Open Source Software Sales Pegged at $5.8 Billion by 2011

Published: June 11, 2007

by Timothy Prickett Morgan

With open source operating systems, Web servers, databases, middleware, and development tools widely and freely available, it is hard to quantify the impact that these products have on the IT market at large. Most of the big open source software projects these days have commercial-grade support that is equivalent to that offered by the vendors of closed-source software, and it is here that open source projects get the money to pay at least some of the programmers who work on key pieces of the product that they sell support contracts for.

According to a study just released by IDC, the adoption of standalone open source software--meaning products that are not bundled together, but sold individually--will accelerate from 2006 through 2011, but growth in revenues will be nothing at all like the growth in licenses shipped. Nonetheless, even considering the relatively low price of support contracts for open source products, IDC is projecting that revenues worldwide for this class of software will grow from $1.8 billion in 2006 to hit $5.8 billion in 2011; that is a 26 percent compounded annual growth rate.

"We are in the early stages of the development and deployment of OSS," explained Matt Lawton, program director of IDC's open source software business models research program. "The market is still quite immature, especially now that we see active open source projects in all layers of the software stack. Although we see healthy growth in revenue from standalone open source software, we must keep in mind that revenue will substantially lag behind the distribution of open source software. Many distributions of standalone open source software are free, while paid distributions typically are based on pay-as-you-go subscriptions rather than pay-up-front license fees."

Considering the hundreds of billions of dollars a year that companies worldwide spend on all kinds of closed source software--including systems software as well as applications--$5.8 billion seems like a drop in the bucket. This is simply not a lot of money, when you look at it that way. But there is another way to look at it.

The real questions to pose about the market for open source software is how much money has the advent of commercially supported, open source products taken out of the software piece of the pie, and then how much has it enabled to be added back into the pie through decreased spending on software? How much money has the relatively inexpensive Linux operating system and various middleware products and databases removed from the coffers of proprietary software vendors who would have been the only other alternative? IT budget money never goes away--it just gets moved around. So the fact that open source alternatives are available is hugely significant if you consider that for every dollar or so spent on supporting a product like Linux, Apache, or MySQL has meant not having to spend many dollars on equivalent closed source products. And those savings got plowed back into the IT budgets of the world, and have therefore propped up other segments of the IT economy where price/performance benefits have lagged and legacy lock in have not allowed lower prices. Using open source software means spending less on certain kinds of infrastructure, which allows more spending on other exotic things.

In a funny way, open source software has hurt and helped the IT economy that predated it at the same time. And it is very hard to gauge with any precision the effect the open source software has had.

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