LinuxWorld 2008 Prediction #5: SMB

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Podcast of LinuxWorld 2008 Prediction #5

Although I’ve previously published the slides for the talk I gave at LinuxWorld 2008 in San Francisco, I thought it might be useful to add some additional comments in the blog about each of the eight predictions I made. This is not the full text of what I said nor a full discussion of the slide, but just some ideas that flesh out what I meant. The full one hour video of the keynote talk is now available at the conference website.

Slide made of prediction at LinuxWorld 2008

Many companies that fall into the Small- and Medium-Sized Business (SMB) category don’t do a lot of tinkering with hardware and software applications to assemble just what they need. For example, a dentist’s office might buy a package from an integrator that includes five PCs and the client and server software to manage the office. There are exceptions, of course, but this notion of just giving the customer what they need to run their business is pretty pervasive here.

Many, many companies cater to this customer market category. It’s no secret that Microsoft, its products, and its partner ecosystem focus intensely here.

So what’s going to happen?

Well, it could be that the same major players maintain some sort of status quo and this category is fairly stable in using proprietary products and services. Because of the size of this market, the revenue opportunity is huge, so we’ll see a lot of competition and jostling to increase share. So this option is “pretty much what is going on now technologically- and business model-wise, perhaps with some rebalancing of market leaders.”

Another option is that the underlying operating system, often Microsoft Windows, is replaced by something else, probably Apple OS X or a flavor of desktop Linux. The Apple option may be appealing if you like Macs, but probably raises the overall cost. The Linux option might be cheaper, assuming the applications and environment don’t require extensive retraining and ongoing service.

If other open source software is used and the package is put together smartly, it might be possible for the provider to increase margin and/or decrease the cost to the customer. That is, the package provider now has more options, more dials to twist and turn, to present something useful to a customer and reusable in other engagements.

By using open source above the operating system level, the software provider may be able to decrease his or her software development costs as well. So this option is “substitute in open source where possible to decrease costs, increase profit, and maintain customer value.” It looks a lot like the proprietary version, but with FOSS thrown into the mix to some degree.

How about an option where we start moving the apps into the cloud? Just as SalesForce.com changed the nature of the CRM business, so might many SMB companies increasingly move to browser-based or portable rich client applications. Through economies of scale, one could potentially get more services at cheaper prices.

That dentist above could keep all the patient records and scheduling information online, and rely on the provider of the online service to send out appointment reminders and deal with insurance company billing. Then the five PCs for the office can be of any flavor with any reasonable operating system, assuming the browser used is fully standards compliant.

The dentist may be able to stretch out the time between office hardware upgrades, while knowing that the Web 2.0 software he or she uses will be upgraded as necessary from the server.

What’s absolutely key here is the quality of service provided by the online app. Privacy and security problems are not an option, nor is downtown in the middle of the work week. Backups of data must be made regularly and kept secure. So this option is “I don’t care where the data is that I need to run my business as long as I can access it securely and reliably through a web-based interface.”

Sorry if you think I’m fudging the prediction, but I think this market will be slow to change. If vendors can use open source to significantly reduce the cost to the customer, FOSS can make serious inroads. I really like the appliance concept, and I even liked it before IBM’s press release last week!

The move to online applications will be happening simultaneously. If the performance, security, and availability are available at a low enough price to overcome customer conservatism to move to a different kind of platform, then it will start to take hold in some industry categories. Affordable high speed and reliable Internet connections will be necessary.

To summarize, this category could be significantly altered by a combined use of open source and online services, but it is a market for providers to lose if they don’t execute well and quickly, while overcoming customer reluctance to re-base the IT infrastructure on which they run their businesses.

Next: LinuxWorld 2008 Prediction #6: FOSS and licenses

Previous: LinuxWorld 2008 Prediction #4: Linux and the desktop


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