Open-Source Software and Offshore Outsourcing: Two Converging Trends

Lowering software licensing costs by adopting open-source components is becoming a widely adopted tactical strategy in the IT industry. Best-practice companies are pushing this strategy to another level. They are taking advantage of offshore talent and resources to lower their software development and maintenance costs even more.

Introduction
Open-source software, such as the Linux operating system, Apache Web server, and JBoss application server, already enjoy widespread use among independent software vendors (ISVs). Often these vendors deploy open-source solutions to reduce their costs and discover that the new technology works as well as or better than the proprietary commercial systems they replace.

Armies of dedicated developers have created a range of open-source software (OSS). For example, databases (MySQL and PostgreSQL), infrastructure software (Tomcat and JOnAS), content management tools (Bricolage, Plone, and Apache Lenya), portals (Jetspeed, Liferay, and Zope), development tools (Eclipse), and even business intelligence applications (Mondrian, JPivot, REX, JFreeReport, and JFreeChart) are currently available under an open-source license.

Today it’s possible for companies to build an entire enterprise software stack purely from open-source components. The first widely adopted OSS stack is known as the LAMP stack. This stack includes Linux + Apache + MySQL + PHP. While the success of LAMP is significant, it doesn’t explain why companies should migrate to an open-source strategy. What is the compelling reason?

Why Adopt an Open-Source Strategy?
CTOs and VPs of engineering often cite the following five reasons when asked why they pursued an open-source strategy:

1. End customers are not willing to spend extra money on the cost of an embedded software component (such as an Oracle database).
2. When it’s time to renew a maintenance agreement or software license, the cost is not worth the value the renewal provides.
3. The current solution includes a product that will no longer be supported.
4. The business requirements are changing rapidly, and the current solution is too unwieldy or complex to keep up with those changes.
5. There is a scarcity of resources that can support the current solution.

Once an ISV decides to build an OSS solution, the next step is figuring out the migration strategy. An ISV going the OSS route tends to be risk-averse. To mitigate risk, the vendor will migrate an existing proprietary component like a database or application server to an OSS component. After gaining some experience, it will migrate part or perhaps all of an existing business application to a new set of OSS components.

After determining the migration approach, the next step is tactical execution. How does an ISV assemble its open-source solution with both the OSS and the required proprietary components? As companies build their first OSS solution, they typically decide to hire external OSS resources to assemble, integrate, and deploy the software products on their behalf.

The alternative is to hire full-time talent in-house, which can drive up costs in the near term. The FTEs would typically be individuals who know their way around open source and how to put it all together. They would spend time building a stack, testing disparate components, and making sure that everything works together.

Table 1 provides an overview of the roadmap to follow when implementing an OSS strategy.

Table 1: Steps for Moving to Open Source

Offshore Outsourcing and Open Sourcing
Companies that do have an open-source strategy are continuously challenged to decrease their overall software development, maintenance, and support costs; improve the quality of their software via more testing; and speed up time to market for new releases.

The best-practice firms are increasingly turning to offshore vendors to make this happen.

Pervasive Software incorporated the offshore approach when it launched Pervasive Postgres, the first integrated set of open-source software and services. The product is ideal for corporate IT departments that use and support databases to build business applications. While developing the solution, Pervasive worked with an extensive team of engineers, testers, and support personnel in both its Austin and Bangalore facilities.

Other parts of the open-source product lifecycle that companies are offshoring are support, documentation, and rigorous QA. The challenge for open-source software is to provide the robustness that customers require for mission-critical systems. The components must pass the “integration testing” and “tested and certified” phases in combination. Completing all this testing in-house is often too expensive. Sometimes the bugs in open-source components are subtle and hard to find, hence, the need for rigorous testing with numerous test cases.

Another reason for going offshore is clear when you consider the following: Open-source projects require large, vibrant communities to survive. Much of the open-source talent is increasingly found in offshore markets like India, China, Russia, and Hungary because these countries are incorporating open-source software into higher education and supporting it on a federal level. For example, the Chinese Ministry of Education added Linux to student courses and established Linux training centers at several universities. Creating an offshore strategy to leverage the talent pools in these regions is a natural next step for an ISV that is reasonably mature in its open-source adoption.

The bottom line: If managing open-source product testing, support, documentation, and maintenance costs is an issue for you, I strongly recommend evaluating a partnership with an offshore outsourcing vendor.

Summary
ISVs with open-source solutions should aim to follow Dell’s example in the PC industry: leverage offshore contract manufacturers and lower the cost of the product continuously and drive competition out of the business.

As the software industry steadily matures and commoditizes, open-source software provides vendors with a powerful, affordable alternative to restrictive and expensive traditional software infrastructure. The outsourcing trend also has tremendous implications for engineering open-source solutions.
Are you ready to take the plunge?

By Dr. Ravi Kalakota, author of Offshore Outsourcing: Business Models, ROI and Best Practices and CEO of E-Business Strategies
A modified version of this article was published in the January 2005 Aztec Executive Forum online magazine.