Forfs Advises Irish ISVs to Pay Attention to Open Source

Lora Bentley

Lora Bentley spoke with Loretta Mulvihill of Forfs. Ireland's national policy and advisory board for enterprise, trade, science, technology and innovation recently released a report on the trend toward open source software in Ireland and what it means for software vendors.


Bentley: The report indicates that Irish independent software vendors (ISVs) and higher education institutions cannot afford to ignore the trend toward open source software (OSS). Can you elaborate on why?
Mulvihill: During the past decade, Ireland has gained increasing recognition as Europe's premier location for software development. Since the 1980s, most leading U.S. software vendors, including Microsoft, Oracle, IBM, HP and Symantec, have based their European operations centers in and around Dublin. A thriving indigenous software development industry has developed in parallel. The Irish software industry spans a wide range of market segments due to the broad base of companies in the sector. It has particular strengths in systems software and middleware; insurance and banking applications; telecommunications software; and e-learning.

At the end of 2004, it is estimated that the Irish software industry consisted of more than 900 companies employing 24,000 people and exporting over 18 billion worth of products and services. The indigenous industry comprises approximately 600 companies, about 250 of which have significant levels of overseas sales. It is characterized by a large number of relatively small firms with a strong product focus and a strong export orientation. With a relatively small local economy, the software industry exports 94 percent of all software produced. Software exports contribute 11 percent to Ireland's total exports, and 35 percent of exported services.

Global trends indicate that revenues based on open source environments represent a relatively small, but fast growing, segment of the total available market for software products and services worldwide. The potential for OSS is expanding very quickly with 2005 revenues expected to show a 48 percent increase over those of 2004 and a compound annual growth rate (CAGR) between 2004 and 2009 of 36 percent. Research from IDC Consultants also indicates that the total revenues derived from software will be larger still. For example, service revenue associated with sales of software will grow from just over US$6 billion during 2004 to US$17 billion during 2008, a CAGR of just under 30 percent.


Bentley: Of the three commercialization models mentioned in the report, are there models that are more suited to certain types of companies or educational institutions?
Mulvihill: For individual companies the decision to go the OSS route is complex, because the use of an open source license for a product brings both potential advantages as well as disadvantages. It really is a case of a company considering its options, within its own business context, so that it has a full understanding at an early stage of the implications of the open source approach.

The guidelines have been developed to present companies and higher education institutions considering the use of OSS with a list of key questions, considerations and actions, together with a number of detailed case studies and background information on the development of OSS itself within the marketplace. It is intended that this will equip companies to better understand the environment, and to use the information to apply it to their own particular circumstances in terms of market strategies, customer base and stage of development.


Bentley: What issues concerning the different licensing schemes should organizations consider when moving toward open source development?
Mulvihill: The ISV needs to consider whether or not an existing (proprietary) code can be made open source under its existing license; whether or not the license permits distribution of the open source code - or in fact, requires it; how derivative works are treated (i.e., modifications to an original work); and what obligations and/or limitations there may be for licensing of documentation, images and fonts that are not computer program source code.

The most critical question governing license selection is whether the licensed work is original or derived from a third-party source. If work is original, then the choice of license is in the hands of the originator. If the work is derived, then the licensing constraints of that work apply. There are also issues relating to how the license treats works incorporating a developer's source code. The importance of this issue cannot be overstated. Many commercialization efforts become unstuck because of open source "contamination" from derived work.

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