Open Source and the Financial Meltdown

by Ostatic Staff - Oct. 08, 2008

Dana Blankenhorn makes some good points in a post from today titled Open Source in a Time of Recession. One of the better points is that, despite the incredible turmoil in global markets and economies, we actually haven't met the official definition of a recession yet here in the U.S., which would be two consecutive quarters without economic growth. Nevertheless, the financial gloom and doom we're seeing will cause constricted business spending on software, and open source stands to benefit from that in several ways. There may also be some unexpected events in the works.

As Blankenhorn points out, and as others have been predicting, consolidation is very likely in the technology industry itself. Technology stock indexes are lower now than they have been in four years. Companies with big cash reserves are likely to be on the lookout for inexpensive acquisitions.

I noted that Bill Gates said this past Sunday that there will definitely be no depression and no major recession as a result of the current crisis. "It's a very interesting crisis," he said. That's how you react when you have tens of billions of dollars.

Dan Farber found Gates' comments overly optimistic. "A hacker or terrorist hoping to destabilize economies couldn't have done a better job than the financial industry itself," he writes.

While lots of open source analysts are emphasizing that businesses will increase their adoption of FOSS amidst this turmoil, there will be more impact on open source than just that. We wrote here, prior to the current financial disaster, that many people are speculating about a possible Oracle acquisition of Red Hat.

Red Hat has been delivering solid financial performance for several quarters now, but its stock has plummeted in the past six weeks. Here, Matt Asay expresses concern that an acquisition of Red Hat by Oracle or another big company could mean the end of independent open source.

I tend to think Blankenhorn's analysis is right on the money. Previous recessions and meltdowns have brought huge upswings in the technology industry overall. "The PC boom emerged from the bottom of a recession in the early 80s, and the Internet boom from another in the early 90s," Blankenhorn notes.

This time, open source is likely to have the wind at its back as the markets pick themselves up and dust themselves off. There will be increased adoption and extension of top open source products, as we saw with the NTT and PostgreSQL news yesterday. There are likely to be acquisitions as well. One thing's for sure: Things aren't just going to stay the same.