Matt Lawton of IDC has a new survey on open source in publication that confirms many of the trends we found in IT Investment Research year-end 2007 survey, which ebizQ commissioned back in January 2008. Of course that survey in turn confirmed research Matt did at this time in 2007. Truth in advertising: I did software-market research for IDC and sometimes with Matt from 1997-2006 so I am sure Matt and I are both using rigorous, intellectually honest methodologies.
But that does not mean we always reach the same conclusions. For example, I believe his results and mine confirm the almost total amalgamation of the open source software (OSS) market into the overall market. I am not sure he would agree with my conclusion from his data but that’s the beauty of statistics. Back in January, I diagrammed it like this:
That is, the software market is made up primarily of two types of revenue streams: maintenance and license (there is a third “other” category but I am ignoring it for simplicity’s sake. Even though it includes Google’s revenue, it is still a minor part of the pie.) Each of those streams is made up of two components. Both have a “new” component, which is a small part of the total in any given year, and represents your initial and sometimes only payment to a software supplier. Each also has a second component. For licenses, that second component is upgrades and add-ons (including when you add more users). For maintenance, the second stream represents your renewing a subscription maintenance contract in the second and successive years of a license if you choose. Despite the way the pie is drawn, maintenance is actually 60% or more of the total.
Among much information in Matt’s publication, he found:
• The majority of average company revenue (63%) is from software products, with 30% from services; revenue from hardware and the resale of third-party products and services is negligible. These vendors are truly software vendors.
• The majority of revenue from OSS (59% on average) is from subscriptions. In fact, almost half of the respondents generated 100% of their OSS revenue from subscriptions.
• Almost 80% of OSS revenue on average is generated directly by the vendor as opposed to selling through partners.
In other words, open source suppliers businesses look like any software supplier’s business. That is why I say “There is no open source market, no open source business model.” That is my opinion not Matt’s. Going back to my diagram, I see open source encroaching on both the license and maintenance side (the dotted lines). On the license side, an example is the value of Apache HTTP server in IBM WebSphere AS or in the Oracle AS. On the maintenance side, an example is Red Hat or Acquia selling subscription maintenance on Fedora or Drupal respectively.
Matt has some other good data on how much of the revenue is from OSS versus from proprietary, how much comes from subscriptions versus one-time license fees, and so forth. Take a look if you want to understand how your open source software supplier is building his or her business.
Leave a comment