James Dixon’s Blog

James Dixon’s thoughts on commercial open source and open source business intelligence

Archive for July 2008

Cancellation of $13m Cognos Deal Highlights Problems of Government Software Procurement Process

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Government software procurement processes have a blind spot. Even if State of Massachusetts had followed its own guidelines on the procurement of the Business Intelligence package the outcome would possibly (or probably) be non-optimal for the tax payers.

The State of Massachusetts administration has reviewed and criticized the bidding process for the deal and The Boston Globe reports that the state will start a new bidding process. Salvatore Dimasi, the Speaker Of The House, has taken an interest in the situation. I hope he can improve it.

A problem with the procurement process is that there is a disconnect between intent and execution when it comes to open source software. The facts are straight-forward.

  • Intent: Many local, state, and federal Government organizations are in favor of open source for reasons of economy and protection from vendor lock-in.
  • Execution: The bidding process during software procurement is intensive and costly to participate in.

One of the advantages of open source software (whether organic open source or commercial open source) is that an organization is able to prove to their satisfaction that the software does what they need it to. The organization does not have to rely on marketing materials and the efforts of a vendor’s sales/pre-sales staff to determine if the software meets their needs.

In the Business Intelligence space the sales and marketing costs of the large independent vendors are roughly equivalent to their revenue from new licenses. This means that the up-front license fee paid by customers is largely used to pay for next quarter’s marketing and sales efforts. By contrast commercial open source software has no up-front license fee, just an annual subscription that is typically less than the maintenance fees of the proprietary software. But in order to operate in this manner a commercial open source company uses mass-marketing techniques instead of enterprise marketing techniques and inside sales reps instead of outside sales reps.

By using a software procurement process that is costly (for an open source vendor to participate in) Government organizations introduce a bias that is contrary to their own intent. An open source vendor either does not participate in the process or has to raise prices to cover the costs of participating. Either way this leads to the procurement of more expensive, not less expensive software solutions. If Government organizations really want to benefit from open source software their procurement processes will have to adapt.

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Written by James

July 2, 2008 at 11:34 am