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Friday, July 15, 2005

The Exuberance Centered On OpenSource

(Via Iweek) Software entrepreneur John Newton’s strategy shows how much the software market is changing, particularly for startups. In June, he and former Business Objects COO John Powell launched Alfresco Software Inc., a content-management software provider whose core technology was assembled out in the open-source community by dozens of independent-minded programmers. By leveraging the power of the people, Alfresco is looking to upend the balance of power in a market for content-management systems dominated by EMC, Interwoven, Vignette, and other major players. The people behind open-source software are better at listening to customers than are proprietary vendors, Alfresco's Newton says. It's the kind of bold talk we haven't heard from startups since the dot-com days. Open-source applications are very real, and the ones attracting the attention and venture capital have a core of committed developers operating in the open-source community. The open-source model is giving birth to for-profit companies like SugarCRM, Greenplum, and Pentaho. These companies are building a new generation of business applications for managing Web content, customer relations, and enterprise resources that are cheaper and may be more dynamic than their commercial counterparts. And their approach just might succeed in changing the way software gets made and sold.
Many open-source startups aren't even creating their own software-they get off the ground by selling services to help businesses implement popular open-source projects. That was the approach of Gluecode Software -founded with $5 million in venture capital around an open-source software stack that includes the free Geronimo application server. IBM bought the company, which had fewer than 20 employees. That's the final ingredient propelling the current open-source movement: A number of the largest software makers, from IBM to Sun Microsystems, are embracing open-source strategies as never before, though to widely varying degrees. There seems to be an open-source equivalent to just about every type of commercial software on the market and almost as many vendors charging money to help companies implement, use, and upgrade this software. Still, business-technology managers know all too well the adage about open source: It's free, as in a free puppy. The work and expense start once you get it home.
Newton believes that services represent the biggest opportunity in CMS space and opensource CMS companies should leverage this . New open-source products can't compete with the breadth of functions in established commercial software. Instead, the open-source sales pitch often hinges on responsiveness- offering exactly what customers want, by letting them have a hand in development. Balancing commercial and community needs isn't easy. The question is can this new crop of open-source entrepreneurs build successful businesses when their core software is built by an army of faceless code jockeys.

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