New business models

When I was a kid, bands were touring to promote their newest album. This is not the case anymore and concert prices which were kept below their market rate to help sell records, as Alan Kruger from Princeton mentionned, are now set toward maximizing concert revenue. As an example, the U2 Vertigo tour, Billboard Boxscore reported, grossed US$ 260 million and drew more than three million people to sold out concert. Average ticket sales in the US was US$ 96.92, between 6 to 7 times more than what is charged for a CD. In addition, on its web site, U2 is now proposing a U2.com subscription for US$ 40/year (US$ 32/year if renewal) and has built a U2 store.

Faced with the appearance of illegal download of music for free, the rock groups have adapted themselves and are diversifying their sources of revenues. I have not still yet found if this metaphor is going to apply to the software industry.

Will companies support open source software themselves in the long run?

One other fact i forgot to mention yesterday is that Gartner and IDC agree on one front: customers are going direct to the community to get support and maintenance. IDC suggests that only 21% of the software developers purchased some sort of support or maintenance versus 55% who said no and Gartner confirms in their study that 43% of services required to support Open Source are delivered internally.

Is this going to last? At the beginning stage of a software revolution, whether it was PCs or client server, the traditional approach was "to do it yourself". However, over time, as the supply of services emerged, a shift occured from internally developed system to packaged approach. For instance, most companies had their own internally developed CRM before CRM software became available as a software package. But now, CRM Software delivered on premise or as a service has become the standard

I think we are seeing the same evolution at play here. As people are experimenting, they won't need any help to keep the cost of experimentation down but when it will get serious such as betting part of an infrastructure on an open source product, companies, understanding that support and maintain a software is not part of their core competencies and afraid of the risk of participating actively in a community, will find a partner to perform those functions for them.

Why does it matter? We are at the early days of the open source revolution and as such suppliers should be reasonably confident that the revenue line will grow but also very cautious about when and therefore limit their monthly cash flow spending.

Are the US behind in Open Source adoption?

I was reading two studies on Open source lately, one from IDC and the other from Gartner both of them published in July 2006. IDC has surveyed 5000 developers worldwide and found that 71% of the developers in the world are using Open Source and that Open Source software is being used in 54% of their organization. At the same time, Gartner had surveyed a sample of 314 North American companies and found that only 17% of the large and medium size organizations and 28% of companies from 500 to 2499 employees are using Open Source internally.

IDC doesn't give any information around adoption in different part of the world but talking to CEO of open source companies, it is clear that South East Asia and Eastern Europe are early adopters and, if we can link those two studies,it sems to confirm that the US companies are behind in term of open source adoption.