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Friday, November 18, 2005

Murugan Pal On Open Source Pricing & Migration Approach

Open Source is in the news a lot more now. Recently Larry Augustin wrote about the failing enterprise software model. I had always been questioning the business model behind opensource. Opensource proponents are beginning to articulate their views on different aspects. We also covered Kim Polese view on opensource support model.In the light of some twilight vendors looking at opensourcing their products, Murugan Pal offers some well thought out tips on migration and support pricing for opesnourcing. He notes that commercial and proprietary software vendors charge one time License (L) and annual Maintenance/Updates (U) plus Support (S) fees. In open source model - one may not be able to charge for newer versions ('Upgrades'). Typically, the maintenance and support costs are 18 - 22% of license cost. When you migrate to open source or SaaS model the L becomes zero as the software itself is free. Customers prefer at least two third cost savings on a 5 year TCO before making a software migration. He proposes an update & subscription model matching to 12% of typical license costs derived from: [( L+L*5*20/100)*1/3*1/5 - mapped per year on a 5 year TCO of L+U&S after two third cost savings]. He also offers some advise on the migration steps that include decisions on the business model and licensing type factoring in the community, licensing type impacts on all stakeholders, making the product easier to download and use, technology audits, documentation, bluewash and fostering community support. Next step - extrapolate these ideas into the Kim Polese model and see how the nature of number on support looks like.

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