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April 5, 2005

Enterprise software model “broken” says open source advocate

Open source champion Larry Augustin has pointed start-ups towards opportunities in the lucrative small and medium business (SMB) market, saying the system of delivering enterprise software is "broken".

By CBR Staff Writer

Speaking at the Open Source Business Conference (OSBC) yesterday, Augustin advised open source ISVs to target specific SMB markets, such as healthcare and customer relationship management (CRM).

Augustin, director for a number of open source companies and chief executive for healthcare software start-up Medsphere Systems, believes these sectors are ripe, because large enterprise ISVs have struggled to move down market.

He noted traditional ISVs are bound by costs associated with sales, marketing and development to effectively price their products and win business.

Quoting Wall Street analyst Goldman Sachs, 76% of new license revenue is channeled directly into expensive sales and marketing. We are charging customers convince them they need out software, Augustin said. The enterprise software model is broken.

He said open source ISVs have the advantage that because they effectively use the community to help build and test products there is little need for expensive pilot programs.

The existence of the community further assists open source ISVs because they have access to a potential customer base that are already familiar with the product, a factor that reduces both ISVs’ sales cycles and time taken to install the product.

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