I just read a great article on the Economist titled “Born Free” which discusses how Open Source companies are still growing despite the recession. “Budgets are tight and we think that is good for open source,” said Jim Whitehurst, Red Hat’s boss. I have to agree, the low price point of the typical open source solution combined with most if not all of the functionality makes open source compelling. The issue still remains however of the perception of open source as a serious business tool. Most Execs I know will not rely on using open source for mission critical applications (Linux is the exception). Whether the new generation of open source companies is yet to be proven or there is a software prejudice against the open source model, most C-level Execs won’t consider open source applications at the enterprise level.

Yet some have started to test the waters with SugarCRM, Alfresco, Zenoss and other open source companies and have had good success. Better, some of the open source companies are starting to lead the way by creating innovative solutions that outpace their proprietary competitors. The model should produce many more innovative solutions given the very fact that it’s open and available to anyone that wants to build on it. In the future, you’ll see open source Content Operating Platforms where you’ll be able to build rapid applications to fit a single need or an enterprise. Think Lego building blocks.

In the future, open source companies will out-innovate their proprietary cousins because contributors will have access the entire code. The Crowd Sourcing of application development will produce incredibly powerful tools and conversely tools that are buggy and worthless. It’s analogous to YouTube videos – some are compelling and others are a waste of time. The applications that are developed that solve problems will command higher premiums than those that are less compelling. Not everyone agrees with me, Robert Mason of MindTouch believes open source will go away and be replaced by “just open enough” because of all of the potential forking.