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It's 2015 And You Can't Remember Why You Ever Paid For Enterprise Software

September 25, 2009
by Marc D. Paradis MS
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FOSS, COSS and HOSS v. The Enterprise Software Model

Before you write me off as just another Open-Source Zealot, hear me out. 2009 will be recognized as the year when Open-Source Software (OSS), and Cloud Computing (CC) for that matter, became mainstream concepts. Within 5 years both will also be the mainstream deployment models for Enterprise Software. Enterprise software includes: both row and columnar databases, Enterprise Resource Planning (ERP) systems, Data Quality (DQ)/Extraction, Transformation, Load (ETL)/Master Data Mangement (MDM) software, Business Intelligence and Reporting (BI/R) solutions, Portal, Collaboration and Social Networking platforms, Customer Relationship Management (CRM) and Campaign Management applications as well as any other number of operational and infrastructural applications.

I can make this prediction with certainty thanks to the paradigm-shifting work of Clayton Christensen and his model of disruptive innovation. In a nutshell, disruptive innovation occurs when disruptive technology (generally cheaper and easier to use solutions to existing consumer needs) is coupled with business model innovation (usually in the form of new value networks) to provide products which are simpler and more affordable than their more functional and more complicated competition. The net effect is to open up whole new markets where economies of scale compensate for reduced profit margins. One of Clayton Christensen’s canonical examples of disruptive innovation is the PC’s disruption of the minicomputer (for all the details, pick up a copy of “The Innovator’s Dilemma”). Suffice to say, OSS sits in the same relation to the Enterprise Software Model as PCs did to minicomputers. I’ll happily take up the debate in the comments section with those who disagree, the rest of you will have to take me at my word.

Before I go further, let me give some quick definitions. When I say the Enterprise Software Model (ESM), I am referring to the proprietary, license- and/or subscription-based models by which software has been sold for the last 40 or so years. In this model a software company develops, patents and copyrights code that is further legally protected from reverse engineering by stern prohibitions in the clickwrap and software end-user license agreements (EULA). The software company then sends salespeople out into the marketplace, supported by a barrage of marketing materials to convince prospective clients to buy said software at exorbitant margins (anywhere from 30-95%, with most around 80%) on the basis of assertions, flimsy comparative assessments (also known as Proof-of-Concepts) and almost always quite a bit of FUD. Such sales are fundamentally based on expectations – expectations of performance, functionality, stability, scalability, extensibility, and so on. When said software is implemented at the client site and one or more features fail to meet expectations, the door to litigation is opened. For this reason most of the language in a EULA revolves around issues of indemnification and the responsibilities of the EULA signatories.

OSS comes in at least 3 models, Free OSS (FOSS), Commercial OSS (COSS) and Hybrid OSS (HOSS). In FOSS the software is written, maintained and improved by a community of developers and the entire source code is provided to the public completely free of charge.

In COSS some form of EULA is wrapped around portions of the software and/or support, development, or maintenance services associated with the software. The COSS model also often provides some level of indemnification, that is a single, legal “throat-to-choke” should something go awry at any point after the EULA is executed. Key to the COSS model is that invariably some portion of the software is still proprietary.

In HOSS, the best of FOSS and COSS are brought together. The entire code base and development community remains free and open while service level agreements (SLA) are wrapped solely around services such as support, implementation, training and/or development. The SLA will often address indemnification, but only in the context of the services provided as the code base itself is transparent and free.

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Link to a nice article on VistA the VA's FOSS EHR package.

http://www.computerworld.com/s/article/9137376/Open_source_software_may_...

Built into all IP is an expiration date and I think that is a good and wise thing. People are always free to take existing art (whether that is OSS or expired IP or simply common knowledge) and rearrange and/or value-add to make something novel and non-obvious (in the case of patents, copyrights, trademarks and trade secrets follow different rules, but the same spirit).

It is a legal (depending on your employment contract obligations, if any) and business model question as to whether a novel and non-obvious invention is protected as IP or merely "released into the wild" as part of the world's commons.

Obtaining IP protection requires an investment and a risk, and as such anyone or any entity seeking IP protection deserves the right to earn a reward (note: the right is not to a reward per se, merely the right is to the opportunity to earn a reward).

Many software "enhancements" or "features", while patentable or otherwise protectable in and of themselves, do not yield a sufficient potential reward for the necessary investment and risk. The analog to this in the pharmaceutical world are treatments for orphan diseases where the size of the affected population doesn't justify the investment in a clinical trial.

