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The Hidden Costs of Open Source

When businesses hear the term “open source” software, it often translates into another word: free. And while open source code technically is just that — free for all to use — it doesn’t mean that there are never any costs associated with deploying open source. To understand the payoffs of utilizing the growing array of open source applications, experts say it pays for small and mid-size businesses to do their homework on the cost analysis front. “The philosophy of open source is more about freedom — to look at the code, modify it, and that there’s no copyright,” says Michael Goulde, senior analyst for Forrester Research, of Cambridge, Mass. “Companies can save money on their expenses, especially if they don’t need all the bells and whistles that a commercial software package has. An open source package might have all they need.” Still, he warns that there are hidden costs of open source and small and mid-size businesses “can get in over their heads really quickly.” Many businesses say cost is not even a factor when moving to open source. They simply pick the best technology for the job. But companies should consider the following before committing: No. 1: Packaged open source comes with a price Some open source software comes shrink-wrapped in a box just like commercial counterparts. For instance, Red Hat Linux subscriptions and training can cost thousands of dollars. Or SugarCRM, a popular open source customer management program, costs from $40 to $75 for the Commercial or Professional versions. It charges $855 to host and manage the application with a monthly maintenance fee. Sometimes migrating to open source — as with any IT overhaul — could mean that a company needs to buy new hardware.  Still, Bruce Perens, a longtime open source evangelist and vice president at Source Labs, of Seattle, an open source provider, says most small and mid-sized businesses don’t need commercial open source products. The Ubuntu OS, for example, is not difficult to install and is free. “You can run it and not get a support contract and not pay anyone,” he says. No. 2: Support isn’t always free Open source communities are known for being supportive and helping with problem solving — for free. In fact, experts say the support offered by open source communities is often better and more in-depth than commercial software companies’ “1-800” numbers. Yet when it comes to using community-developed open source applications, being able to get on-demand technical support is a concern for some small and medium-size businesses. “Support is always a concern, no matter what kind of product it is,” says Bernard Golden, CEO of system-integrator Navica, a San Carlos, Calif. systems integrator and author of Succeeding with Open Source. In this case, businesses can hire a local company to provide open source support or to manage updates just like they might when using Microsoft Windows. Red Hat support packages for Linux can cost anywhere from $349 to $18,000. Goulde adds that small businesses should seek outside support if IT administration is not their strong suit: “When they start trying to download it themselves and support it themselves and stay on top of all the changes, that gets hard. They need somebody to guide them.” No. 3: Consultants can cost you True, open source code is free. But, if a small business doesn’t have an information technology staff to research, implement and maintain it, the firm might need help, Golden says. “If they don’t have a lot of tech savvy, they should find a partner or service provider who is open source aware and supportive,” he says. When a vendor installs open source, it also has terms of service to stand behind. Free downloads don’t. Perens says if a small business wants to get its feet wet, at the very least, there are free open source products out there that mimic off-the-shelf packages, such as Open Office. “The people who really needed supported open source, are the larger businesses,” he says. “If you’re getting big enough that you need support outside of your company, get it locally and find a local consulting firm that is willing to support Linux. The price corresponds with the level of support.”

Does Open Source Software Make Sense for Your Business?

