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Friday, August 07, 2009

How Economics Drive Open Source Software

A recent market study from IDC reveals that worldwide revenue from open source software (OSS) will grow at a 22.4 percent compound annual growth rate (CAGR) to reach $8.1 billion by 2013.

This IDC forecast is considerably higher than 2008 for three reasons:
  1. the bottom-up list used to calculate the revenue has expanded through an exhaustive effort to include more projects in this forecast.
  2. open source software has had a much higher level of acceptance over the past 12 months than previously expected.
  3. the economy accelerated the uptake and use of open source software in the closing months of 2008.
"The open source software market has seen a strong boost from the current economic crisis," said Michael Fauscette, group vice president, IDC.

OSS is increasingly a part of the enterprise software strategy of leading businesses and is seeing mainstream adoption at a strong pace. As the overall software industry continues to consolidate, it will be key for OSS vendors to reach scale if they plan to continue as a standalone business.

Key findings from the IDC study include:

- Large software vendors like IBM, Sun, Dell, HP, and Oracle are making significant amounts of indirect revenue from their activities with and support of OSS. This has greatly aided mainstream adoption and acceptance of OSS.

- Hybrid business models seem to be increasing. It is likely that this will end up as the most prevalent business model, with on-premise vendors adding SaaS, SaaS vendors offering on premise, OSS vendors selling variants, and closed source vendors offering more OSS.

- The opportunity to leverage OSS in ways that increase competitive advantage, such as a part of BPO offerings or as a part of a software appliance, is on the rise and should help increase adoption and growth for OSS vendors.