In the pharma world, governments and/or philanthropic institutions need to step in to fund the necessary investments for these orphan diseases. Luckily, in the software world, many enhancements or features don't require anywhere near the investment and therefore hobbyists or interested individuals can readily innovate, upload to the appropriate OSS community and advance the state-of-the-art.

Much work and theory and policy has been built around "the tragedy of the commons". Well, it turns out there are times when "the bounty of the commons" is true and individuals acting in their own rational self-interest can actively benefit the whole. One of the most philosophically and emotionally appealing aspects of OSS and free OSS in particular is that it is NOT a zero-sum game.

Empirically, that makes a lot of sense. Back-end and middleware layers have the highest value of re-use, cross-industry, and in another economic sense.

There's a notion of patent protection to provide investors a fair and reasonable return on their investments, when they innovate in ways that are distinctly novel. Those protections, for example in new drug development, have an expiration period, at which point the intellectual property becomes no longer protected. It becomes "open source" in effect. [Legal scholars are welcome to clarify here! ] There is a recognized value for the societal good to make the openness happen.

On to OSS. Is there value that has been infused in large, initially (at least relatively) private investments, including commercial vendor software and, in fact, in the Veteran Administration's DHCP / VISTA / GUI software. Clearly there is.

Do the organizations who made those investments deserve meaningful recognition? (either a recurring revenue stream of some duration to provide a return on the investment, or continued, meaningful and reliable funding to recognize merit, in the case of the VA.)

Yikes, I used the word "deserved" ! Marc, care to comment on the parallels to IP time limitations related to OS? And, care to comment on whether we "should" live in a meritocracy where words like "deserved" are built into our societal decision making processes?

Two exceptions to the near-term demise of Enterprise Software are the Windows OS and the Microsoft Office Productivity Suite (principally Word, Excel, and PowerPoint). The primary reason for the durability of these is the trainability of the workforce which relies on them. Users of ERP, DBMS, CRM, etc. systems expect to have to learn new interfaces, andin the process to conform their workflows to the capabilities of the tool.
Users of Windows and Office on the other hand expect stability and consistency (prime example is the nearly complete market rejection of the Windows Vista release). Furthermore, users of Windows and Office outnumber the users of all other Enterprise Software packages by at least a factor of 10, if not 100.
Even if one could put together a cost-effective training plan, the short-term costs in lost productivity, the massive cultural resistance and the fact that some significant portion of the workforce simply wouldn't be able to make the switch, would present enormous barriers. Barriers which even the most effective and ingenious training plan would not be able to surmount.
Certainly small organizations or autonomous business units may prove the exception here, but across the broad swath of Windows and Office users, adoption of Open Source alternatives will take a generational turnover in the workforce.

In support of my comments regarding the Windows OS:

"For many members of the CIO Jury, it's not a judgment on the performance of the OS itself but rather a recognition of the prohibitive costs involved in such a change.

Ibukun Adebayo, IT director of social care organisation Turning Point, told silicon.com that the upfront costs, as well as the productivity hit a move would entail, serve as a deterrent to adopting Macs.

Adebayo said: "Before recommending such a radical change for close to 2,000 in-house IT customers, I'd need to consider not only the costs of the software, hardware, and training but also the intangible costs of inevitable downtime, stakeholder disgruntlement, and more calls to my service desk team whilst staff come to grips with a system that is reportedly 'quite easy' to use according to the many Mac enthusiasts out there, but probably more daunting a prospect to the millions who have grown up with a PC and Windows products all their life."

From Why CIOs are Saying No to Macs on silicon.com (http://software.silicon.com/os/0,39024651,39554596,00.htm?s_cid144)

Thank you Frank! It is true that "there is nothing new under the sun". Ideas often have a deeper history than we recognize. Newton predicted the man-made satellite, the Romans "toyed" with steam engines and the ancient Greeks developed the first programmable "computers". What is different under todays sun is the scalability, efficiency, power, cost, speed and/or form-factor. These enablers allow for novel uses and unexpected interactions by capturing the mindshare and capability of "the masses".

A somewhat contradictory take on OSS from a jury of 12 UK CIOs (http://management.silicon.com/itdirector/0,39024673,39607327,00.htm?s_ci...). While most came out stronly against OS as a way to save money and as the front-end of their stack, they were almost unanimous in their use of OS as back-end and middleware stack components.

Cloud computing a 'mainstream concept'??
No it's back to the future...called shared service ala 1969!
Remember SMS? McAuto? Tymeshare?...and many others.
Only diff is they did not include desk top tools like wp, and excel.

Here we go again...

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Marc D. Paradis MS

Marc D. Paradis, MS, is Director of Strategic Data Services in Applied Informatics and a Manager...