Open Source: A Silver Lining in the Economic Slump

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Support and Added Features

"We have seen an acceleration of our growth as things have gotten worse," says Bill Karpovich, CEO and co-founder of Zenoss. He says customers can save as much as 80% using Zenoss instead of products from such rivals as Hewlett-Packard (HPQ), IBM Tivoli, Computer Associates (CA) and BMC (BMC). Zenoss customers include Formica, Tyco (TYC), and LinkedIn.

But downloads of a free software don't bring in much money unless customers also opt for support services or added features, such as security enhancements. In the case of Digium, the unprecedented number of downloads was also matched by record revenue.

At publicly traded open-source companies, rising sales don't necessarily result in a climbing share price. At Red Hat (RHT), third-quarter sales rose 29% amid new demand from such battered businesses as retail, airlines, and construction, said CFO Charles Peters in a Sept. 24 conference call. That was the first time in three years that billings for the August quarter had exceeded billings for the previous period. Yet the stock price has swooned 42%, to 9.48, in the two-month period that ended Nov. 25.

Open-Ended Growth?

Despite near-term interest in open-source alternatives, many investors remain concerned about the long-term growth prospects for Red Hat and other purveyors (BusinessWeek.com, 8/18/08) of open-source software. Red Hat Executive Vice-President Paul Cormier says there's still plenty of room for growth.

JasperSoft's Gentile is plenty bullish, too. He says customers these days are opting for JasperSoft and its lower maintenance fees at a faster pace than they were six to nine months ago, when customers were using JasperSoft as an add-on to competitors' software. "We weren't displacing competitors" at the time, he says. But the company is doing that now, he says. "I can't say that I have a crystal ball," Gentile says, "but I believe the advantages of open source will endure in a tough economy."

Business Exchange related topics:
Open Source Software
Customer Relationship Management
US Economy
U.S. Stock Market

King is a writer for BusinessWeek.com in San Francisco.