Open source growing fast, but encountering growing pains

Thursday, February 17, 2011

Advantages such as lower costs and easy customization propelled open source software's popularity in Latin America to a new highpoint last year, but the view looking forward is not as rosy as some may think.

An open source bellwether for Latin America, US Linux operating systems provider Red Hat (NYSE: RHT) raised eyebrows earlier this month with news that its Brazilian division had just scored the largest middleware contract in the entire company's history. The deal comes amid snowballing activity in other regional countries from Cuba down to Argentina.

Open source technology use in Latin America has also matured and evolved into a centerpiece of companies' strategies, market sources say. Adopters are leveraging those solutions not just for ROI, but also to get a strategic leg up over competitors.

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Despite the significant upsides, analysts and industry observers caution that open source roadblocks ranging from lack of trained technicians to product security may curtail future growth.

"It's known that the open source technology has some clear restraints," Frost & Sullivan's Latin American information and communication technologies industry manager, Marcelo Kawanami, told BNamericas.


The government sector has played a central role in Latin America's open source adoption in the past, and will continue to hold sway in the foreseeable future, ICT consultancy Gartner's research director for technology and service provider research, Laurie Wurster, told BNamericas.

Venezuela and Brazil were among the first two Latin American countries to jump on the open source bandwagon, and have made the most significant headway in this area.

Open source software penetration reached 80% of Venezuelan public sector workers last year, according to state news agency AVN. Education represents another open source front, with local officials touting plans to issue 768,000 open source computers to first- and second-graders during the current school year.

Meanwhile, Brazilian government agencies on board with open source include the armed forces, as well as Brazil's federally controlled Banco do Brasil (BB) and savings bank Caixa Econômica Federal (CEF), according to Frost's Kawanami.

Public sector open source decrees have also been popping up left and right in Argentina, where government officials have started working with their counterparts in Brazil and also private companies to promote the use of open source software in state departments.


Red Hat's Latin American marketing manager, Martin D'Elia, told BNamericas that the company's historic deal in Brazil was with a government agency, but noted that business has not been limited to the public sector.

"In various countries, we have won tenders, both in the private sector and public sector," he said without naming specific clients.

A Gartner report published in January found that open source solutions accounted for roughly a quarter of all current deployments in Mexico's media and communications industry, followed closely in percentage terms by the manufacturing and banking and securities sectors.

Meanwhile, Brazil's manufacturing sector reported that just shy of 20% of its total software implementations were open source, followed closely by media and communication. Banking and securities also reported that a significant percentage of their software was not proprietary.

"Financial services' open source implementation has been very high, and they were very early adopters. That would include insurance companies," said Gartner's Wurster.

Other industry observers have a slightly different take. Frost's Kawanami noted that open source adoption in the private sector has been uneven, including in countries such as Brazil and Venezuela.

"In both countries, it depends of the institution and the vertical in question," he said, pointing to pitfalls such as "certain lack of support for users, a difficulty of adaptation if the person was used to another platform and network security."

"Due to these reasons, many private institutions prefer the private versions."


Lower costs and customization advantages will continue to woo new open source users and put them firmly in the IT driver's seat, according to Wurster. "If you are using an open source component... you can customize that yourself to create an advantage. You make your company special. You program."

Still, open source providers need to work out kinks in crucial areas such as license terms, she said. "There are too many licenses with too many components, whether they are conflicting terms, fear of indemnity issues, intellectual property suits. Those tend to be the biggest fears."

The public sector full-court press will continue, but within the private sector, the prospect of open source software overtaking proprietary solutions will remain dim.

Both Wurster and Frost's Kawanami agreed that mixing and matching will become the name of the game, as firms trend toward hybrids of open source and proprietary software.

"It's important to make a balance and evaluate the mix of what can and should be private and what can be open, and take the advantages of it," Kawanami said. "The trend is diversity. You have users on both sides."