But some analysts including Al Gillen, a research vice president of system software at Framingham, Mass.-based IDC, have questioned the validity of this argument. Free or lower-cost open source software does not guarantee bottom-line savings in an IT budget, said Gillen.
"Acquisition costs and ongoing support and maintenance and management cost … are not an automatic indicator of which solution will have the lowest total cost of ownership over three to five years," he said.
At an hourly rate of $100 to $150 an hour, it takes only 10 to 15 hours for an in-house problem-solving effort to exceed the tab for a support contract that lasts a few years, said Gillen, noting that software takes up only 5% to 8% of IT budgets, while labor now takes up to 75% of the total. The IT analyst, declined, however, to compare the relative costs of supported open source software with those of supported proprietary products.
Gillen also debunked one oft-touted advantage of open source: access to the source code. In practice, most companies lack the expertise to modify the code so this doesn't really help, he said. Therefore, The only advantage of open source software is reduced vendor lock-in, Gillen concluded.The Linux party line
But Jim Zemlin, executive director of the San Francisco-based Linux Foundation, didn't agree that total cost of ownership studies are an accurate measure of the bottom-line benefits of open source software.
"The TCO models are driven by product marketing," Zemlin said. "You don't grow at the rate of the Linux platform without a strong price-to-performance record."
As far as can be determined from published figures on their respective websites, the costs of Red Hat Enterprise Linux (RHEL) and Novell SUSE Linux Enterprise appear to be significantly lower than those for Microsoft Windows Server 2008. The latter costs $2,999 for a data center edition and $3,999 for an enterprise edition, plus a 25% annual fee for software assurance, which includes upgrades and minor support. Additional Windows Server 2008 support is $259 per incident or $8,299 and up for the Essential Support package and more for Premier support.
Red Hat and SUSE cost nothing to buy, of course, but RHEL costs $349 to $1,299 per year for support, RHEL Advanced Platform (which adds virtualization and other features) costs $1,499 to $2,499 annually for support, and SUSE costs $359 to $1,499 a year for support.
In comparing Linux with proprietary Unix operating systems, the ability to run Linux on commodity x86 hardware instead of more costly Unix machines also tips the TCO scales in favor of open source.Other open source platforms
Beyond the operating system, many open source application vendors claim large savings. For example, GroundWork Open Source Inc., a San Francisco-based open source network management company, said an independent study confirmed that over the course of three years its equipment was 87% less expensive than proprietary products when factoring in purchase, installation, licensing and other costs.
Wayne Kernochan, the president of Wellesley, Mass.-based InfoStructure Associates, said that databases are an area where open source products such as MySQL can offer savings of 40% or more over proprietary rivals from Oracle, Microsoft and IBM because they are easier to administer and therefore have lower labor costs. On the other hand, Progress Software's proprietary OpenEdge RDBMS database is even easier and less costly to run, he added.
"It depends," Kernochan said. "There are certain areas where open source software can save a significant amount of money," but it can also cost more, he said. "It's a mixed message."
Dan Olds, a principal at Beaverton, Ore.-based Gabriel Consulting Group said large enterprises can often negotiate prices for Windows that are close to those of open source competitors. Also, Windows Server 2008 has sophisticated automated management features that can save customers time and money compared with open source alternatives. But customers who don't use the extra attributes in Windows Server 2008 are paying for more software than they need, he added.Expertise is key to savings
Interestingly, a veteran IT contractor working in a data center and a senior vice president for a large financial services company came to a similar conclusion: Firms can save a lot of money using Linux, but only if they have the expertise to get the full benefit.
Contractor Ed Sawicki of Lake Oswego, Ore., said that many IT managers simply think that Linux is just a money saver and "the latest thing" but don't realize its profound differences and how to apply those differences to streamline operations in a business environment. Using Linux, for example, he can bring servers back online after an outage in minutes instead of hours. He can write step-by-step scripts for software installation to make the process as automatic as possible, and he can get quick answers directly from the open source community rather than waiting for answers from a vendor.
"You can easily achieve lower cost and dramatically improved security with open source," Sawicki said. "But you need to deploy it properly by people who understand the details."
A financial services vice president, who could share his experience only without attribution, said that over a five-year period, open source software can save companies 50%. Here's the math: typical support is 20% of the purchase price, so in five years, a company has doubled its initial investment. Remove the initial purchase price, and the five-year cost is halved.
Math aside, the bottom-line benefit from open source depends on numerous factors, including a company's ability to negotiate discounts based on size as well as its technology maturity, its open source policies, and its architectural and deployment models, he said.
Companies that take a bolder approach to open source should realize larger gains, the IT executive said. Firms that provide their own support, acquire software from noncommercial sources and modify open source software for their own requirements, for example, should achieve greater gains than those who take a more cautious approach, he said.
"Linux-based architecture, applied correctly and with its radically different cost structure, could equate to quite a boon for IT managers and their budgets alike," he said.
Kim Weins, the senior vice president of marketing at Broomfield, Colo.-based OpenLogic Inc., said that open source aggregators are another way to save money on open source applications. In addition to training and tools to ease the transition from proprietary to open source products, OpenLogic has a library of 450 open source packages that it will support for customers at a savings, she said. Support for all these applications is provided through a network of in-house engineers, on-call experts and vendor partners, who work collectively with service-level agreements to ensure that problems are resolved in a timely manner, she said.
After switching from proprietary software, customers have reported overall savings of 20% to 60%, with a 40% cost reduction typical, she said. OpenLogic's support averages 80% to 90% less than comparable proprietary services, she said.
Zemlin agreed that open source applications are a bargain.
"Just ask users," he said. "They use Linux all the time because they get a better bang for the buck."