It’s Not the Tool, but How it is Used

October 30, 2008
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A research note from the 451 Group “Open source is not a business model” discussed that selling open source is a tactic rather than a business model. They then went on to discuss the various business strategies of 114 open-source…

A research note from the 451 Group “Open source is not a business model” discussed that selling open source is a tactic rather than a business model.  They then went on to discuss the various business strategies of 114 open-source vendors.

I’ve got a couple of thoughts on this, but I’d also really like to hear your take on this in your comments.

First, there are other technologies that are also tactics, not business models. These include on-demand or software-as-a-service (SaaS) software and cloud computing. There are many people who hope that all three will change how software is distributed and used in our industry. All claim to have a lower TCO (total cost of ownership), but whether that is true depends on the specific business strategies employed by each vendor.

The advocates of these technologies proclaim that they are the wave of the future.  This may indeed be true, but just as PCs, client server computing and the web took years to become “mainstream,” it may take a while for these technologies too. Keep in mind that the leaders in these technologies, especially if they are small vendors, may not be the leaders (or even exist) by the time these technologies “cross the chasm.

Second, and more important, is the underlying fact that it is the business use of these technologies that will drive their adoption and spread not the tool itself. There has to be a business use for the software before it is adopted. If a business does not need the required application then it does not matter whether it is offered on-demand versus on-premise, proprietary versus open source, or just hanging out on a cloud.

We have been experiencing a bear market and a recession lately. In general the stocks in our On-Demand Software and Business Intelligence indexes have fared poorly. When these stocks and companies rebound, besides the usual stock fundamentals, one of the key ingredients to success both in the marketplace and the stock market will be whether the vendors have the business applications that corporations are willing to pay for. Companies that are laying off people and have hiring/expense freezes are probably not going to adopt salary or expense management software regardless of the cost. Software targeted at new automobile or real estate sales will also get a lukewarm reception. Software oriented towards health care, particularly helping health care providers operate more efficiently, are likely to sell well.

Selling is always about meeting someone’s needs. Technologists too often think it is about the tools. Early adopters, often other technologists or companies with deep pockets, reinforce the Technology is King mindset. Sometimes it takes a bear market and a recession to highlight that it is not about the tool, it’s about how it’s used.


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