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Expert: With open-source software, ROI tough to peg

The old metrics don't always work, says Robert M. Lefkowitz

By Todd R. Weiss
August 4, 2005 12:00 PM ET

Computerworld - PORTLAND, Ore. -- For businesses looking to move to open-source software, the metrics used to compare return on investment with proprietary software may not always give the best answers. Basing such decisions on the costs associated with licensing fees, hardware, support and maintenance -- all traditional ROI factors -- ignores the expertise of workers who can create and use open-source software.
That was the argument made today here at the seventh annual O'Reilly Open Source Convention by Robert M. Lefkowitz, vice president of research and education at Optaros Inc., a Cambridge, Mass.-based open-source consulting and systems integration vendor for large businesses.
In his presentation, Lefkowitz talked about how companies need to devise their own ROI models when evaluating open-source solutions rather than relying on ROI calculations done elsewhere. The idea, he said, is that traditional business measures of ROI focus on monetary savings, while today's IT companies should also consider expertise gained.
"If the best people are using open-source, then that's a reason to go there," Lefkowitz said. "And if the best people are using something else, then you'd want to go there. Where the best people want to go, that's where the future is."
The problem with traditional ROI calculations, he said, is that it is expensive to gather detailed, timely information inside a company for an ROI analysis. Instead of getting accurate data about their own operations, companies often use generic data gathered about similar-size firms that have done their own ROI studies or gotten help from analysts, he said. But that generic data doesn't usually give an accurate picture for every company.
"You can find a study that proves a point, and you can find a study that disproves a point," Lefkowitz said.
Traditionally ROI arguments are made by companies to figure out where and how to grow, while vendors create ROI maps to help figure out sales pitches to customers, he said. "The ROI is the document to build consensus around the plan," he said.
ROI for developers and other staff people is not easy to measure or recognize, Lefkowitz said, but it should be made a part of the equation when looking at whether a company should adopt open-source software.
"Open-source provides a mechanism to identify the good [workers]" because "good people invest in themselves, learning technologies they can use throughout their careers," he said. "Expertise matters. If you have better people, you'll manage the hardware and software better."
One example he cited is search engine company Google Inc., which built a huge IT system with generic white box computers -- creating a powerfulnetwork that is unique and efficient with the hardware available to anyone. What made Google different, he said, is that the developers there have done the creative work with open-source software and thinking.
"That's what Google did," Lefkowitz said. "The scarce resource there is the expertise."

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