The Financial Considerations of Open Source Software

This article is a reprint of Wise Bread's contribution to OPEN Forum from American Express -- where small business owners can get advice from experts and share tips with each other.

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On the surface, using open-source software is an easy way to save money. After all, open-source software is distributed freely — you can download a copy of OpenOffice without paying a cent, let alone the more than one hundred dollars that an individual license of Microsoft Office costs. However, the upfront cost of open-source software is not the only financial consideration you must look at when deciding to switch your business to open source.

Beyond Out-of-the-Box

You may be used to buying a piece of software and having it automatically work for you. While most open-source projects are usable when you install them, many users find it necessary to customize the tools they're using or add missing features. That's not a matter of calling up the software's makers and seeing what's available — rather, it's a matter of having a software developer do the work then and there.

Nikunj Mittal uses a variety of open source software at Rent A Smile, including SugarCRM (a customer relationship management package), Asterisk (a voice-over-IP and telephony package), and OpenOffice (a suite of office applications). He says, "We have been using OpenOffice for a long time now. Asterisk and Sugar were introduced when we were planning for our new venture, Rent A Smile — a virtual assistant service with multiple models of customer engagement and service."

Mittal's team did find that customization was necessary to get the tools they really needed. Rent A Smile had the benefit of having in-house developers who could customize Asterisk and SugarCRM as needed. "Asterisk was just a matter of one week [of development] while Sugar took longer, but only because we changed a lot of things and built in a lot of additional features...integrated it with billing and online payments, live chat, our customer portal, etc. So effectively it became more than a CRM: It became an all encompassing tool including sales, leads, etc. The customization of Sugar was done by a team of two developers, and they took approximately five weeks."

Bringing Employees Up to Speed

One consideration when choosing open-source software is what it will take to get your employees comfortable with the tools your business runs on. While it's common to find an employee with great Microsoft Excel skills, it's less common to find someone who is adept at an open-source alternative the day he starts work. You may need to invest more time and funds into training when you use open-source software.

The situation is better than it has been in the past, of course. Spicer Matthews has been writing custom software and open-source packages for more than 10 years, including his latest venture, SkyLedger. "Thanks to the efforts of the Linux community and particularly Ubuntu, we had very little issues in training our employees who were not familiar with Linux when they first started working with us," says Matthews. "Interfaces are becoming so similar these days that most employees did not notice much difference when switching between Windows, Apple, and Linux. Also, as cloud-based computing becomes more popular the operating system becomes less important."

Missing Pieces of the Puzzle

It's not uncommon for businesses that can't spend time and resources on customizing and improving open-source software to switch back to more commonly known tools. Chris Heuwetter, the owner of twiloPR found that OpenOffice simply did not perform in the same way as Microsoft Office. "When you're preparing a document in OpenOffice Word Processor, you're not sure whether the receiving party will see the formatting the same way in MS Word. There is a chance columns, lines, paragraphs, images, headings will all be distorted and look VERY unprofessional. When sending out resumes, proposals, or other important documents that need to look sleek, you simply can't trust OpenOffice to create documents that will look exactly the same in Word when received. And the worst part is you don't have Word to see what it will look like."

Heuwetter switched back to using Microsoft Office, although he does use other open-source software, such as Gimp, a graphics tool, in his business.

Open Source as a Stepping Stone

Matthews has been able to use his open-source skills to build a new business dedicated to creating software tools for small businesses using open-source technology. "A few years ago I realized this software was worth something, and today I am running a software company built from our real-life small-business needs — all open source based."

That business is entirely based on the fact that Matthews kept finding that the software packages he was working with weren't robust enough for the businesses he was running. By spending the time and money to customize open-source tools, he created exactly the software his businesses needed. At the time he ran a real estate development firm, and Matthews' approach increased profit margins by 10 percent.

Matthews notes that the flexibility open-source software provides is invaluable: There are "two main reasons for a small business owner to make the switch to an open-source platform: flexibility and cost. As the business grows, the software license costs increase, too. It will always be a big expense for cash-strapped small businesses. When using closed software, we were always saying 'I really wish this application did XYX.' In the open-source world there are many more options and often the flexibility to make XYZ feature happen. Software built around making profits always seems geared toward 'What do we have to do to get the customer to pay us?' while open-source software has no profit motive, for the most part, and is really geared towards what is best of the user."