inc., a maker of ERP (enterprise resource planning) software; and Digium Inc., developer of the Asterix Linux PBX, are all examples of companies that are successfully marketing open-source examples of enterprise applications.
A few years ago these applications were the exclusive preserve of companies selling big, expensive software packages under proprietary licenses, Augustin noted. For example, Digium is "completely disrupting the PBX model that for years was based on companies supplying everything from the handsets to the wiring" as well as a specialized computer that ran the PBX software, Augustin said. Now companies that need a new voice system can buy a standard server from their usual hardware vendor "drop in a piece of software—the Asterix PBX—and you have a phone system," Augustin said. He identified six areas where open-source developers have advantages over large commercial software vendors. Most proprietary enterprise applications "are big, expensive, heavy applications" that have long sales cycles and "take forever to install, in some cases several years," Augustin said. To read more about the latest user collaboration features built into the latest version of SugarCRM, click here. Medsphere and other open-source companies can frequently install their applications in six months or less, allowing customers to start getting a return on investment faster, he said. Proprietary software companies are also big slow moving companies that usually require "big upfront development fees just to get in the door," Augustin said. They usually start out by building a pilot application as part of the process of convincing the customer to buy a full-scale application, he noted. Augustin contends that the proprietary software vendors are highly vulnerable to competitive inroads by open-source vendors because "they are dependent on that large license revenue to make this model work," he said. Open source represents a lower cost, lower overhead alternative, he said. Click here to read about Microsofts motives for sponsoring and appearing at major open-source conferences. With open-source products, customers can often download and install a full-scale edition of the enterprise application so they can get up and running quickly, he said. Most open-source applications have a large and enthusiastic user base that is familiar with the product and knows how to use it. As a result, open-source software vendors dont have to spend huge amounts of money on marketing to introduce people to the product and show them how it works, Augustin said. Next Page: Tapping the developer community.

John Pallatto John Pallatto is's Managing Editor News/West Coast. He directs eWEEK's news coverage in Silicon Valley and throughout the West Coast region. He has more than 35 years of experience as a professional journalist, which began as a report with the Hartford Courant daily newspaper in Connecticut. He was also a member of the founding staff of PC Week in March 1984. Pallatto was PC Week's West Coast bureau chief, a senior editor at Ziff Davis' Internet Computing magazine and the West Coast bureau chief at Internet World magazine.

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