Over on searchSOA on April 14, Jack Vaughn asks
The real important question for investors is "What is the Future of Software?"
Only a very small part (I mean low single digit small) of IT spend is specifically for software. As an aside, only a very small part of that relates to software that is licensed under open source terms and conditions (Ts&Cs).
The real issue for investors is that software sales are really about service. In the Gartner 2010 forecast that got all the buzz last week, of the quarter-trillion in software spending mentioned, 67% of that is software subscription maintenance spending. And hardware sales are really about service. Of course if it's really complex hardware and software it's all about service. And if it's simple hardware and software like sales activity tracking, you can sell the whole bundle as a service, which is even better.
I don't agree with Jack that there is a pendulum swing in progress back to smaller, not-for-profit projects in the open source culture. He doesn't provide any research for that finding. But, on the other hand, as someone that does IT investment research, I don't go looking for not-for-profit open source projects. I'm sure they exist in academia and among hobbyists just as they have for decades before the term open source was invented.
But historically, there is no pendulm then/no pendulum now/no pendulum tomorrow. The guys we know and love--Google (GOOG), HP (HPQ), IBM, Oracle (ORCL)--have used open source Ts&Cs to reduce research expense forever. We used to call them user groups. Microsoft (MSFT) got on the open source bandwagon about four years ago and will be the grand marshall by the end of this decade. But it has always made major similar usage of its developer network without the Ts&Cs. Adobe (ADBE) and SAP have been very slow on the uptake and are paying for it.
But it doesn't matter. The successful software suppliers form an investment point of view are the ones that realize they don't sell software, they develop software to sell services (and increasingly appliances sold with a time-series value, and other bundled services-oriented packages of technology).
-- Dennis Byron
(no financial interest in companies mentioned)