Today I attended a conference on the state of Open Source technology--the Global Open Source Colloquium, sponsored by SD Forum, a Silicon Valley-based organization for technology entrepreneurs, and Microsoft, among other sponsors. From all reports by participants, ranging from industry analysts to venture capitalists to CEOs of open source companies to developers, Open Source is alive and well, especially in this downtrodden economy where price for value is more important than ever. I was excited to hear the CEO, Michael Doyle, of Medsphere talk about using the VA Hospitals' Vista Open Source electronic medical record software to adapt to the greater world of hospitals out there. Combined with the fairly dramatic incentives in the Obama budget for hospitals to get going on the EMR, we may actually be able to see progress soon. I certainly hope so.
The other big success story mentioned numerous times was Sugar CRM, clearly a value-oriented alternative to SalesForce.com and growing at a whopping 20%+ annually, which is basically unheard of in this economy. But folks still need to sell. Something.
The issue has always been: how to make money with Open Source so that reinvestment and growth can occur and so investors will want to put their dollars into the stew. The answer seems to be in hybrid, partial, and mixed Open Source models. Build something proprietary on top, in the middle, or on the side and charge for that. Training, service, and hardware are not the way to go--thin margins and great uncertainty prevail. Outside of the US, revenues are driven by governments' need to cut costs. Standards on everything from contracts to who does what when are still a bit squishy but everyone agreed, creating community is the most important thing about Open Source. Loyal believers can make an app grow and grow fast. The key is looking at that what to do and how to charge as free downloads begin to move up the charts fast. After all, all this work does take $$$s to develop and maintain.
My take away: Many VCs will shut their doors this year. The ones who are left are likely to look at companies differently than they have in the past and hopefully, will abandon the herd mentality and choose ideas on their merits. Open Source technologies, especially creative plays on them, will have a shot at getting funding and growing into what will later be their natural place in the ecosystem.