Michigan Association of CPAsBusiness EdgeInside Technology
Aug. 31, 2007
Volume 4, No. 8
In this issue...
 -  What Every CPA Should Know About Foreign Asset Recovery
 -  Cash and Control: Bringing in Private Equity Minority Investors
 -  Credit Score Monitoring Crucial to Pre-Retirement Checkup
 -  Linux and Open Source: How It Affects Small Organizations
 -  Financial Executives Offer Opinions on the New MBT
Linux and Open Source: How It Affects Small Organizations

By Curt Finch


Linux and other open source applications are finding increasing acceptance in the global marketplace in small and large companies alike. Statistics on the growth of a few open source programs—like Apache, a web server; Linux, an operating system; FreeBSD, an operating system; and PostgreSQL, a database server—show this to be true. In this article, we’ll consider why open source is growing so fast, and what it means to you, the leader of a small company.

Apache: A New Challenger
Apache is a free open source web server that runs on most operating systems. The following graph shows how it has been taking market share from Microsoft’s web server (and others) since 1995.

 Source: Netcraft.com

Its success does not result from any lack of effort by Microsoft. Users have found Apache to be easier to implement, more secure, and more reliable than its competitors in the marketplace. It is also more reparable when there are problems (after all, you have the source code) and, most of all, it is free.

Linux and FreeBSD Operating Systems
The largest and most successful software-as-a-service (SaaS) providers have all chosen free open source operating systems such as Linux or FreeBSD as their primary platforms for serving their high performance web sites.

Large, Successful SaaS Providers Choice of Operating Systems
Source: Netcraft.com

Salesforce.com CRM - Sales Linux and FreeBSD
Taleo.com Recruiting Linux
Journyx.com Timesheets Linux
Rightnow.com CRM - Support Linux
Netsuite.com ERP Linux

These companies absolutely cannot afford downtime. They have plenty of money; they aren’t choosing Linux because it’s free.

Red Hat is a company that sells services and support for the Linux operating system. They have annual sales of $257 million and their five-year stock chart shows substantial growth.

(NasdaqNM:RHAT) Source: Yahoo.com

How does a company that gives away its products show this kind of revenue growth? Simple: they sell support and other services to large enterprises who are converting from Windows and Unix servers to Linux.

Apple Computer released OS X a few years ago, which is essentially code added to the FreeBSD operating system. If you have a Mac, you have a free open source operating system under the hood. Apple’s five-year stock chart is even more impressive than Red Hat’s, although surely the iPod has something to do with that. Companies like Apple Computer and Red Hat that are embracing open source in one way or another are succeeding in the marketplace because of it.

  (NasdaqNM:AAPL) Source: Yahoo.com

As for the future, Linux is looking strong.

Advisory services predict that Linux’s market share of the server market will grow from 19 to 26 percent by 2010. And Linux will have the strongest relative growth of any server operating system, including server operating systems from Microsoft. Shipments will increase from 1.4 million units in 2005 to 2.4 million in 2010. Revenue will grow to $11.5 billion by 2010.

A Free Database Server
PostgreSQL is an open source database server that had 1.2 million downloads in 2005 alone and has recently received commercial support from Pervasive Software (NasdaqNM:PVSW), the original makers of Btrieve. PostgreSQL is a free object-relational database. It offers an alternative to proprietary systems such as Oracle, Sybase, IBM's DB2 and Microsoft SQL Server. Similar to other open-source projects such as Apache and Linux, PostgreSQL is not controlled by any single company, but instead relies on a global community of developers and companies to develop it. It is very stable and bug-free.

Why the Open Source Movement is So Powerful
Software reflects a convergence of ideas; as such, ideas are very important in the minds of software developers. The key to market power in the software industry resides in the minds of developers. Fashion plays a role; some ideas are fashionable, some are not. The idea or philosophy of open source is powerful, frictionless and seductive. And like the ‘little black dress’ in the clothing world, open source may just stay fashionable forever.

Open-source software (OSS) is software which permits the use and modification of its source code by anyone. By definition, it has certain characteristics:

  • Free redistribution. The software can be freely given away or sold. This makes for frictionless idea transmission.
  • Source code. The source code must either be included or freely obtainable.
  • Derived works. Redistribution of modifications must be allowed.

Apache is an open source web server. PostgreSQL is an open source database server. Linux and FreeBSD are open source operating systems. There are many other examples, from applications to infrastructure. The philosophy associated with the term "open source" emphasizes collaborative development. This philosophy tends to quickly gain developer mindshare. As you would expect, Microsoft is visibly concerned about Linux's upsurge.

Microsoft had expressed concern about OSS, particularly as it threatened short-term revenue on the server space. Moreover, the parallelism and free exchange of information in OSS offers benefits that are not available with Microsoft’s current licensing model because it would be harmful to long-term development.

How Small Businesses Can Use Open Source Today
Rolling out Linux in your company can provide advantages. First, it’s cheap, fast and less prone to worms and viruses. The most common uses for Linux today in small businesses are server-based. Linux machines make good file servers, print servers, database servers and web servers. Open source software has been more successful so far in infrastructure software than in applications software.

The OSS Advantage for File Servers
A file server differs from a desktop computer in that it is dedicated to storing files in a centralized location while permitting network access. By having a file server, users can save work and have access to files without having to carry around a disk. Access privileges can be restricted by file or directory, while a centralized location means one place to backup all files.

This is the most common type of server in small businesses. Linux works well as a network file server. Linux includes software called Samba that allows files on the server to be viewed and edited on any Windows PC or Macintosh computer. Samba is faster and more secure than the native file sharing services available on Microsoft Windows machines. You can connect to shares on the Linux file server just as you would on your Windows file server. Everything will look the same and there is no per-user license required. Moreover, experience has shown that Linux will perform better as a file server than Windows, even when Linux is on older, slower hardware.

What to Expect in the Future
Many people are more skilled in Windows than in Linux; this is particularly true in small businesses. Therefore, investment in learning may be steeper initially in OSS than in Windows. If you are considering rolling out OSS technologies in your company, keep in mind the skill levels of the people in the company regarding this kind of technology.

If you are currently using any of the on-demand SaaS applications like Journyx or Salesforce.com, you are already using OSS technologies.

With the growth in the OSS marketplace led by Linux, more and more companies will be using OSS as a portion of their IT infrastructure, particularly in the area of servers. As more applications become Web-based, there will be less and less reason for people to use Windows or Macintosh desktop computers. Windows isn’t going away any time soon, but its days are numbered. OSS is shrinking Windows' lifetime for servers and eventually it may do so for desktop machines as well. And that should provide interesting developments for all of us to watch.

About the Author:
Curt Finch is the CEO of Journyx, a provider of Web-based software located in Austin, Texas that automates billing, payroll & project management by tracking time, expenses and mileage. Curt can be reached at curt@journyx.com.


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