SiliconGrassland.com

Bear Sterns. AIG. Lehman Brothers. Even Goldman Sachs. The list goes on. Large companies are failing or having liquidity problems in droves. The mortgage crisis is impacting every corner of the global business climate. It’s an interesting note that Oracle is boasting record profits despite the tough economic situation. This will not last. Organizations will not put up with being ripped until they can move to something else. Oracle is nearing the end of it’s stranglehold on software. Why? Open source.

So what does this mean for IT budgets? Aggressive cost cutting. Everywhere. Firms are beefing up on cash and cutting expenses in every area, including IT spending. The first thing to go will be expensive software licenses and internal IT budgets. The problem is that CIO’s can’t eliminate software functionality. However they can move quickly to more cost effective solutions. Expensive proprietary licenses can be eliminated and IT staffing can be reduced.

I happen to run an open source/SaaS firm, and we’ve noticed an upswing in interest from a broad swath of businesses. Why the upswing? 3 major reasons:

1. Flexibility – Businesses are tired of getting locked into a feature set.
2. Control – If the vendor or solution doesn’t work, businesses want the assurance they can take their software and data elsewhere.
3. Cost – Our on-demand (SaaS) and on-premise solutions are 50% below market rates for closed-source solutions.

Let me make a bold statement: an economic downturn of this scale has the potential to change not only the financial sector landscape, but also the software development and delivery industry. High-cost proprietary vendors will have an increasingly difficult task of selling value to an increasingly cost-conscious business world. Open source software has the potential to offer robust software, compatibility and interoperability, and a price point that becomes increasingly attractive.

Software as a Service (SaaS) is also a trend that is poised to gain significant traction because of recent events. Organizations are looking to shed overhead and assets in favor of a dynamic model that can scale with their business. Investing in expensive IT equipment like servers, network equipment, and the staff to run it all is a fixed cost. You can’t run servers with no staff. SaaS solves this. Businesses can grow and shrink dynamically and connect IT costs directly to business size and objectives.

In a time where most businesses are taking big hits, I’m very bullish about the open source/SaaS market. I’m watching it on the ground level, and I see the value proposition growing stronger in many hurting industries.