How Free Software Helps Small Business

By providing low cost, easily accessible resources, free software helps small business gain a foothold in markets that would otherwise be dominated by large corporations.

In the computer industry, it has become increasingly hard for small businesses to compete against big corporations. The resources and marketing clout of big corporations make it difficult for small companies to make competitive bids for big projects. Free, open source software is one way small companies can fight back.

The Corporate Resource Advantage

Leaving marketing and legal issues aside for now, one of the advantages big corporations bring to the table is substantial resources. If a big corporation wants to move into a particular market, they can afford to invest in developing a reusable solution custom made for that market. Then they go to clients that need the resource, and simply plug in their solution, thereby solving the problem quickly and easily.

In this scenario big corporations have three advantages not available to small corporations:

  • They have both the human and financial resources necessary to assign their best people to the difficult task of creating an easily reusable solution.

  • Once the solution is created, they can pay lower wages to employ average programmers to perform the much simpler task of plugging in their solution so it solves the needs of a client.

  • They can quickly finish the project. Despite the fact that the programmers onsite may be less skillful than those found in small companies, corporate programmers have the advantage of working with a pre-built solution easily customized to meet a client’s needs. This allows less talented developers to quickly finish the job.

When a small company comes in to bid on the same job, they have to look at solving the problem from scratch. This means they have to take months to create software that a large corporation might already have available. As a result, they have to work under extreme financial and time constraints. Their solution may therefore tend to be both more expensive to build, and less robust.

The Free Software Solution

Free Open Source projects released under reasonable licenses provide a solution to this problem. In particular, these projects create free software that comes with source, that can be plugged in to projects to help solve complex problems.

Let’s take two perhaps over-simplified examples that can help show this process in action. In projects that I have been working on recently, there has been a need for tools that aid in FTP transfer, and in AS2 communications. Big corporations are likely to have the resources to have solved both these problems while working on similar projects. Their teams therefore have the luxury of simply plugging in pre-built solutions left over from previous projects.

A small company, on the other hand, may not have such resources in house. As a result, they might need to add a month or more of in house development in order to create these tools.

Enter the world of free, open source software. In both the cases mentioned here, the following free, open source projects can be used by businesses to solve these problems quickly and easily:

  • The Open AS2 Project: Released under BSD License

  • C# FTP Library: Released under LGPL

With the aid of these libraries, a small business can save at least one to three months of programmer time, thereby helping to bring a project in on budget, in time and at a competitive price.

Big Ticket Software

Another way that big corporations can come to dominate a market is through the use of big ticket software. A few years ago, big corporations had an advantage on the Application Server market because only they could afford the huge bills associated with using such expensive software.

The classic way this system worked was for a big corporation to create its own application server and assign it a huge price tag in the six figure range. Most small companies want to bring in a whole project for about the same price that these big corporations wanted to charge for their tools. A big corporation could therefore come into an account, give away their expensive application server for a nominal fee, and charge only for programmer time. This meant they had three advantages:

  1. They could underbid the competition because they "got" the application server at a bargain price.

  2. They could claim superior expertise in a tool which they, after all, developed in house.

  3. They had the source to the product, and could modify it or fix bugs if needed.

These advantages could be multiplied several times in the case of some companies. For instance, Oracle can promise to deliver their database at a reduced rate, they can promise to provide their development environment, JDeveloper, at a reduced price, and they can provide years of experience and other libraries at no additional cost.

Given all these advantages, how can a small business hope to compete? Well, one answer is to use open source:

  1. Small business can save money by using the free, open source MySQL database rather than Oracle. These savings can be passed on to the customer, thereby lowering the cost of the whole project. MySQL has the same performance characteristics as Oracle, thereby costing the client nothing in terms of performance.

  2. Small business can use the free, open source Eclipse development environment, thereby lowering expenses, and helping the small business to be able to afford a lower bid.

  3. Small business can use the free, open source JBoss application server, again saving money for the client, and helping to lower the overall cost of the bid. It is arguable that JBoss is the best tool of its kind, therefore giving small business an advantage over the clunky tools used by big corporations.

The end result is that free, open source software can help make a small company more competitive. Of course, the big companies can also use free software. But if both the big company and the small company are using the same tools, then the playing field is considerably more level. This makes it possible for clients to choose solutions based on the talents of the developers, rather than the relative clout of the two companies.

On a level playing field, talented developers will tend to break away from big corporations, thereby fostering the growth of small business, and promoting the democratic ideal as represented by truly free markets.

Summary

Some, but not all, mature industries tend to metastasize around a few, large corporations that gain control of markets. This occurs both because of market forces, and because of recent trends in the American economy. The end result is that market forces make it difficult for small companies to get sufficient leverage to compete in many mature markets.

This article has helped to show one way in which free, open source software can help to promote competition, foster the free market, and create a more open economy that provides room for individual talent to emerge.

Intelligent small companies will not only use free software, but they will help develop it. By doing so, they provide themselves, and other small businesses with tools that can be used to compete against the dehumanizing effects of big business and corporate culture. If a small company is lucky and talented enough to take the lead in developing a successful open source project, then they can have the best of both worlds: They get to use the software for free, and they get the publicity associated with having publicly demonstrated their expertise.

In future articles, I will take up the subject of legal hurdles that have been placed in the way of small business. In particular, the Sarbanes-Oxley Act and other legal developments have pushed many departments to standardize on big business. Future articles will show how open source projects can be used to help level the playing field. A future article will also give a few simple tips to help guide developers who are concerned about the licensing issues involved with using free software.

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