Open Source Does Matter - But In What Segments?

Does Open Source Matter? To IT, It Does, Says Nicholas Carr

"The exact shape of things to come is still hard to discern, but Carr predicted a commodity base of open-source software was likely to become available through large centralized suppliers.

Carr said the enterprise software stack of the future would have a mix of open source and commercial code, with the more specialized layers, such as industry-specific applications, remaining the province of private suppliers. But the operating system and middleware layers will move toward open source code because of its low cost and the inability of commercial suppliers to strongly differentiate themselves and add value at that level."

I agree with Mr. Carr in that some types of applications are well-suited for open sourcing while others are not. The large centralized suppliers like Oracle and SAP are already moving in this direction and considering what they need to do to have a smart, consistent open-source strategy. We've seen the multitude of completed and pending acquisitions from Oracle for embedded database -- namely Sleepycat, JBoss, and Zend. Certainly the open-source opportunity is there for that particular segment (i.e. a commodity embedded database segment) but will it be the case for industry-specific applications that thrive on detailed business process automation? SAP argues not:

"While open source software is known for bringing enterprise costs down, that alone may not be enough, according to SAP's Peter Graf. "What really matters is the business value you provide and how much you can provide IT value to the organizations," he said.

So business value DOES matter and open source software doesn't necessarily deliver on that. This gives SAP a sustainable advantage to maintain its current bread and butter. However, SAP would be wise to consider parts of the Netweaver stack for potential open-sourcing. One of these areas is Master Data Management (MDM). MDM has gotten a lot of flack for not being a universal, operational engine for managing all types of data and no single vendor, not Oracle, not SAP has been able to conquer this market and serve up what customers need.

Now, what if SAP were to open source its MDM code? It would be very interesting for SAP to explore the potential for open sourcing the raw technical implementation (e.g., the synchronization engine) and then capitalize on the proprietary data schema and related meta-data descriptions (i.e., sell repository and data schema implementation pre-integrated with R/3). This may be a bit too progressive but considering all of Oracle's recent moves, SAP would be smart to manage the open-source movement proactively and with a differentiated strategy - one that doesn't include buying anyone and everyone up.