Open Architecture Opportunity: Open-source software components are fueling a new reseller's market, customized enterprise software for smaller companies. (Enterprise Applications).

VARs have been missing opportunities to sell into the small manufacturing space for years, and they know it. The potential market is huge (around 350,000 strong in the US alone) and what it needs is fairly straightforward--an upgrading of decades-old technology into the 21st century. But while they desperately need an infusion of modern technology to compete in today's world of ecommerce and integrated supply chains, most small entrepreneurial manufacturers (SEMs) with sales under $50 million have small budgets and quirky technology environments. Worse, traditional software licensing schemes leave little room to meet the unique needs of the SEM customer without blowing the budget. Into this environment, a new breed of application has entered under the banner of "open architecture," the cornerstone of an emerging reseller's market for customizable software built on an "open stack" of open-source software components, such as Linux, the PostgreSQL database, and the Qt programming framework for C++.

The open architecture approach goes beyond application programming interfaces (APIs), scripting layers, and plug-ins, and gives VARs the full source code access under generous licensing terms. VARs can modify code to meet special customer requirements (or even design whole new applications) from inside the comfortable buffer of a lower total cost that keeps projects under budget and provides additional opportunities for service revenue. With a dramatically lower total cost of ownership than proprietary enterprise resource planning (ERP) systems from the familiar crop of legacy vendors, these more open products also deliver far more functionality than the low-end systems that until now have been the SEMs' only option.

Under this new type of licensing, which combines aspects of both open source and traditional software licensing, the open architecture vendors manage the VARs' software changes and contributions and decide what goes in the main release. This gives the subset of VARs that want to be involved in software development a powerful tool--a new class of standards-based technology that offers the same features and performance of high-end solutions at a fraction of the cost. This brings the benefits of sophisticated ERP software to smaller manufacturing companies who haven't been able to afford such a system, and opens up huge new markets for VARs looking to decrease their reliance on legacy vendors. One characteristic of VARs who have worked with ERP software is a deep and abiding frustration with incumbent software vendors--even their most "preferred partners." The smallest customization or adaptation of an ERP package can be an ordeal, and the software vendor will frequently flat-out refuse to modify anything or all ow the VAR to customize it to meet a customer need.

That leaves SEMs--and their VARs--with very little to choose from. Much of the existing low-end market consists of legacy character-based systems and limited manufacturing modules conceived as add-ons to basic accounting functionality. Development tools are either extremely limited (e.g. the Microsoft Access desktop database) or obscure (proprietary languages like ProvideX), making it difficult to find qualified development engineers. Just above these Tier 3 offerings are mid-range systems, almost all of which depend on Microsoft component technology and require additional license fees for other software such as the underlying database, operating system and tools. These extra costs run up the price of the software, putting these packages out of reach of many small companies. There's also some well-founded skepticism about Microsoft plans to push its customers and partners to the ill-defined (and, to SEMs, slightly scary) ".NET" strategy.

The Open Road

The freedom to modify source code opens new business opportunities for customized, highly functional, yet far more affordable enterprise application packages. These packages are built on powerful, freely available software components. They leverage the work of the thousands of talented programmers who have contributed to open source software suitable for any number of vertical applications or business uses.

With licensing that makes source code freely available and encourages contributions, software built on top of this open stack offers solution providers the ability to configure and ship ERP applications to meet their customers' needs quickly, and even develop new functionality within the architecture. The open-architecture and development platforms clear the way for these applications to operate on a wide range of platforms, as the contributors to the underlying code themselves work on multiple operating systems, databases and hardware. Likewise, many of these applications are collaboratively developed across the world--and the products are often fully international-ready, both in the handling and storage of data and in the client-side presentation. Conversion to a localized version of the product in a particular country is a minor linguistic effort, and requires no programming changes, since all the relevant data (character sets, words and phrases to be translated, units of measure, etc.) is readily availabl e and distinct from the business logic. Local solution providers who are experts in the particular requirements of the region (including business processes, accounting and tax questions) can then concentrate on the client's business needs.

Open for Business

The open-architecture activity in the SEM market should prove interesting to watch. Because of the unique complexity and customizing requirements inherent to the field, small manufacturing would seem well suited to an open software development model that could easily gain a foothold in any number of vertical and business software markets. Existing legacy vendors are likely to be closely watching this new wave as well, as it threatens many of the foundations of their own business.