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Despite its technical mystique, open source software holds a lot of appeal for small and medium-sized businesses. And no wonder: It’s free. Free as in no off-the-shelf, licensing, or upgrade fees having to be paid to a software maker. And although open source code is by nature developed by a collaborative community of programmers, experts say it’s becoming more mainstream and that non-technical end users can increasingly take advantage of open source software.  “The open source folks are coming from a small business background — they wrote this software for themselves and they have an affinity for the small and mid-size users,” says Bruce Perens, a long-time open source evangelist and vice president at Source Labs, a Seattle-based company that offers support for open source deployments. “When I wrote my open source software, I was a one-person consulting business and the needs of small businesses were paramount to me.” Still, many businesses have concerns about using open source, such as worrying about whether or not it comes with tech support, how to deploy it, or how to even start researching the possibilities. So how can small and medium-sized businesses evaluate whether open source software is right for them? Experts offer this advice: Step 1: Evaluate your business needs Whether you need a simple word processing program or a customer relationship management (CRM) application, small businesses need to approach evaluating open source software solutions the same they would commercial software, says Bernard Golden, CEO of Navica, a San Carlos, Calif. system-integration company, and the author of Succeeding with Open Source. “The thing that makes sense is to look at their needs and what functionality they are looking for — then they can see whether open source fits their needs,” Golden says. “I would ask are there things you need to do for your business or would like to do but feel you can’t do because of the cost of software? In those cases it would make sense to look for open source alternatives. In almost every category of software there are open source packages that are very capable.” Step 2: Explore open source options Companies in the business of developing Web applications or software are probably already dabbling in open source — or even developing it. But you don’t have to be a high-tech firm to delve into open source. For instance, Perens points out that there is an open source package that is free to download and compatible with Microsoft Office, dubbed OpenOffice. Mozilla’s Firefox is an open source Web browser that is growing in popularity for its tabbed browsing and ability to block pop-ups. Or a business can try Thunderbird, a free open source e-mail program by Mozilla. Open source repositories that IT staff can check out include SourceForge.net, Codehaus, or Freshmeat.net. Although some Linux open source operating systems, such as Red Hat, come packaged with a price tag just like Windows, Perens says small businesses don’t have to necessarily plunk down the cash. The small business users who are less tech savvy could start with Ubuntu, which boasts the tagline: “Linux for human beings.” Perens says the Ubuntu OS is easy to install and use. It’s updated every six months and includes server and desktop software that can be installed from a single CD. Step 3: Determine if you need outside help If a small or medium-size business already uses outside consultants to deploy, manage or support their IT system, they can consider doing the same when it comes to open source — especially if they are concerned about not having someone to call if something breaks. “Vendors and consultants use open source to add value, but the SMB doesn’t have to be concerned as long as the reseller is standing behind it,” says Michael Goulde, a senior analyst with Forrester Research, of Cambridge, Mass., who’s written several reports on the trend toward enterprise use of open source. “It’s tempting to do it yourself because it’s free. SMBs can get in over their heads really quickly.” Perens says if a small business’s open source application is mission critical to consider using managed servers by an outside vendor. “And if you’re getting big enough that you need support outside of your company, get it locally and find a local consulting firm that is willing to support Linux. For a small business, or one with fewer than 1,000 employees, local support is the best deal.” If a small firm isn’t tech savvy, Golden aggress that it should look into finding a partner or service provider who is open source aware and supportive. Still he says: “Support is always a concern, no matter what kind of product it is. For most open source products you can find commercial support if you want it. You can also get community support from open source forums, which are tremendous resources and can even be far better than an 800 number that you get with commercial products.”

