Selling open source

Making money from free software sounds like a recipe for disaster, but open source offers channel players the chance to carve out a market niche while cutting costs and increasing margins.

The religious fervour of some open source supporters opposed to software giants such as Microsoft may have nurtured the movement through its early years, but it also hindered efforts to be taken seriously in the boardroom.

Now open source has come of age, it has swapped the sandals and hemp jeans for a suit and tie. It is also shaking off the “free” tag as more people come to appreciate open source is free as in “free speech”, not as in “free beer”.

Open source, and in particular the Unix-like Linux operating system, now presents a significant opportunity for channel players prepared to stake a claim in this new frontier.

The open source development model operates mostly under the GNU General Public Licence (GPL). Often referred to as 'copy-left' as opposed to copyright, software covered by the GNU GPL is available free of charge to the general public. Developers have access to the complete source code, making it easier to build customised solutions.

If a programmer modifies software covered by the GNU GPL, then those modifications must also be made freely available.

At first glance it would seem impossible to make money under such a model. The profit lies in providing integration, support and other services to end users. In an industry where hardware and even software are becoming commodity items, services are where the fat margins are to be found. As such, open source offers an opportunity for distributors, system integrators and resellers to increase profits and move up the food chain.

The Linux operating system for servers and desktops is perhaps the best-known open source product, but other popular software includes the Apache web server, the Samba file and printer server, the MySQL database and OpenOffice -- a Microsoft Office-like application suite.

There are many variations or "distros" (short for distributions) of Linux. Two of the most commonly used distros in business circles are Red Hat and SuSE, the latter having been acquired by Novell in 2003.

These are developed by companies that make their profits from support and training rather than licensing fees. All Linux distros share a common code base but have been customised to suit different needs.

Current figures indicate global $1.3 billion server Linux sales revenue per quarter. Sales of PCs running the Linux will reach $10 billion by 2008, predicts market researcher IDC.

Forrester's Goulde: Open source is flexible

Open source is also moving up from the operating system at the bottom of the "software stack" to high-end enterprise software such as the SugarCRM customer relationship management application and the MySourceMatrix content management system.

Sydney value-added distributor Avnet Partner Solutions took the plunge into open source in February, striking a deal with Novell to distribute SuSE Linux. Part of the Avnet group headquartered in Phoenix, Arizona, Avnet Partner Solutions operates in 68 countries and distributes IBM, HP and Oracle.

Avnet Partner Solutions now operates the only Novell authorised testing centre in Australia and New Zealand.

The distributor has embraced open source for pragmatic rather philosophical reasons, says Avnet Partner Solutions marketing director Michael Costigan.

“When we first started with Novell SuSE we had two or three business partners who had a real keen interest in Linux. We’ve now seen that grow to 30 to 40 business partners who are actively engaged in Linux opportunities or seeking out help for driving Linux opportunities into the mid-market space,” Costigan says. “They want to put another string in their bow and offer another solution to their end users.”

Thanks to the fact that Avnet Partner Solutions’ IT staff were already familiar with open source technologies, it was not a case of jumping into the deep end, says technical services director Craig Murphy.

“The guys were very au fait with Linux so it was a natural progression for us. Actually the push from within really came from our technical team because they were seeing the need for it as well,” Murphy says.

The makeup of the audience at a series of breakfast seminars to launch relationships with Novell brought home to Murphy the changing attitudes towards Linux in the wider business community.

“The types of people that are asking questions within a Linux organisation are changing, and we were getting mainstream business executives who were trying to find out about Linux, trying to talk about commercial opportunities, rather than just tech people.”