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Startups Mainstream Open-Source Software

Posted on: Thursday, 2 March 2006, 12:00 CST

By Barbara Grady, BUSINESS WRITER

SOME HAVE CALLED it the communist movement within software. Industry giants such as Microsoft Corp. and Oracle Corp. have tried to quash it. But the "open source" software movement is nonetheless alive and well. Lately, this once radical mode of developing and using software is even becoming mainstream.

Open source refers to software developed by lots of programmers after the original source code is made public and anyone interested - - and capable -- adds to it or improves it. Then the program is usually available for free download and use.

Some widely used programs, most notably the Linux operating system, were developed this way. MySQL is a widely used database produced by the open source community. The Firefox browser is open source.

Now, in 2006, open source programs are proliferating and a plethora of startup companies, including some Bay Area firms, have been launched to seize opportunities created by the growing acceptance of open source programs in corporations.

A survey of 140 of the largest U.S. companies by Forrester Research found that 56 percent of them use Linux or open source software in some part of their operations. Another 19 percent plan to use it soon. The open source database market alone was $300 million last year and is expected to reach $1 billion by 2008, Forrester said.

"Cost savings continue to be the driver behind adoption," said Michael Goulde, a Forrester analyst.

Meanwhile, former opponents have quit trying to defeat it and instead are joining the fray. Redwood Shores-based Oracle in February purchased Emervyille-based Sleepycat Software Inc., an open source database developer, and announced a new release of Oracle Database XE, an open source version of its own databases. IBM Corp. acquired Gluecode Software last year and has been a major contributor to Linux and other open source collaborations. Microsoft -- the last holdout -- has partnered with open source application provider SugarCRM Inc. and supported "Open Office" -- an open source version of its Office desktop application.

Moreover, startups built on opportunities in the open source space have proliferated.

"Open source has come into the foreground over the past year, particularly in the past six months," said Julie Harra Farris, founder of Scalix Corp. of San Mateo, one of the open source startups. "It's rare that you talk to a CIO today who isn't thinking actively about the role of open source platforms in their operations," Farris said.

Scalix designed an e-mail server and calendaring program that is an open source application built on top of a proprietary e-mail server platform licensed from Hewlett-Packard Co. Scalix gives away for free in its "community edition" e-mail and calendaring server to nonprofit organizations and sells a second "enterprise edition" with more features and robustness for $60 a user plus $12 yearly upgrades.

Farris said she started Scalix because she could see dissatisfaction among customers of software systems about having to be "locked in" to proprietary systems -- so that if they bought the operating system or a database from a particular vendor, they had to buy applications from the same vendor.

Scalix was "started on the belief that Linux and open source were fundamentally disrupting the enterprise software business model" and even common software platforms such as e-mail and databases, Farris said. That dissatisfaction created a large opportunity for anyone wanting to offer open source substitute. Thus Scalix launched its e- mail platform and calendaring application for organizations and large companies.

While Scalix gives out one version for free, its enterprise edition is bringing in enough money for the company revenues -- and customer base -- to have grown 250 percent last year.

"A significant shift is happening toward open source. It is becoming mainstream," said Fima Katz, founder of Concord-based Exadel Inc., which provides a toolbox and consulting services for tailoring open source applications to specific business needs.

A big part of the attraction of open source is cost -- it is often free.

But a widely acknowledged problem with most open source programs is that, because no one entity created it or owns it, there is no company to turn to for maintenance and fixing troubles.

Forrester found that 26 percent of large companies it surveyed had no plans to use open source, and their main reason was lack of technical skills. Lack of maintenance was their next biggest worry.

Katz argues that free software can add up to costing more than proprietary or commercial software if the user spends a lot of staff time trying to make an open source application work or fit particular needs.

"Savings from open source is often tremendous, if you can figure it out," Katz said. But "it costs money in the time it takes to try it out," Katz said. Some companies might make costly business mistakes in the process of adopting an open system application or platform for a critical function.

That is the market Exadel is trying to address.

Large companies with sophisti cated information technology staffs can afford to adopt open source -- and can often realize big cost savings in doing so, Katz said.

But "second tier" companies, which are either medium sized or do not have large IT departments, need outside help.

Another local company addressing this "how-to-adopt-it" market and providing maintenance and fix-its is SpikeSource of Redwood City. Other local companies launched in the open source segment include SugarCRM Inc. of Cupertino, Funambol mobile open source of Redwood City and Zmanda Inc. of Sunnyvale. Zmanda makes open source data protection, storage and archiving software.

SpikeSource Chief Executive Kim Polese, the founder of several startups, told an audience of software professionals recently that the open source movement reflects changes in society generally. According to Polese, phenomena such as blogging and other forms of self-publishing on the Web are part of the same trend in which regular people assume more control in the marketplace. Polese said the open source movement is accelerating growth in the software market, spawning scores of companies, as well as nudging more people to be software engineers.

Meanwhile, more and more large companies in old-line industries are shifting to Linux for some part of their operations.

"Linux sales continue to ramp up at incredible pace and Firefox has become a real force in the browser market."

However, her company was founded on the premise that open source programs are often too difficult or risky to adapt if they come with no maintenance plan. SpikeSource sells tools and services to help companies adapt open source applications on the market to their particular businesses.

Source: Oakland Tribune

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