Open Source: A Silver Lining in the Economic Slump

Sales at open-source software companies are booming, even as stock prices slump and corporate IT spending plummets, Are the good times here?

By Rachael King

The economy may be a shambles, but Brian Gentile's software company, JasperSoft, is doing better than ever. JasperSoft posted record revenue for the quarter that ended in October, and its customer tally rose 63% over the previous period. The gain is all the more notable considering the record cutbacks in corporate software spending.

JasperSoft is thriving as other vendors struggle because it provides software at a lower price than competitors. In fact, JasperSoft supplies the basic software for free, making money by selling support services or additional features. Its annual fees can be as much as 85% to 90% lower than its competitors. "We're seeing more interest from companies looking to replace an older software product they can no longer afford," says Chief Executive Officer Gentile.

JasperSoft can afford to sell its reporting and analytics software for considerably less because it relies on what's known as an open-source model of development, wherein the source code—essentially the blueprint of a software program—is openly shared. The company's product benefits from the input of some 90,000 developers worldwide who volunteer their time writing code to enhance the program, though few work for the 80-person company. In October, the free version of JasperSoft software was downloaded 300,000 times. This "try-before-you-buy" phenomenon is common in the open-source world, and the vendors say they don't need to keep an army of sales people because customers can easily find their products. Today, JasperSoft has 9,000 paying customers located in 96 countries.

Budget Squeeze boosts Asterisk

The demand for JasperSoft's wares reflects companies' increasingly urgent search for low-priced alternatives to products no longer supported by shrinking IT budgets. Corporate software purchasing in the current quarter is undergoing its sharpest decline ever, according to an October study by ChangeWave Research of companies' 90-day outlook for IT spending.

The economic slump is fueling a miniboom in open source open source. Digium—which sells business phone systems built off the free, open-source Asterisk software—said the number of downloads of that free software increased 32% from the beginning of September 2008 to the end of October 2008. "There are customers who are delaying purchases and putting off decisions," says Digium CEO Danny Windham.

In addition to Digium and JasperSoft, four other open-source vendors said in interviews that they've posted record third quarters, and most are optimistic that the current quarter will bring more gains. The companies are Zenoss, which makes networking monitoring software; SugarCRM, a seller of customer relationship management software; Alfresco, a maker of content management software for Web sites; and MuleSource, which sells infrastructure software.