Ernie Ball Inc. is certainly not the norm when it comes to software use.

The San Luis Obispo, Calif.-based company switched completely to open source software after a surprise audit by the Business Software Alliance produced a hefty fine for using unlicensed software.

Most small and medium-sized businesses (SMBs) are nowhere near that level of open source use. "The majority of open source attention goes to the hobbyist market and large enterprises, and it's much more difficult for smaller companies to find what they need," said Maria Winslow, an open source strategies consultant based in Chapel Hill, N.C.

That's too bad, because open source software offers one big benefit prized by SMBs -- cost savings. No licensing or upgrade costs, not to mention no initial software purchase, can prove an attractive proposition for cost-conscious SMBs.

For example, Athenahealth Inc., a healthcare software company in Watertown, Mass., recently saved a bundle when it switched from Salesforce.com Inc. to SugarCRM Inc., a Linux-based CRM application.

"The price difference is enormous," said Bob Gatewood, chief technology officer at Athenahealth. Gatewood uses a supported version of the software, which means that he's paying for support services for the application, but even with that, it costs less than Salesforce.

Open source software also allows more flexibility in long-term planning, as it frees companies from vendor lock-in, and the forced upgrades and licensing

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issues that can crop up. "All these things make open source something that SMBs should consider," said Bernard Golden, CEO of open source consultancy Navica Inc., and author of Succeeding with Open Source (Addison-Wesley, 2005). "It's really a viable source for them."

Right now, open source use in the SMB market is mainly concentrated in companies that play in the technology arena, Winslow said. "In general, the more tech-savvy -- i.e., software -- companies are going to be much farther ahead with open source," she said, adding that their expertise gives them the option of choosing less marquee companies. "An SMB doesn't necessarily need the branding of a large Linux vendor."

Gatewood agrees. "I think you're going to find that organizations that adopt [open source] are tech-savvy. The local hairdresser or auto parts shop aren't going to want to do that. I certainly would not have made the same decision if we were not a tech organization to being with."

Widespread adoption of open source software in the SMB markets rest on a couple other factors as well:

Acceptance by the distribution channel. "Most SMBs don't have much IT staff or IT expertise, so they tend to rely on outside service providers to come in and set up infrastructure," Golden said. "Whether open source is an option depends on whether your service provider is an open source or Microsoft-friendly provider."

Getting widespread recognition amongst the fragmented network of integrators, resellers and consultants that support the SMB market has never been an easy task. "Nobody has managed to reach the SMB market with open source, and the reason is that the SMB market is the channel," Winslow said. "Focusing on the channel is a hard thing to do."

However, Golden thinks the numbers of open source service providers are growing. "There is probably not as widespread an availability of open source providers as there is Microsoft, but you can definitely find open source consulting firms," he said. "We're seeing more interest in open source from the channel, but it has a ways to go to reach critical mass."

Availability of open source applications. While Linux is widely known, open source applications are less so, and many companies don't want to run a mixed environment, Golden said. "The gating factor is that the applications drive what they choose, and if it's available on Linux, it gives them more options," he said.

That's changing, as open source applications such as CRM or ERP become more widely available, Winslow said. "They can bring functionality to an organization that they couldn't otherwise afford," she said. Winslow cites OpenNMS, an open source network management tool. "It doesn't have all the bells and whistles of a $200,000 product, but it's close enough," she said. "It gives SMBs real network management and monitoring capabilities that they might not have had otherwise."

Even in the Windows world, there are open source applications. "Open source does not equal Linux by any means," Winslow said. "SugarCRM runs very happily on Windows, as does Compiere, an open source ERP package."

It's clear that while open source is making incursions in the SMB market, it has a ways to go to reach the tipping point. "We'll see continued penetration of open source as more service providers become aware of it and solutions get recommended more," Golden predicted. "But while we in the industry think, 'Oh yeah, it's going to happen overnight,' the reality is that things change more slowly than that."

Carol Hildebrand is a contributing writer based in Wellesley, Mass.

This tip originally appeared on SearchSMB.com.

This was first published in August 2006

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