Not so long ago, open source was seen as merely a hobby for so-called technology enthusiasts.

Today, it has broken into the mainstream, become a movement in its own right and is creating waves in the software world.

The question now is: can we throw away our proprietary packaged software?

The appeal of open source is as much about driving open standards as it is about the licensing model. But it brings with it opportunities and potential pitfalls.

Organisations see the benefits of open standards and the integration headache it soothes.

This relationship between open standards and open source software is driving business to consider it as a viable alternative to proprietary solutions.

This year, we may well start to see open source challenge long-established and credible products and services in customer relationship management, enterprise resource planning and other enterprise software applications.

But what will be different this year is that developments will be much more related to the consumer.

Most big inroads from open source software to date have been in the development and server sides of technology – Apache and Eclipse are great examples.

What is coming, however, is more likely to have the big consumer application vendors scurrying to the strategy desk.

Unbundled office software, such as OpenOffice, provides all the functionality required for most users with no cost.

Likewise, Mozilla Firefox operating in the web-browser and email space and Clamwin in the Antivirus space are genuine alternatives to more traditional paid for “closed source” products.

The consumer is also becoming more educated. The numerous online forums which discuss these applications lend additional weight to their authenticity and usability.

Word of mouth is driving consumers to try open source software.

Applications are no longer differentiated from each other by pure functionality and extra bells and whistles. When that happens in a market, purchasers tend not to volunteer to pay for the privilege.

Clever software bundling means it is difficult to remove the “paid for” applications. But hardware is made cheaper when it is unbundled, which means it might not be long before consumers buy a “skeleton”, ready to add the “application” flesh.

Leading technology vendors are using open source to drive revenues as well as to gain market share.

Existing vendors see open source as a way of gaining market share before looking to “upsell” into paid-for solutions with additional capabilities.

It will take longer to hit the corporate desktop – the prior investment and perceived risk of change are still big issues – but eventually they will follow the consumer.

Established software industry players should, if they have not already done so, develop an open source strategy, but it is probably a little too early to throw away the packaged software just yet.

Businesses considering acquiring open source software should bear a few things in mind. Open source is sometimes mistakenly perceived as free – but its ultimate impact may be to redistribute, rather than sharply reduce, the flow of revenues to the software sector.

Additional products and services, from maintenance costs to services support, may well consume technology budgets, rather than the core product itself.

The bottom line

While the cost of software research and development – and hence the cost of products themselves – may decline in the short-run, pride, rather than profit, becomes a main motivator for developers.

But there are some downsides to open source. Lack of adequate support is one of them.

Businesses should think carefully about who they sign up to provide their software solutions.

Just because a small open source company has access to world-class code, it does not mean it will be able to support its clients properly.

The cost and effort of moving to open source far outweighs the saving that can be expected in the short-term. But the long-term costs of not switching could turn out to be much greater.

Open source does not herald the dawn of “free” software, nor does it signal the death of the packaged software provider.

However, it will lead to a redistribution of wealth, and some packaged software players may have to change their game.

Royston Seaward is director in consulting at Deloitte

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