News

Open Source Limited in SMB Market, Report Finds

• By Will Kraft
• December 03, 2007

The viability of selling open source software (OSS) to the small and medium business (SMB) segment of the market may not be as big of an opportunity as previously thought, according to a report released by the 451 Group. The report's assessment is based on its analysis of companies and organizations that provide or support open source solutions, such as Alfresco, BitRock, GroundWork, OpenOffice.org, Open-Xchange, SugarCRM, Untangle and Xandros.

Software vendors find simple OSS programs to be unprofitable to sell, while SMBs may find complex OSS to be untenable, according to the report, "The SMB Market Opportunity -- How Big Are SMBs for Open Source?"

Cost and resource limitations have put a crimp on SMBs when it comes to deploying OSS. SMBs don't have large enough IT budgets to take a chance on OSS in a Microsoft-dominated world. They are more likely to stick with what they know, such as Microsoft operating systems and software, or software for Mac environments. However, SMBs are attracted to open source solutions that are compatible with Microsoft software, the report found.

Another limitation to OSS adoption by SMBs is an abundance of MCSE technicians. Certified Linux/Unix administrators are in short supply.

Linux and OSS use will grow where Microsoft does not yet have overwhelming market share, such as in Asia, India and South America, according to Jay Lyman, analyst with The 451 Group and lead author of the report. Local government and business acceptance of OSS in those countries is also an enabling factor toward adoption.

OSS vendors can still make inroads in the U.S. market, where Microsoft solutions are well established. The 451 Group's report recommended a few strategies. OSS vendors may be more successful if they offer hosted versions of their solutions and provide separate commercial licensing options. They should adopt more novice-friendly solutions, such as distributing OSS with automated installers. Another approach is to ensure that their solutions run on Windows.

The report is part of the 451 Commercial Adoption of Open Source Research Service and is available here.