Why startups use open source and why they should be open to others

Open source or Proprietary Software? Ask any startup and the answer is obvious, i.e. open source. But this need not be true, now that companies are launching their customized offering for SMBs.

In the last few weeks, I have been talking to a few government offices and a few startups. As with this fortnight’s theme (i.e. Free Software for Startups), most of them seem to agree that open source is the way to go.
Apart from the usual rants about Microsoft being the big bully and the bad guys, one usually hears a lot of arguments and I will try to address some of them below. I think most of the arguments below are not 100% valid.

Let me qualify that – most of these arguments are made by people who use open source and are defending it – rather than taking a objective view of the argument from the point of view of a startup. Alternately some arguments are also made by Microsoft and the data backs up the assertion. Typically such examples stress on TCO (total cost of ownership) than bits and pieces of software for free.

I should again state that this post primarily is for startups. If you would like to read more about the Open Source debates for larger companies, there are many posts one can find like this HBR article and some others here and here and a million others.

Some of the arguments that people often make about using open source (used interchangeably with free) are –

Lower costs – Free is obviously zero cost. However in small companies it doesn’t usually happen that way. One experience I got of working in a startup is to cut down on all kinds of unnecessary maintenance costs that come associated with software. While OS is usually “Free”, the TCO (total cost of ownership) usually far outweighs the benefits one gets from the free software. There is also the added cost of support which occurs infrequently but when it does, takes its own pound of flesh.

More frequent updates – In many a argument, I have faced the issue of client software being taken to the cleaners for “frequent upgrades”. I look at it as a preventive measure – somewhat like H1N1 vaccine. Studies (by MS) do show that PCs which are frequently updade get almost no effect of virus attacks etc. The advent of browser based SaaS models take away much of the edge of this argument anyways.

Better response – Although the OS community is highly vibrant and responsive, it often suffers from credibility. However this is one factor where OS typically scores better over other proprietary software. In many cases support is also highly costly – therefore a strict no-no.

Better extensibility – Theoretically OS should have better extensibility than proprietary software. However in today’s scenario, most of the commonly used technologies are highly commoditized with specialised extensibility being very niche needs. Most startups dont have very specialised needs in most cases (they code whatver else is needed) – hence this gap is also not very wide now. Again with SaaS models, this argument loses a lot of its punch.

Free vs paid, OS vs proprietary

Again going back to our startup focussed dicsussion, the divide we are talking of is pretty much Free vs Paid. Typically OSS falls under free while proprietary software is usually paid for. However Microsoft has come up with a business initiative called BizSpark which aims at handholding startups. The uber-aim remains to tap these guys early and make them use MS products so that if they grow bigger, they still continue using the same. Towards this end, Microsoft provides them almost all software for free – provided they meet a few criteria.

a) The revenues of the startup have to be less than 1M USD

b) No free stuff if you get bought over / revs cross 1M

c) Startups pay a nominal fee if they leave after 3 months

In turn they get (pasted from MS website – details here)

  • Software. Receive fast and easy access to current full-featured Microsoft development tools, platform technologies, and production licenses of server products for immediate use in developing and bringing to market innovative and interoperable solutions. There is no upfront cost to enroll.
  • Support. Get connected to Network Partners around the world — incubators, investors, advisors, government agencies and hosters — that are equally involved and vested in software-fueled innovation and entrepreneurship who will provide a wide range of support resources.
  • Visibility. Achieve global visibility to an audience of potential investors, clients and partners
    As a Microsoft BizSpark member, you’ll be tapping into a rich, vibrant ecosystem of peers, partners and support resources around the globe, helping you grow and succeed. Microsoft BizSpark is the quickest way to get your Startup fired up.

To cut a long story short, I don’t think there is a clear winner for startups in terms of open source vs proprietary. With Microsoft coming up with initiatives like the above, with initiatives by big players like Oracle, SAP catering to needs of small businesses and startups (with a very low cost or a SaaS model), the lines blur even further. At the end I would like to believe it works out to the comfort level of working with some software and development tools – and for a selfish reason I do prefer Microsoft (and its surrounding ecosystem) in the same.

Disclosure: MS is a NextBigWhat.com sponsor – but that relationship has no influence on any of the post.

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