Oct 2006
Cost Conscious

With continued cost pressure on IT budgets, despite enterprises' growing dependence on IT (i.e., 'doing more with less'), open source is an appealing option. Achieving cost savings is a main reason for initial open source adoption. Calculating the financial benefits of open source can help determine whether to pursue a project, discover how much it may cost to generate anticipated benefits and prepare for the potential risks involved. This applies across multiple use cases, whether for an end user with an internal IT project decision to make, a systems integrator considering an open source deliverable or an independent software vendor looking at embedding open source components into its software offering.

In this report, 451 analysts step back and focus on one of the earliest phases in the open source adoption process for enterprises – supporting the business case for adoption through the process of financial analysis. Not all open source adoption efforts are driven by cost savings, but this is becoming a more common theme, especially when it relates to 'top down' initiatives driven by IT leadership.

This 451 CAOS report is a practical guide for understanding and calculating the financial benefits of open source in enterprise IT projects. This report was written for the IT manager or architect, who, often with no background in accounting, is tasked with building a financial analysis for a proposed open source initiative. It includes an introduction to the basics of financial analysis – concepts, processes and elements – as they relate to the open source adoption process, and a tool to help identify and capture the costs (and potential benefits) for adopting an open source project. It offers analysis with concrete examples, as well as findings from an end-user survey.

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