Open source gains from the downturn?

I've been hearing that open source vendors will win when the money gets tight. Is this true, or is it just spin?

In the short term, there's no denying that open source companies will suffer, like everyone else. Everyone is so shocked at the powerful downturn meme, that it can look like no-one is buying anything at all (it's true. I've been holding off on buying things like printer paper and toner).

This hits open source vendors. It's been the "most unpleasant quarter I've ever been through," according to Mat Asay of open source content management company Alfresco (quoted in a good article at Linux.com).

Long term, though, people do have to buy things again - but they will be more price conscious. (Yes. I'm printing on the back of documents. When they run out, I'll get more paper, but I won't go for the high-quality stuff).

At that point, open source wins - because it's cheaper in upfront costs. Asay lists three deals where he says Alfresco was up to 90 percent cheaper than proprietary: "One competitor had a $5 million bid, and we won with a $500,000 bid. We won another with a $250,000 bid; and another in Canada, [the bid from the proprietary software company] was well over $1 million, and ours was $100,000."

But there's a big danger. Open source companies make their money on service and support. Customers take the software on evaluation, and are free to use it, then turn it into a commercial deal when they start to rely on it.

The danger is that they will start to rely on "free" software, without going over to commercial support - something that Gartner analyst Mark Driver likens to "driving without insurance".

"In every case with us, and across the board with companies I work with, customers can evaluate a long time before they make a purchasing decision," Asay tells Linux.com. "One Fortune 10 company has been using our product in production for a while without paying us a dime."

But at the moment, most of these companies have a significant strength: long term contracts with customers. The trick now is to get more customers to sign up for this sort of regular business, by undercutting proprietary, and by offering better services.

Red Hat's consulting service promises just this, helping users cut costs by ditching proprietary software.

And developing this sort of thing should be possible. Canonical's Gerry Carr tells Linux.com that a lot of the resources you need to grow your business are going to be cheaper in the downturn.