and other vendors see Iona staying on top of industry trends, he said. For example, Iona was invited to participate in important standards groups with other industry players like IBM, BEA Systems and Oracle.
"From the day we announced (the open-source plan), even though we had not made any revenue yet, it gave us more marketing visibility than US$10 million would have given us," Zotto said.
Even Wall Street analysts have been enthusiastic with the plan, despite the potential lost revenue, he added.
For a small company like Aras, giving customers the code to the product effectively gives them a site-wide license, rather than restricting the product's use to licensed customers. It also functions as a form of code escrow, a common practice where business customers have a copy of the product in case a smaller provider runs into financial straits.
"Early customers have an opportunity to have more influence, with the level of support they get. And they can have a greater effect on product road maps," said 451 Group's Zachary.
Free and open source are firmly rooted in a philosophy of sharing and collaboration. But for software companies adopting open source, it's far more pragmatic.
Even Microsoft, the largest proprietary software company, has adopted various open-source practices such as sharing code. The code from Aras' PLM application, for example, will be hosted on Microsoft's CodePlex code-sharing site and use one of Microsoft's Shared Source licenses.
Microsoft's change in tactics vis-a-vis open source allowed Aras to go ahead with its open source strategy.
"Historically, Microsoft and open source have not been thought of together, but we saw a pervasiveness of Microsoft infrastructure and even more importantly, the skill sets companies have in working with Microsoft products," said Marc Lind, Aras' vice president of marketing.
While Aras intends to give away its entire product, often software companies hold something back.
OpenMFG, a company that sells ERP applications to small businesses, is typical of many software companies in that it embraces only aspects of open-source development.
The company's application is built using the open-source PostgreSQL database and Trolltech's Qt development framework. The company has set up a collaborative development process, where customers and resellers can contribute customizations to the base product.
Venture capitalists and others have urged OpenMFG to open up entirely by making its software free, but the hybrid approach suits the company, said CEO Ned Lilly. He regularly considers whether OpenMFG should offer its software for free, but he hasn't seen the demand from customers.
The advantage of going fully open-source is that it would get the software into more potential customers' hands, particularly as the company seeks to expand in Asia. But the company is growing at a manageable pace, Lilly said.
Lilly said that many companies have made products open source to try to resurrect a poorly received product, which is a mistake, he added.
"There will be plenty of people who do it for the wrong reasons, and the pendulum will swing the other way and people will ask, 'What were we thinking, giving away our software,'" Lilly said. "They'll be blaming open source, but in all likelihood the blame will lie with a failure to execute, or taking care of customers--all those old-fashioned things."
Zachary said that many smaller companies are forced into taking a free product strategy. Large vendors like Oracle and SAP can count on recurring maintenance and support revenue, while companies with a small number of customers are far more dependent on license revenue.
"The only way to (compete) is to go open-source or software as a service--do something disruptive," Zachary said. "You have to do something to generate demand."
Play video
Open Source definitely is the best platform for Technology company to increase the user base and improve the product quality in the shortest time.
Just look at SugarCRM and it's rapid development pace.
Benny
iZeno Pte Ltd
Posted by Benny Ng on Tuesday, April 24 2007 11:19 AM