Conflicting interests

The ongoing open source versus commercial software debate has fervent partisans on both sides. Each tries to woo the uncommitted to its camp, citing its approach and products.

Like swing voters in an election, resellers often find themselves at the centre of all this activity.

To cut through the noise and predict the real value for a reseller considering the offerings, CRN Test Centre set out to demystify some of the issues.

Open source-derived software has taken the lead from commercial competitors in several product areas. Latest figures from market researcher Netcraft, for example, suggest the Apache Web Server leads its market with a more than 67 percent share, compared with number two, Microsoft's Internet Information Server, with 21 percent.

Several other open source offerings command respectable shares of their markets as well. These include Microsoft Exchange-compatible mail server Sendmail, Domain Name System server BIND and programming and secure shell scripting languages PHP and OpenSSH.

Other products, such as the Linux and FreeBSD operating systems, and MySQL, an open source SQL Server database engine, are steadily gaining on their more 'commercial' competition.

IDC market research has claimed that US organisations might buy US$98 million worth of open source services this year. That was expected to more than double to US$228 million by 2008.

One reseller embracing what he sees as a real open source opportunity is Johnny Chin, president of US-based Onesimus Enterprises. 'In my case, margins on moving software boxes don't matter. It's all about the service revenue opportunities,' he says.

Chin turns to the open source community for technical support. 'When it comes to troubleshooting, a solution can be found quickly online. If not, you can code the fix yourself.' Chin is willing to go it alone. Others favour the more commercial route for support and marketing collateral.

'As a Microsoft Certified Partner, I know Microsoft will always be there to help with support, marketing and customer development,' says Evan Leonard, president of Chips Computer Consulting in the US. A recent Microsoft-sponsored Insight Technologies study claims VARs emphasising Windows garner higher profit growth percentages, mean profits and revenue per employee.

Yet the potential benefits long term of going the open source route are profound. Con Zymaris, a spokesman for Open Source Industry Australia (OSIA) and CEO of services provider Cybersource, says open source-derived software has matured.

Even the support issue is not as clear-cut as one might think. Some popular open source-derived platforms are now much easier to install and maintain. Malware attacks are rare. And companies such as IBM and HP have become the biggest supporters of Linux, Zymaris says.

'You choose very good vendor support from Microsoft - or even better vendor support from HP and IBM,' he points out. Yet he adds that sales and marketing expertise is often lacking in the open source community, large vendors such as Novell, HP and IBM notwithstanding.

Open source offers better margins than more commercial software because it is generally so much cheaper. Smart resellers building extensive, customisable services around open source products have found the sky's the limit.

'There's more scope for flexibility,' Zymaris says. 'And there's a lot of stuff made available for deployment by resellers ... on different platforms. That's where the interesting action is happening.' Chances are, software is going to get more commoditised as time goes on. This means keeping it open and compatible with other technologies is likely to get increasingly important, Zymaris argues.

On the other hand, proprietary commercial software makes it difficult and costly for users to change platforms or get applications to do exactly what they want.

For Zymaris, that's one of the biggest opportunities open source offers to the channel, especially in such fields as outsourcing and managed services. 'That's the key difference, as long as we can meet customer requirements,' he says.

CRN Test Centre found that service and integration is key to ongoing profit from either platform. While both platforms offer ample opportunities for service and integration, open source may have a slight advantage.

Test Centre engineers estimated start-up costs for a basic, customised e-commerce package, comparing an open source-based offering against opposing Microsoft products.

Without question, it is initially cheaper to start with and generate integration revenue from the open source version.

When developers want to craft a custom application and slightly enhance the operating system, or look to integrate normally incompatible applications, open source allows users to customise any aspect of an integration. But a major consideration is ongoing costs, for both VARs and customers.

Kevin Crouch, marketing manager at Sydney-based embedded Linux developer Fluffy Spider Technologies, says the increasingly 'huge' licensing cost of proprietary software is proving a big hurdle for end users. 'Initially, open source support was a problem, but the biggest issues have been mainly ironed out,' he says.

'And Linux is very fast and flexible and being used for desktops to mainframes and mobile applications.' Fluffy Spider develops niche embedded applications for cross-platform mobile telephony.

Proprietary technology is available, but has different strengths, Crouch opines. '[Ours] is built on a Linux core. It's got a very small footprint. It's very fast and doesn't use as much of the battery life,' he says.

All those factors might seem intangible but, added together contribute to improved ROI for reseller and customer. 'I think it really drives down into two areas. Carriers want a fast return, while manufacturers want an individual look and feel for their product offerings,' Crouch says.

Makers want their mobile phones to interoperate but have customisable, personalisable, yet strongly branded user interfaces. Open source can provide a more cost-effective yet flexible route to market for ISVs and other solution developers, Crouch suggests.

Of course, taking that customisability too far can create disadvantages out of a perceived benefit. Those who customise open source products often create their own standards or practices. This can make customers very dependent and can also make resellers vulnerable.

Smart competitors can use marketing messages to point out to customers that they are being held hostage by resellers.

Also, resellers may find that the cost of supporting open source increases drastically if a key developer leaves the company and a new employee has to be trained. Yet resellers that do a custom complex integration with commercially certified employees can allow a new employee or reseller to pick up where someone else left off.

The CRN Test Centre concluded that resellers with low turnover and secure, long-term relationships with key customers should strongly consider going open source.

Unsurprisingly, providers that want to gain vendor marketing collateral, offer standardised solutions and resell support services, should opt for commercial software. Other resellers select platforms based on compatibility with other vendor partners.

Attain IT, for example, is an Oracle shop. But Red Hat Linux complements Oracle databases, so when Red Hat approached Attain IT, they were in no hurry to say no.

'Oracle is very closely aligned with Red Hat,' says Robin Habgood, director at Att