For the SEMs, open architecture promises to deliver immediate and dramatic savings on operational costs, and to help manufacturers to grow and thrive through more efficient production and planning. For the VARs willing to take up the programming challenge, it opens up huge new business opportunities, and avenues to a market that--until now--has been ripe, but largely out of reach.

How Open Source Stacks Up

After several years as the misunderstood stepchild of mainstream business packages, open-source software is no longer off limits for businesses. IBM's very-public embrace of the Linux operating system and the Apache Web server bolstered the open-source platform for enterprise-class environments--and the successful initial public offering of Linux distributor Red Hat helped answer the commercial viability questions, as well. However, open source to most people is still synonymous with Linux--and there's more to it than that. The open-source software communities have developed powerful, flexible equivalents for major development tools, databases and operating systems, and these software components are driving new markets. Software such as Linux, the PostgreSQL database and the Qt framework for C++ are free from proprietary license terms, which opens entirely new doors of opportunity for software companies, enterprises and VARs.

Software developers are gathering together these and other tried-and-tested pieces of opensource software to create alternative business-class applications suitable for everything from manufacturing, shipping and order-tracking, to accounting, sales and human resources. The companies in this emerging space are eyeing a market that traditionally has been polarized; on one hand are the big-name, big-ticket software companies such as Microsoft, SAP and Oracle, and on the other are legacy Tier 3 systems not up to the job of running a business in the 21st century. Open-source alternatives change the mix by offering high-end functionality for considerably less money than even mid-tier competitors, with source code that vendors, resellers or customers are free to modify for special needs.

Standards-based open-source software components are especially compelling to smaller business markets. They offer a lower total cost of ownership and liberation from dependence on software that requires additional license fees for the underlying database, operating system, and tools. Application vendors and resellers can completely customize and even bring entirely new, affordable products to the marketplace by building around an open stack of core opensource components.

Stacking the Deck

A typical open stack might consist of the following open source software components:

Linux, Linus Torvalds' Unix-type operating system has become the world's most widely known opensource software. Collaboratively developed by thousands of contributors worldwide, Linux offers functionality and stability that surpasses comparable offerings from Microsoft and commercial Unix vendors, at a substantially lower total cost of ownership. It has historically been best suited for server applications, but is starting to make inroads into the desktop workstation space as well.

PostgreSQL is a sophisticated object-relational database distributed under an open-source license. Rivaling the leading proprietary vendors in speed, reliability, extensibility, cross-platform compatibility and scalability, PostgreSQL conforms to accepted database standards, suiting it well for open-stack application development. It is generally considered the most advanced open-source database available. Various companies provide commercial support for the database.

Qt is a framework for the C++ programming language for application development. Available in both open-source and commercial versions from Trolltech AS (based in Norway), it lets application developers write cross-platform applications that run on all major operating systems, including Microsoft Windows, Linux, Unix, even Mac OS X, with a single application source tree. Qt provides a platform-independent application programming interface (API) for graphical user interfaces (GUIs), database access, networking, file handling, etc. Qt also encapsulates different APIs of the various operating systems, providing the application programmer with a single, common API for all. There are no runtime license fees for applications built with Qt.

Open Licensing

While anyone can download and modify open-source code free from commercial control, the use and distribution of open-source software is regulated by various open-source licenses. Generally, companies may charge to package, distribute and support the software, as long as they follow certain rules of conduct. Basic open-source licensing usually requires that any changes to the code be submitted to the original authors so improvements are available in subsequent versions of the software. However, there are many types of open-source licenses, from the one-page Berkeley Software Development (BSD) license with its three-sentence requirement that future versions contain a copyright nod to Berkeley and a standard disclaimer, to the 12-page Mozilla Public License that covers everything from definitions of terms to claims responsibility.

The Open-Source Initiative (OSI), a California-based public-benefit (not-for-profit) corporation, defines and regulates open-source licensing today. Some alternative software packages carry licenses that don't try to meet the OSI's definition because they incorporate elements of both open source and proprietary software models. These companies make the source code freely available, and encourage code contributions from qualified development partners, but place restrictions around distributing or reselling competing versions of the application. Such hybrid licenses tend to encourage long-term, mutually beneficial partnerships between software vendors, installation and support partners, and customers, something relatively rare in the pay-to-play proprietary world.

Ned Lilly is president and CEO of OpenMFG (Norfolk, Va.)

www.openmfg.com