The many faces of small business and open source

(Most businesses visited by Mike Rowe of "Dirty Jobs" (right) are what I call legacy businesses. For more on that read on.)

We define the term too broadly. Politicians routinely call companies with as many as 500 employees "small businesses" when tax breaks are under threat. Reporters never call them on it.

Analysts are little better. They have this catch-all called "SMB" -- small to medium businesses -- which can include firms with nearly 1,000 employees.

The definition lumps too many different markets into one.

It includes entrepreneurial enterprises, slow-growing legacy enterprises (often family-owned) and true small businesses, which are single-location shops with only a few employees and a closely-defined mission.

Which brings me to Matt Asay's latest, a complaint that open source still doesn't have the SMB market right. It's a follow-up to a 451 Group effort from December saying open source doesn't get much from the SMB market.

If we're talking truly small businesses, this is an immense opportunity for Value-Added Resellers (VARs), as I wrote concerning my own pharmacist a few years ago.

You can give your customer more hardware, and yourself fatter margins, by selling open source and adding Windows through emulation or virtualization when necessary. You also get more control over your customer.

The lesson for vendors is to build their channels. Open source is the best pitch a VAR has to get new business.

Many entrepreneurs are big users of open source, but don't pay for open source (or anything else) until they have a going concern.

These going concerns are great opportunities for hosted solutions, and the client need never know he's on Linux at all.

The lesson for open source here is to focus on hosting and clouds that run Linux, selling their software as a service because it's the best way for entrepreneurs to scale.

The real weakness for open source lies in what I call legacy enterprises.

These are not small businesses, and they're not usually new businesses. They're going concerns which scaled their systems when Windows was the only client-server choice.

Switching now may seem like a big, "bet the business" change. And most legacy enterprises are conservative in the best ways -- they know what works and resist changing their operations.

These folks are tough to switch. Their budgets can afford Windows, Office and Oracle. The update and upgrade "taxes" these firms impose are just a cost of doing business.

You can't try to hit these clients up in a crisis, either. If a big client goes toes-up, or a tornado blows through, computing does not top their list of concerns.

Your best chance lies at a time of positive change. When there's a big new contract requiring a general expansion or a new facility, then these folks can see open source savings coming to their bottom line.

But that's a rare event. This is the heart of the "SMB problem" for open source.  Legacy businesses may be where the money is, but it's not where the growth is. Go for the real little guys, and the entrepreneurs, first.