Spicing up IT with Open Source

By Paul Harris in Santiago (November 2005)
Chile is one of Latin America’s leading lights in the development of Open Source software, an upstart that is challenging the domain of licensed software. Open Source software is often labelled “free” software but that is neither accurate nor does it do the concept justice. Open Source may not mean much for anyone beyond the periphery of IT circles but Lan.com and Paris.cl are using it, which may make you curious about what it is and why should Chilean companies know about it?

Open Source software is software whose code is open for all to use and develop with software products generated by the Open Source community generally distributed free of charge, while the public is generally barred from access to code as found in Microsoft products that are traditionally available for a license fee.

In the computer world there are the server back end and the desktop front end. Open Source is having a big impact on the server software market and will become the dominant business model through the success of the Internet in facilitating new collaboration, production and distribution methods, says Tim Delhaes, product architect at Chile’s first Open Source company Humano2. “While Open Source is not an alternative all the time but if you are not considering it as an option you are definitely making a mistake,” he says.

By looking into Open Source you are in good company, he continues. “About 70% of all websites - Google, Amazon and Hotmail – run on Open Source software. Linux, Apache, My SQL and PHP – reffered to as LAMP - are the three infrastructure products that put companies on the net. Why pay for a licence for an e-commerce package when you can get the same software that Google uses for free?” he asks.

Cost is seen as the initial advantage as not having to buy software licenses either represents huge potential savings to companies or a change in their spending habits. Hardware companies love this because IT budgets are spent on hardware. “Software licences are like tomatoes as they have a limited life and then you loose them and have to buy more. The effect of Open Source software on the hardware market is like when you subsidise gasoline; people buy bigger and better performing cars, so big hardware manufacturers like IBM, Intel and Hewlett Packard are making lots of money, with Open Source related revenues of over $3 billion in 2003 according to eWeek.com,” he says.

Eduardo Pooley, Microsoft’s regional business and applications manager, counters that free Open Source software does not have zero cost because of the higher total cost that follows the zero initial payment due to development, training support and other costs that are incurred. “Overall it is still cheaper with a company like Microsoft,” he says underscoring the viewpoint divergence between the traditional and the new.

Open Source is certainly developing new business opportunities in local markets as companies form to provide services with different business models using Open Source such as Red Hat (packages and distributes code in distinct versions), MySQL (relational database server), JBoss’s business model is professional services such as consulting, integration and training while companies like Sugar CRM and Santiago’s Humano2.com pioneer web hosting services. “Open Source today is like the Internet was the moment that Jeff Bezos put books on the web,” says Delhaes.

Paris.cl - the online e-commerce store of retailer Almacenes Paris - works closely with another Open Source firm, Netred, to develop its business and its own developers commonly use Open Source development tools, says Patrico Perez, head of development projects for online sales at Paris’ parent company Cencosud. “Our developers use Open Source tools such as [development toolset] Eclipse a lot. It is very exciting and allows us to do things we couldn’t do before,” he says.

Despite some notable early movers, the IT industry is divided on just how much Open Source will change the industry and how fast its penetration will be. “Open source is still up to five years away from mainstream use in enterprise IT infrastructures, despite the progress made in the commercialisation of the platform,” www.silicon.com blogger Andy McCue said in September quoting a Gartner study.

Microsoft potentially has a lot to loose if Open Source software starts to erode its software license revenue base, but the company seems certain it is not going to loose out in the server market. “Microsoft has not lost out against Open Source. People don’t change Windows for Linux. It is a very dynamic sector and for each front end – the web, email, blogs – there is a server. Linux does well but it is only for techies as most people just want to plug and play. 90% of people just want software to function. How many companies really modify code?” asks Pooley.

DESKTOP

Despite its strength in the server environment Open Source software is just starting to gain strength in the desktop environment. The Open Source web browser Firefox celebrated its first anniversary in Chile in November, which is equal or better than Microsoft’s Internet Explorer in terms of security, velocity and functionality, according to Delhaes, who says it shows that the collaborative production methodology can produce higher quality products at a lower price.

Delhaes says Finnish cell phone producer Nokia is a key supporter of Firefox because it knows every cell phone will soon connect to the Internet and therefore need a browser. “Nokia has the choice between shipping a free Open Source browser like Firefox or paying millions of dollars in license fees to Microsoft for Windows,” he says. Google is even paying $1 to download Firefox with its toolbar.

Paris.cl has been one of the first Chilean companies to respond to the growth in the penetration of Firefox browsers. “In 2004 Internet Explorer accounted for 99.6 percent of our website traffic, this year it is 94.3 percent with Firefox having grown from 0.2 percent to 4.9 percent. The 5 percent implies the whole site has to work with Firefox, which has been the case since October 2005,” says Perez.

