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There are two enterprise markets

Right now this seems like the biggest untold software story of 2007, one that has been unfolding for several years, as open source has grown and the proprietary world has consolidated.

Cognos logo
It's apparent there are two enterprise software markets developing:

  • Big enterprises feel locked-into a dwindling number of proprietary offerings, with open source used to fill gaps.
  • Smaller enterprises find themselves with more choices than ever, not only between open source and proprietary vendors but within the open source community.

(Cognos' acquisition by IBM was announced earlier this month.)

It reminds me a bit of the convention marketplace, where small shows can go many places but the biggest shows must choose among Chicago, Las Vegas and Atlanta.

In the trade show game this has resulted in the break-up of some large shows. Only one tech trade show, CES, still needs Las Vegas.

What might the result be in the enterprise space?

The lack of choices for large businesses means they are at a severe handicap, compared to smaller enterprises. They are paying more, and their systems evolve more slowly.

All this should change over time as open source enterprises move "up the stack," gaining the size and scale needed to compete for the biggest businesses. But this will take time -- the software will likely get there before the enterprises.

This could be the market opening IBM has been seeking for years. It now supports Linux in all sizes, for all kinds of customers. But IBM remains a high-priced choice, more akin to an Oracle or Microsoft than a true open source company. The Cognos buy is Exhibit A on that point.

And will these larger, "enterprise-class" open source vendors still retain the nimbleness which helped them reach the top of the stack? It's hard for me to see that happening. More likely, the rise of true enterprise-class open source will result in more development moving in-house.

Right now this seems like the biggest untold software story of 2007, one that has been unfolding  for several years, as open source has grown and the proprietary world has consolidated.

It's not always good to be the king.