Adoption, Improvement, and Disruption: Predicting the Impact of Open Source Applications in Enterprise Software Markets

Abstract

This article develops a model of open source disruption in enterprise software markets. It addresses the question: Is free and open source software (FOSS) likely to disrupt markets for commercial enterprise software? The conventional wisdom is that open source provision works best for low-level system-oriented technologies, while large, complex enterprise business applications are best served by commercial software vendors. The authors challenge the conventional wisdom by developing a two-stage model of open source disruption in enterprise software markets that emphasizes a virtuous cycle of adoption and lead-user improvement of the software. The two stages are an initial incubation stage (the I-Stage) and a subsequent snowball stage (the S-Stage). Case studies of several FOSS projects demonstrate the model’s ex post predictive value. The authors then apply the model to SugarCRM, an emerging open source CRM application, to make ex ante predictions regarding its potential to disrupt commercial CRM incumbents.