The 451 Group has found that while many vendors consider small and medium-sized businesses (SMBs) to be a hot market for adopting open source software, the SMB market opportunity for open source software vendors is actually limited. SMB customers are highly cost-conscious and generally lack the IT resources to effectively manage anything beyond the simplest open source software.

Easy-to-use open source software can be difficult for software vendors to make money from, but more complex or component-based open source software is unpalatable to the majority of the SMB market, unlike the historical and continuing success of open source software in the enterprise market.

The 451 Group sees Microsoft's dominance in the SMB market as a significant barrier for many open source software vendors attempting to infiltrate this market, and that is unlikely to change anytime soon. The prevalence of Windows and Office, and the sheer number of IT experts with MCSE certification, mean that most SMBs will continue to use the technology they know, even if that means adjusting internal business processes to meet the technology available. Open source software that integrates with and supports Windows and other Microsoft products will have an advantage among SMBs.

"While Microsoft's market hold will be hard to chip away at in North America, many other markets in Asia, Europe, India, South America and elsewhere should experience rapid growth of Linux and open source software fueled by local government and commercial directives and preferences," said Jay Lyman, Analyst with The 451 Group and lead author of the report.

Opportunities to sell open source products and services to SMBs do exist, but only under the right set of circumstances. In fact, 451 analysts found that most vendors mix various strategies: offering hosted versions of the application (SaaS); ensuring that open source applications run on Windows; building easy-to-install, bundled 'software appliances'; and providing separate commercial licensing options and tools such as installers, which make open source more like shareware and packaged software, and thus more appealing to SMBs.

"Many of these strategies seem logical given the variety of users in the SMB market, and this may prove wise as vendors are able to gauge what is working and adjust accordingly," said Raven Zachary, Open Source Research Director.

About this study

The 451 Group 40-page report, "The SMB Market Opportunity -- How big are SMBs for open source?", explores the challenges and conditions that must be met for open source software and its vendors to succeed in the SMB market. In addition to providing guidance for SMBs contemplating open source, it also examines the future trends and opportunities taking shape for open source in this very different market.

The report includes in-depth competitive assessments of the following organizations: Alfresco, BitRock, GroundWork, OpenOffice.org, Open-Xchange, SugarCRM, Untangle and Xandros.

Additional companies are covered in the report.

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