IBM was an early adopter and leader and played a significant role in open source being taken seriously.
In part this was a tactic to combat Microsoft and it worked. Linux runs on everything and is everywhere. Even Microsoft has embraced Linux, which even a few short years ago would have seemed like a fantasy alternative timeline.
But the ravenous open source community is consuming everything and moving up the value chain. Commercial software is becoming increasing difficult to sell because
1) there is a “good enough” open source alternative
2) customers are much more wary of vendor lock-in
3) consumers would prefer to rent rather than buy – the SaaS model
4) developers, though the adoption of Agile have much more influence on how software is built; open source is easier to acquire than proprietary software; the trend towards microservices only serves to reinforce this; the effectiveness of the “C-Suite” sell is diminished
These trends are hurting IBM’s traditional software business, both in terms of selling its own software and selling supporting services. There is much more competition when it comes to supporting an open source package since all players are on more or less equal footing. The only incumbent advantage left is if was your company that contributed the open source in the first place.
If this is not possible, the next best thing is to wrap open source in a foundation and to become a “platinum” sponsor as a means to increase stature, yet sidestep accusations of vendor lock-in. This works, but development and marketing investments are diluted since they benefit all foundation participants.
Another tactic is to approach open source as a system integrator. There is value in someone selecting amongst the best packages, assembling them, providing documentation and integrating them into a cohesive whole. As the volume of open source increases, the opportunities and sheer number of permutations and combinations of different packages make this a more viable business.
IT Services organizations love the predictable reoccurring revenue from support contracts. In an open source world there is more competition because no vendor has a proprietary advantage, unless they themselves are the major contributor. This will force vendors to be more cost competitive and technically savvy (smarter people == less hours spent addressing customer problems == better customer retention). Bottom line is expect less profitability and harder won support contracts in an open source world.
The pace of change in the open source community is positively head-spinning compared to traditional in-house product development timelines. As open source iterates faster, is more widely adopted and battle tested, proprietary software will be increasingly relegated to solving niche problems or only being developed for competitive advantage as a differentiator. Good software is designed to be modular and extensible in part because architects have accepted the fact that not everything can be anticipated (Agile allows for this where as in Waterfall this is a painful experience). Proprietary software will take the shape of these plugin extensions, and in time they too will be open sourced as markets change.
IBM should keep its core middleware software products like WebSphere Application Server, DB2, MQ and the like. It needs to also keep the entire zOS line going. However development and operations centric software from the operating system (AIX) all the way to IDEs, including provisioning tools, monitoring tools and software engineering applications are all being disrupted by Agile and cloud-computing. I’d consider them all on a death-watch list. Open source evolves fast. For what isn’t open source, laser-focused single-purpose companies are leading the market. IBM can either get out or play catch up.
Open standards mean proprietary and open source software is conceivably interchangeable. Of course there is usually a huge gap between theory and practice, but nevertheless clients feel that with open standards they are not beholden to a specific vendor. This reduces vendor stickiness and client loyalty and makes competitive migrations more likely.
Architectural trends from large monolithic applications to a federated collection of services lowers the barrier to adopting open source. No longer does a single product or framework need to be selected to satisfy the entire application. Rather the application, once decomposed to a number of different services, can have each constituent part built with a different technology. The associated risks in making a poor choice don’t necessitate a complete project overhaul. Of course any of those services may be realized by a commercial vendor, but their overall involvement and hence profit potential is diminished.
Open source coupled with architectural trends towards decomposition and open standards is a potent game-changing combination that evolves rapidly and moves up the value chain. The end result is that software is becoming a volume business with low friction migration between vendors. Thankfully, software is “eating the world” and the customer base is expanding.