Archive for April 20th, 2009

The procurement advantage, or a simple test for “purity”

There is no end in sight for the “open core” debate, or for the matter what role companies should have in the OSS marketplace. We recently witnessed the lively debated sparked by a post by James Dixon, that quickly prompted Tarus Balog to descent into another of his informed and passionate posts on open core and OSS. This is not the first (and will not be the last) of public discussions on what an OSS vendor is, and I briefly entered the fray as well. I am quite sure that this discussion will actually continue for a long time, just lowering its loudness and turning into the background as OSS becomes more and more entrenched inside of our economy.

There is, however, a point that I would like to make about the distinction between “pure OSS” and “open core” licensing, a point that does not imply any kind of “ethical” or “purity” measure, but just a consideration on economics. When we consider what OSS is and what advantage it brings to the market, it is important to consider that a commercial OSS transaction usually has two “concrete” partners: the seller (the OSS vendor) and the buyer, that is the user. If we look at the OSS world we can see that in both the pure and the open core model the vendor has the added R&D sharing cost reduction (that, as I wrote about in the past, can provide significant advantages). But R&D is not the only advantage: the reality is that “pure” OSS has a great added advantage for the adopter, that is the greatly reduced cost and effort of procurement.

With OSS the adopter can scale a single installation company-wide without a single call to the legal or procurement departments, and it can ask support from the OSS vendor if needed- eventually after the roll-out has been performed. With open core, the adopter is not allowed to do the same thing, as the proprietary extensions are not under the same license of the open source part; so, if you want to extend your software to more servers, you are forced to ask the vendor- exactly the same of proprietary software systems. This is, in fact, a much overlooked advantage of OSS, that is especially suited to those “departmental” installations that would be probably prohibited if legal or acquisition department would have to be asked for budget.

I believe that this advantage is significant and largely hidden. I started thinking about it while helping a local public administration in the adoption of an OSS-based electronic data capture for clinical data, and discovered that for many authorities and companies procurement (selecting the product, tendering, tender evaluation, contracting, etc.) can introduce many months in delays, and substantially increase costs. For this reason, we recently introduced with our customers a sort of “quick test” for OSS purity:

The acquired component is “pure OSS” if (eventually after an initial payment) the customer is allowed to perform extensions to its adoption of the component inside and outside of its legal border without the need for further negotiation with the vendor.

The reason for that “eventually after an initial payment” because the vendor may decide to release the source code only to customers (this is something that is allowed by some licenses), and the “inside and outside of its legal border” is a phrase that explicitly includes not only redistribution and usage within a single company, but also to external parties that may be not part of the same legal entity. This distinction may not be important for small companies, but may be vital for example for public authorities that need to redistribute a software solution to a large audience of participating public bodies (a recent example I found is a regional health care authority, that is exploring an OSS solution to be distributed to hospital, medical practitioners and private and public structures). Of course, this does not imply that the vendor is forced to offer services in the same way (services and software are in this sense quite distinct) or that the adopter should prefer “pure OSS” over “open core” (in fact, this is not an expression of preference for one form over the other).

We found this simple test to be useful especially for those new OSS adopters that are not overly interested in the intricacies of open source business models, and makes for a good initial question to OSS vendors to understand what are the implication of acquiring a pure vs. an open core solutions.