Forecast: Cost Cutting Will Drive Open Source Growth

• By Jeffrey Schwartz
• 08/10/09

Expenditures by enterprises on open source software jumped 34 percent last year, and spending in 2009 is on pace to increase at least another 24 percent, according to a forecast released last week by IT market researcher IDC.

Enterprises will spend $3.9 billion on open source software, up from $2.9 billion last year, the report projected. The expenditures account for infrastructure software and middleware and associated services but do not cover software for embedded systems such as appliances.

Revenues associated with advertising were also excluded, said IDC analyst Michael Fauscette, who oversaw the research for the report. Revenue growth is projected at a compounded annual growth rate of 24.4 percent during the five-year span of the forecast, reaching more than $8 billion in 2013.

Fauscette said in an interview that the accelerated growth is the result of organizations looking for lower cost solutions. "The economy has given quite a boost to open source," he said, adding he wouldn't be surprised if the 24 percent growth rate for this year does not actually turn out to be higher.

While subscriptions for Linux- and system-related software have fueled open source expenditures in recent years and remain the largest category, the latest findings of IDC's report suggest that spending is across the board, covering databases, applications, and middleware, according to Fauscette.

"We are definitely seeing more growth in the application side, and particularly in the middleware side," Fauscette said.

A case in point is Ingres, the supplier of open source database software for transactional applications. After the company's revenues doubled in 2007, they increased again by 32 percent, hitting $68 million in 2008. The company said it's seeing increased interest in open source solutions from once reluctant customers.

"We've seen a tremendous growth in interest from companies who really feel uncomfortable with the price hikes and the pricing practices of the big players in the proprietary world," said Ingres CEO Roger Burkhardt in an interview. "Now that budgets are being squeezed, we see a tremendous interest in the economic model that we offer."

Much of the growth of open source software is also being fueled by software as a services and cloud computing infrastructures, according to IDC's Fauscette. "Cloud infrastructure and service providers are going to really give boost to database and middleware because that's one of the keys for them to really scale this and keep the cost down," he said.

Analysts point out that key cloud infrastructures, notably Amazon, Rackspace, and Google, as well as smaller startups, have relied heavily on open source software. And not surprisingly key open source providers are targeting their efforts at the cloud.

"Open source continues to need to pave the way such that new cloud providers can come online and offer various levels of service and differentiate their services from those of the existing incumbents in cloud computing," said Ret Hat CTO Brian Stevens, speaking at the company's Cloud Computing Forum, held online recently.

"There's a lot of potential for open source software and cloud computing to compliment each other and perhaps for open source software to become an onramp to the cloud," said The 451 Group analyst Matthew Aslett in an interview.

Aslett, who also gave a presentation at Red Hat's event, said open source software is appealing for those who want the option of moving their systems to another cloud, back in-house or a hybrid of the two. "It has some potential to make it easier for organizations to shift their deployments," he said.