Meetings Go Virtual

Success in the global market was giving Marla Landreth headaches. Her company, InfoGenesis in Santa Barbara, Calif., was doing well. Customers as far away as Australia and Asia were buying its systems that link sales terminals together to track sales, inventory and customers across large properties such as resorts, casinos and stadiums. But each sale was an added challenge for Landreth, who heads training for the company, which has 150 employees and 17 sites. Most customers had steady employee turnover and a constant need to train new hires on InfoGenesis’ systems. Add to that the quarterly updates of new bells and whistles to the company’s software and Landreth faced big budget hits for training and travel. The dilemma grew as many clients cut their own travel following 9/11 and the economic downturn. “We use to distribute documentation and have everyone call in with questions, but that didn’t address the needs,” Landreth says. So InfoGenesis tried Web conferencing through Centra Software Inc., in Lexington, Mass. By setting up training sessions over the Internet, trainees several time zones away can click a link on their computers and enter a virtual classroom with a simulation of the InfoGenesis system and real-time instructions from a trainer. Students see what the software looks like in action. They can interrupt the lesson with questions using text chat or voice-over-Internet protocol (VoIP) technology, which lets them make long-distance telephone calls over the Internet rather than over telephone wires. The online solution, Landreth says, “has solved a huge problem of training and turnover for our customers.” Once the province of larger firms, Web conferencing and other collaboration technologies — tools that help people work with one another through their computers — have become more available and affordable. This is a boon for smaller companies whose only previous collaboration option was to gather workers in a room with coffee, donuts, and a whiteboard. Simple collaborative tools such as instant messaging (IM) can be incorporated into company systems, and even on individual employees’ home computers, courtesy of the AOLs and Yahoos of the world. Calendaring — the ability to check colleagues’ schedules or add a meeting their calendar — is now a standard feature in Microsoft Outlook. Web conferencing is being bundled into operating systems sold by companies like Microsoft Corp. and IBM Corp. Such systems will soon or already offer teamware — software that creates virtual workspaces for project groups inside or outside a company. The choices don’t end there. The marketplace teems with companies challenging larger companies like Microsoft and WebEx Communications Inc., a hosted Web-meeting provider based in San Jose. Flypaper.com, a San Carlos, Calif., firm hosts secure digital workplaces where teams can gather and share information, and Co-create Software, an Hewlett-Packard spinoff in Fort Collins, Colo., makes software that lets engineering and manufacturing teams work together. You can even buy turnkey systems, with servers and software, for $40,000. All tolled, the collaborative market is now estimated at around $3 billion a year. “The field is really growing by leaps and bounds now, in part due to the whole history of 9/11 and SARS [last year's outbreak of severe acute respiratory syndrome that put a chill on international travel],” says Mark Rice, a former Xerox executive who saw the potential of collaborative technologies and started his own Web-meeting business called Webinar Resources in Florissant, Mo. With the flood of collaborative products available, how do you choose? The best advice is to think hard about what you need and take it slow. “It’s hard to assess the values of these technologies,” says Erica Rugullies, a senior analyst at Forrester Research Inc. in Cambridge, Mass. “Some companies are afraid of collaboration because they see it as something that is just cool” rather than truly valuable, she says. “But there are advantages when you look at the business process, such as reduced phone bills or e-mail storage costs.” Web conferencing and teamware–software designed for groups and for communication, including e-mail, videoconferencing, chat features, and document collaboration–hold the biggest promise of savings in both money and time. Coworkers, clients, or prospective customers in different locations can look at documents and images on their computers while talking on traditional teleconference lines or directly over the Internet via VoIP. There are several ways to go. You can contract with the main players, like Microsoft’s Live Meeting, WebEX or IBM, which put together larger, more expensive Web conferences. You can also try going solo: Microsoft has bundled Net Meeting into all its new Windows products. Click the icon of the globe with the two arrows and you can try your hand at conferencing with up to 10 people. The third route is to sign up with a smaller conferencing firm such as Centra, which can take the mystery out of Web conferencing, especially for companies with small or nonexistent IT departments. For a fee of around 20 cents per participant per minute, Centra will set up your Internet meeting place, send out invitations, and register participants. All you have to do is click on the site, hook up a computer headset, and log into the meeting. (Centra also provides a Cost/Benefit Analysis, which shows the cost savings involved with online learning initiatives.) Going the third-party route may make the most sense for newcomers, the experts say. As with any new venture, due diligence is a necessary first step. Talk to the conferencing companies, check out their websites, ask for reference lists of customers, or even sit in on a conference, which many hold to demonstrate product features. But if you discover that conferencing works for you, you begin to use it frequently, and you and/or your IT department is up to the task, you might consider purchasing the technology to do it yourself. Microsoft offers Office Live Communications Server 2003, which lets companies set up their own IM networks via Office applications. OpenScape from Siemens AG combines voice, e-mail, IM, and collaboration features. Apple Computer Inc. has added video to IM with its iChat AV software and iSight digital camera. Oracle Corp. is challenging Microsoft’s e-mail dominance with its own Collaboration Suite, which builds on Oracle’s already considerable collaborative capabilities. The overriding advice is to take your time, especially with your own staff. Shifting cultures from donuts and coffee to computer screens and headphones may be jarring at first. “With options like teamware you have to change habits,” says Mike Gotta, senior vice president and principal analyst at Meta Group Inc. of Stamford, Conn., an industry advisory firm. “Getting people to change can be tough. You have to convince them that new is better.”