After the tech bubble burst, E*Trade’s technology chief, Lee Thompson, needed to find a way to do more with less. In 2001 and 2002, the online stock trading company shrank its tech budget by one-third. “We had to go through and figure out every penny that we were spending and make alternatives to reduce those costs,” says Thompson, vice-president and chief technologist of E*Trade. So he began using software that can be downloaded at no cost via the Internet. By the end of 2002, he was saving $13 million a year thanks to use of these freely available applications known as open-source software.
It’s 2001 all over again. With the economy in a tailspin, companies once again are under pressure to cut IT costs. Tech spending may contract 0.9 percent in 2009, according to market researcher IDC. The end of 2008 looks particularly bleak, according to an October survey by ChangeWave Research, which noted the sharpest decline for corporate software on record. About 40 percent of the 1,841 corporate software purchasers surveyed said their companies would spend less on software in the coming 90 days.
Budget Cuts Spur Interest
The tightening of the purse strings is causing some companies to step up use of open-source software. “Budgets are being cut, and some companies are looking at opportunities to use open source more in the enterprise,”says Matt Aslett, an analyst at consulting firm 451 Group. While open-source software is already widely used to help businesses run their servers and database management systems, it’s gaining wider acceptance in such areas as collaboration, customer relationship management, and supply chain management.
A resurgence of interest in open-source software bodes well for the companies that have invested in its development but at times have struggled to make money from it. Open-source vendors typically generate revenue from helping maintain or…