5% Firefox may not sound much but it is enough for Paris.cl to see an opportunity for differentiation while ensuring it does not lose potential customers, and from 2006, Perez says the company will undertake more commercial initiatives using Open Source software such as website plug-ins. In countries with higher penetration like Germany (25% Firefox) web businesses cannot afford to ignore it. “You cannot force a user to change their browser, but you can change your server,” says Delhaes.

The growth of Firefox is a big deal according to Delhaes who believes the browser is the desktop of the future, the application through which people access all the tools they need from email (Hotmail and Gmail) to office applications. “Whoever dominates the client interface in which the browser is an essential part, controls access to the network and what applications run,” he says.

Perez thinks Firefox competes well with Microsoft’s Internet Explorer. “I think Firefox is more secure and quicker than Internet Explorer because it is less popular and so is less subject to attack,” he said.

Microsoft’s Pooley says there are many popular myths about the company’s Open Source rivals, which he supports with a body of evidence including studies by respected research groups and industry commentators. As Firefox’s popularity grows hackers will take more interest in ransacking it destroying its reputation as secure application, a problem Microsoft has been dealing with for years for its Internet Explorer web browser. “Firefox was secure while it was unknown but attacks and viruses start with volume. It is difficult to have a program that has no problems of compatibility or security once it reaches a critical mass,” he says.

Pooley’s view is shared by blogger George Ou, an advanced networking and server architecture expert. “Now that Firefox has become the first viable contender to Microsoft Internet Explorer in years, its popularity has brought with it some unwanted attention. Firefox not only has more vulnerabilities per month than Internet Explorer, but it is now surpassing Internet Explorer for the number of exploits available for public download in recent months,” he said.
Delhaes counters that because software is produced using Open Source methodologies does not mean it is open to hackers and viruses. All software has failures or vulnerabilities but as more and more people are looking at the source code, there will be fewer and fewer errors.

Businesses adopt new technology at different rates depending on their fears and risk profile. Although part of a larger group, the nature of Paris.cl’s business allows it to accept a higher degree of risk to explore future technologies. The website has a big change coming up as it is working towards migrating from its IBM 4.1 platform to the IBM 5.6 platform to have a full Java [Open Source] e-commerce store. “Big companies are trapped and have no liberty to change [software platforms]. We are not a traditional company, we have more flexibility, are not tied to any [software system] and can take technological change initiatives through developing the parts of the business that are not sensitive to change,” Perez said.

However, he notes that flexibility comes at a price. “We have two development teams and it is costly to develop in parallel,” he says, noting that “in 2006 we are going to seriously analyse whether we can make [Open Source] changes in the heart of the e-store.”

DIGITAL DIVIDE

Delhaes says Microsoft completely misses the point. “Microsoft talks about total cost of ownership or TCO, but it is not a question of how much money but where the money goes. Does it go to Microsoft or stay in your country?” he asks.

The money spent on license fees is staggering: over $120 million a year just by Brazil’s federal government and more than $100 million a year in Chile says Delhaes. Savings on license fees through Open Source can release funds for other uses such as health and education and help breach the digital divide.

Breaching the digital divide is increasingly on the agenda of Latin American governments that do not want to get too far left behind by the developed world. The topic has been given added impetus this year through an initiative by MIT Media Lab founder Nicholas Negroponte with a plan to build a $100 Linux PCs. Argentina has stolen a march on its neighbours and committed to manufacture up to one million of these PCs.

Chile has yet to move on the initiative because of a big software lobby, says Delhaes. “Instead of spending $100 million on software licences the government could give one million $100 laptops to kids in schools,” he says.

Breaching the digital divide is about more than cheap computers and concerns developing local IT industries. Open Source provides a great opportunity by allowing local firms to develop and fix software rather than simply re-installing it or relying on expensive engineers from foreign companies. “By offering the possibility to develop and fix things yourself through Linux server software countries develop their own capacity to fill the digital divide. The dollars stay in country not at multi-national software companies,” says Delhaes. “

However, reports from China, where the government has supported Open Source initiatives, say enthusiasm is waning. “The strong support for the free operating system has been detrimental to the development of software products in the country,” says Zou Bian, a researcher at the Chinese Software Industry Association (CSIA) according to Chinese English language news website China Daily, due to the difficulty of generating income streams. But as Delhaes points out, “there are many business models and not all work.”

Microsoft says it is doing its part too, through its participation in the My First PC initiative that Pooley says removes the three barriers of price, fear and availability. In its first three months 60,000 of the PCs have been sold which contain a simplified, cut-down version of Windows that is one third of the cost of traditional Windows. The PCs cost 249,000 pesos payable in 36 instalments.

What is certain is that through the Internet the Open Source is here to stay and will spread to other sectors says Delhaes. “Open Source software is not an isolated phenomena. Open Source is part of global change in intellectual property. In many industries the Internet suddenly reduced the cost of distribution as well as R&D. The most affected industries – including software, music and bio technology – are undergoing radical changes. This change is creating great opportunities for everyone: customers, IT companies, and governments,” he says.
ENDS