ADAXA is a management and information technology services provider focused on the implementation of business solutions for small to medium enterprises in Australia.  It was formed by three former directors of Praxa Limited, each with extensive experience in business solutions for commercial and government enterprises in Australia and New Zealand, who have been responsible for innovation in the design, development and implementation of major projects in the financial, distribution, retail and service sectors of industry.

The Open Source Business Model

Many companies ask us about the long term viability of organisations' that build their business based on the provision of open source software. Inherent in the question is their concern that should they commit to the implementation of a business critical system, they need to be certain that there will be ongoing development and support for the product for years to come so that their initial and ongoing investment is protected.  This is an important question which applies equally to vendors of proprietary and open source business solutions.

By adopting Open Source applications, the continuity of ongoing development and support is assured to a much greater extent than it is with proprietary software.  Whilst these two concerns were important in the early days of open source applications they are becoming less relevant as industry increasingly moves towards the adoption of Open Source solutions.

The Financial Model

Software solutions are typically developed by one organisation and implemented and supported through a partner channel.  Whether the partner channel is implementing and supporting proprietary or open source software the financial model is very similar.  The channels' revenues are derived predominantly from services associated with the implementation and support of the software solution that they supply.  Revenues will typically come from the work involved in defining requirements, installing and configuring software, training, ongoing support and the like.  In the case of the suppliers of proprietary software an additional stream of revenue will come from the proportion of the licence fee that they receive from the developer of the software, typically in the range of 20% to 30% depending on the volume of licences sold.

The revenue streams are therefore quite similar and whether or not an implementation partner remains viable will depend mainly on the quality of the software solution and the service they provide to their clients. It has very little to do with whether the solution they promote is based on proprietary or open source software.

Continuity of Development and Support

The protection of an organisation's investment in their chosen business solution is a major cause of their  concern.  In the case of proprietary vendors and their offerings there is no guarantee of continuity.  One needs only to consider the recent spate of acquisitions by Oracle and Microsoft and their publicly stated intentions. Peoplesoft recently acquired JD Edwards and in turn Peoplesoft has been acquired by Oracle.  Microsoft has acquired a portfolio of ERP system suppliers including Great Plains, Navision, Axapta and Solomon.  In many such cases the acquiring company's stated intention is to rationalise the acquired solutions into a smaller number of offerings.  There is no certainty of continued development and ongoing support for the acquired solutions in spite of vendor statements to the contrary.

In order to protect themselves, organisations may require software to be placed into an escrow agreement which can be triggered should certain events occur.  There is little opportunity for SMEs to make such arrangements with large software vendors.  Even if such an arrangement can be put in place, the cost of maintaining and complying with such agreements is high and there is no guarantee that the software maintained in escrow will be of value without access to the people who have developed it.

This is in stark contrast to open source software.  The very fact that the source is freely available protects the end user organisation who will have access to a wide range of knowledgeable partners and developers worldwide.  Any business is free to customise the software to meet its own needs and the software is inherently more secure, since errors can be plugged by any programmer as soon as they're noticed, and it is not dependent on any one vendor being around in the future to keep supporting it.

Open Source is the best way to protect an organisation's IT investment and the increasing trend towards the use of Open Source in mission critical areas of the enterprise will gather increasing pace in the coming months and years.

Reducing costs through smart implementation

Application software vendors traditionally adopt prescriptive methodologies for software implementation, taking a top-down approach to project management and business process and requirements definition by establishing a command-and-control system. The underlying assumption is that with enough planning and management, the outcome can be predicted and risks avoided.

These methodologies are most effective in situations where the customer's business and requirements will remain fairly static. On an increasing number of software implementation projects, however, prescriptive methods provide neither the flexibility nor the speed-to-market that organisations require. Too often, the end result is a huge set of documentation that collects dust on a manager's shelf that is a far cry from what actually happens in the workplace.

ADAXA adopts a light approach to application software implementation based on the Agile Methodology which is increasingly being used in successful software development projects.

• Light methododologies are adaptive rather than predictive - heavy methods tend to plan out a large part of the implementation process in great detail over a long span of time. This works well until things change and  the nature of vendors adopting such an approach is to resist change. The light methods, however, welcome change. They are processes that adapt to and thrive on change, even to the point of changing themselves.
• Light methods are people-oriented rather than process-oriented - they explicitly make a point of trying to work with peoples' nature rather than against them and to emphasise that the implementation of new business solutions should be an enjoyable activity rather than a threatening one.

The benefits of a light approach are significant.  The focus of the implementation is to ensure that the end users see the application right from the start.  They are involved in the process of ensuring it fits their requirements and are involved in the inevitable decisions which have to be made about the most appropriate way to configure and deploy the application throughout the implementation process.  This ensures that ‘change management’ is something that they are involved in rather than having thrust upon them.

Furthermore, close communication between the supplier and the end user enables them to play a part in the implementation activities.  This leads to a reduction in the overall costs of implementation so that work better performed by staff in the organisation is done by them rather than external staff.

This light approach starts by documenting as much or as little of the requirements as the organisation wishes to do. Typically an organisation is not able to articulate its requirements in detail and the requirements document may consist of as little as one or two pages of broad requirements.  Better still the approach starts with the installation of the application software and a 'conference room pilot'  to walk through the relevant business processes with the appropriate end users and the application software that is to be implemented.