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May 01, 2007

How will Indian outsourcing cos. impact Open Source software?

Bill Burnham has a post on how Indian IT outsourcing companies are promoting open source software among their enterprise customers and, in the process, also taking away some service revenues away from open source software firms.
...it would appear that Indian outsourcers are one of Open Source's best friends. Not only are they driving adoption of the products into enterprises (both overtly and somewhat covertly), but because everyone is hiring them as "experts", their endorsement of open source platforms is likely to start swaying the minds of a lot of internal IT types ("If it's good enough for the experts, it's good enough for us").

I was pretty much set on this opinion until I talked to an entrepreneur friend of mind who was telling me about his own set-up. He has outsourced all of his IT to India (it's interesting to note that he has also outsourced his CFO to India, his customer service to the Philippines, and his manufacturing to China). For his CRM system, his outsourcer recommended a well known Open Source CRM platform and even offered to customize it for his needs. This would seem to prove the above point in spades expect for the fact that in addition to the customization work the outsourcer offered to do all regular maintenance and support for $10/hour. This meant that my friend had no need to buy a support contract from the Open Source CRM company which means, being a cash poor entrepreneur, he didn't.

Now the idea of a 3rd party providing open source support is not a new one and is often held out as a convenient Open Source boogie man. For example, Oracle has made a big deal out of its own efforts to offer 3rd party support for Red Hat's Linux distribution. However, big firm's such as Oracle are never going to be the low cost providers of support and are not likely to view 3rd party support as a core business. That's not true for the outsourcer's though. They are definitely focused on being cost competitive. What's more, support services have the potential to become a critical component of their business models as it gives them a means to not only generate more stable non-project based revenue streams, but also a persistent connection to their customers. After all, what better way to amortize their up-front training costs and ensure continuing proficiency than to have their own troops continue to support Open Source products once they are deployed.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.