Everywhere you turn nowadays, another company is targeting the Small and Medium Business (SMB) marketplace. SMBs are growing, and represent a segment of the IT market that has not been fully exploited by many, including open source software vendors that boasted early successes with large enterprises.
However, as vendors have learned, there have been obstacles to penetrating the SMB space. SMBs are reluctant to taking a chance on an open source solution in what has become a Microsoft market. They want IT solutions that are easy to install, configure, and maintain. The full penetration by open source software vendors is sluggish, but it’s moving.
Nearly three years ago, AMI Partners researched the Linux penetration into the SMB marketplace. According to their research, Linux had penetrated about a fourth of all companies with 100 to 249 employees.
The greatest concentration of Linux users was found in the businesses services industry. In fact, many SMBs who do use Linux and open source software are in the IT industry and already familiar with open source solutions and their configuration and maintenance. Resellers are integrating open source solutions into their offerings to the SMB marketplace accordingly.
The Huntsville, Alabama IT firm Avocent, a maker of managemnt products including KVM and serial console equipment, has continued to build a business strategy intended to capitalize on the SMB marketplace. They introduced a new Linux server management product developed specifically for the SMB market.
“Small businesses are looking to save money on technology,” says Kamini Rupani, a product director with Avocent. “In a time of tightened licensing, escalating software costs, relative to total costs, and low initial costs of Linux and its cadre of tools, SMBs are looking at the strategy of considering open-source software.
Linux is well suited for a smaller organization because it scales incrementally without large initial cash outlays. SMBs can tailor their enterprises to better fit their needs with Linux.”
Rupani adds that other cost savings associated with open source include using Linux servers in a variety of roles such as file server and Web server. In addition, Linux servers can service a large number of users at no extra cost apart from the additional hardware.
Heather Boyer, director of product management for the Englewood, Colorado-based Verio, an Internet Protocol (IP) network provider, pegs the lure of Linux and open source solutions for the SMB marketplace to three factors: to reduce costs, get away from vendor lock-in, and improve security.
Microsoft is avidly pursuing the SMB market and Boyer’s point of getting “away from vendor lock-in” is something that the SMB would not mind at all.
“People are learning that sole-sourced, proprietary [software] is bad for their business long term. Not only will they be stuck paying higher prices over the lifetime of the product, in many cases the proprietary technology isn’t suitable for directly solving the business problems they are facing,” says Dave Roberts, VP of strategy for Vyatta, a supplier of a commercially supported, open-source router and firewall solution based on Linux.
“Open source allows them to modify things and adapt the solution to their particular problem. In many cases, consultants and SMB business partners are helping them develop the systems they require using open source as the raw material.”
The momentum of open source adoption by SMB has been aided by its lower lifecycle cost as well as other factors.
“Linux deployments are taking place at such a rapid pace, it can be difficult to keep up; but the increasing adoption, based on multiple motivations depending on region, is compelling evidence for others who are considering Linux,” adds Rupani.
“Linux offers flexibility, ownership and security at little cost. With a variety of return on investment scenarios for government, business and education, Linux is not only accelerating technological innovation but also economic and social development around the globe.”
Boyer adds that larger enterprises who adopt open source helps win the hearts and minds of SMBs.
“Open endorsements by Asian and European governments are improving the credibility of open source solutions, and even driving concerted efforts to move away from vendor lock-in,” adds Boyer. “Over the past few years, increased support by brand-name vendors has expanded awareness among SMBs and is driving adoption of Linux in general.”
According to Ellen Libenson, vice president of product management at Symark, which offers password and user management solutions for Unix and Linux environments, one of the important cost drivers that Linux has always enjoyed in SMBs is that it is typically implemented on commodity hardware that they can acquire or replace at the local computer store.
“The initial and on-going maintenance costs are very reasonable as compared to proprietary hardware,” she says. “What has become an important new trend is the maturity of the install and configure process.”
Setting up a Linux-based network used to be a configuration effort. However, most Linux server distributions now include deployment and management functionality that make them reasonable additions to an SMB’s Microsoft-oriented network.
Gerald Carter of Likewise Software teaches a popular tutorial at the annual LinuxWorld Conference and Expo, focusing on integrating new Linux Servers into a Microsoft Active Directory environment. Now an open-source Likewise product, Likewise Open, has been integrated into several popular Linux distributions, making it easier to drop a Linux server into an existing Active Directory environment.
Some feel that the penetration of Linux and open source into the SMB space is not as robust as it may appear. The 451 Group, another IT research firm, found that the SMB market will take some time to penetrate.
According to their research, nearly three-fourths of open source vendors surveyed felt that the SMB marketplace constituted less than half of their revenue. Nearly half feel that it will account for a significant increase in their business in the future and about a third feel that it will not.
According the 451 Group’s research, Microsoft’s dominance in the SMB market is a significant barrier for many open source software vendors attempting to infiltrate this market, and that is unlikely to change anytime soon.
For example, Windows and Office products are supported with a decent supply MCSE certified professionals. Open source certified professionals for the SMB community were in shorter supply.
451 Group’s research points out that riper markets for open source penetration of the SMB niche will be in areas where there is less Microsoft dominance.
“While Microsoft’s market hold will be hard to chip away at in North America, many other markets in Asia, Europe, India, South America and elsewhere should experience rapid growth of Linux and open source software fueled by local government and commercial directives and preferences,” said Jay Lyman, an Analyst with The 451 Group, in a prepared statement upon release of their research.
Still, there is a lingering paradigm that Linux is here to stay and that SMBs are the next big mother load and the paradigm has been that way for a few years now and sooner or later it will be an integral part of their IT infrastructure.
“Open source is Borg of the IT world: resistance is futile;” says Roberts. “You will be assimilated eventually. Whether that happens in 3, 5, or even 10 or 20 years is hard to say, but the fundamental trend is definitely running that direction.”
