Wednesday, May 23, 2007

It's Not About Free Software, It's About Control and TCO





Often times when discussing open source software, you hear the term FOSS, which stands for Free Open Source Software. To me personally, FOSS is very idealistic and somewhat unrealistic. In case most people have forgotten, we live in a capitalistic society that rewards those who create wealth. Ultimately, we must provide necessities for ourselves such as food, clothing and shelter. Writing free software and then giving it away does not lend itself to a supportable model. Even considering the power of community and collaboration, it is likely that those two factors are not enough to sustain a long term model producing FOSS.

So where does that leave us? Paying customers of course that enable a philanthropic software model to exist over time with sustainable results. That is not a bad thing and the reality is that is the way successful open source software works now. In my lowly opinion, OSS is really about control and total cost of ownership, not free software. Let's look at these two items separately.

We will start with TCO because it is very easy. For the record, I will say that M$FT produces very good products and for those education organizations interested in an integrated environment, M$SFT fits the bill for them. The caveat is that M$FT is in business to sell software licenses and over time, a M$FT district will be forced to upgrade products and pay additional costs for those upgrades. Often times, this means a requisite hardware upgrade as well. Anybody say Vista? This can become very costly and in large districts the sums of money spent can be staggering. Take Broward County Schools that two years ago tried to get approval to spend $68M on Apple Computers. That is a chunk of change to say the least.

Or take the FLDOE's Sunshine Connection project where M$FT gave them the software for free and some services to implement as well. I think that the total value could be around $20 million supposedly. Did M$FT really give away $20M or did they secure a long term annuity stream of revenue? I recently read in a white paper somewhere that Sharepoint 2007 has certain functionalities that require Office 2007. In other words, to enjoy the full potential of Sharepoint 2007 you must acquire Office 2007. So let's do some simple math. I am going to assume that the state of Florida's education system has about 1 million computers. Let's say at some point in time, that the FL DOE forces everyone to do at least one thing in Sunshine Connections that requires Office 2007. Assuming a per desktop license fee of $25 for Office 2007, that comes out to $25 million and it seems that over the long haul, M$FT is really giving Sunshine Connections away for only $5 million. And as the years go by and more upgrades are required and profits rise, you begin to realize that M$FT simply made an investment in FL to drive an incredible revenue stream over time.

OSS presents a situation where schools and districts can begin to take control and manage TCO to their benefit. Let's consider Linux as a start and specifically, let's look at thin client technology. For our example, we are going to consider Brandon Elementary School in Atlanta, GA. Brandon had approximately 1-2 computers per classroom running Windows XP and was experiencing a myriad of problems with those computers. Because it was an elementary school, Brandon did not have the proper technical resources and depended upon two parents for maintenance of their computers. These poor souls were spending a great deal of their time fixing these computers and decided to look for an alternative. They found K12LTSP and decided to give it a try. Using equipment donated from local businesses, they built an environment of 35 K12LTSP servers that are now managing approximately 250 Linux thin clients. They have raised the average number of computers in the classroom from 2 to 6 and have 8 or 9 in some classrooms. The uptime has been amazing and they are using thin clients running on 350MHz processors. Businesses are throwing away computers with that kind of processing power and would willingly give them away to schools. You can read the entire article here. Bottom line, Brandon estimates that they have saved about 90% costs per computer. That is a lot of money. Here is the direct quote from the article:

"Having Linux on the desktop has been a shot in the arm for the school in many ways. Howard and Fragakis estimate that installing used hardware with a cost-free operating system saved Brandon Elementary 90% of what it would have cost to install Windows XP PCs, and that doesn't include savings on operational and support costs. But the biggest benefit can't be counted in dollars."

As the years go on and they don't spend money on new hardware or new software, the cost savings begin to skyrocket and you can see that the TCO picture gets prettier over time. A side benefit: Brandon's test scores have risen and were the highest in the district and third in the State of Georgia.

What about control? Let's look at student information systems and small school districts. For this case, we will examine PowerSchool. PowerSchool is a SIS that was developed by Apple and later sold to Pearson. Pearson owns many SIS offerings and currently has greater than 50% market share for this particular application. In the small school districts, it is the dominant player by far. How much does PowerSchool cost? Here is a recent offer: http://www.pearsonschoolsystems.com/email/files/PremierBundle030708.htm

For the low one time licensing fee of $28 per student, you can acquire PowerSchool for your district of 1,000 - 3,000 students. These fees include implementation services, which I am guessing is installing the software and making sure it is working correctly. I can pretty accurately guess that fee does include services like data conversion from your old SIS. You can have those services performed for you at what appears to be a fee of $225 based on the Apple price list for Arkansas from 2005. So I have 3,000 kids, which means I pay $84,000 to acquire the software, have it installed and make sure it is running correctly. Should I require any additional services for something like data conversion, that costs and additional $225 an hour plus travel. For our case, let's assume that we will need one resource for one month (160 hours) to successfully convert all of our data, validate that it is correct and turn off the old SIS, That now adds another $44,000 assuming $2,000 per week travel costs. Now I am up to $128,000 total so far. At the end of year 1, I have to pay maintenance. For our example, we are going to assume that our district has purchased the Premier bundle, which includes a SIF agent for PowerSchool. According to the AK price list, maintenance comes to about $8 per student adding another $24,000. I am also going to assume that the three days of included training is not enough and add one more week. According to the AK price list, that will cost me $1,595 per day X 5 days = $7,975. My grand total is now $159,975.

What if I went with an open source SIS? There are multiple efforts underway. Centre, SchoolTool and OpenAdmin are examples. Of all the ones out there, I would guess that Centre is the most mature and has the most traction. Since it is open source, I immediately eliminate my one time licensing fee of $84,000. Let's assume that maintenance and support are equal. I checked Centre and they sell state reporting modules for $2,500. I don't know what they charge for data conversion of customization services, but am going to assume a flat rate of $100 plus travel. Using our earlier metric of 160 hours that adds $24,000 to the total. For training, I will assume the same $100 X 8 hours per day X 5 days = $4,000. Our grand total now comes to $54,500 representing a cost savings of $105,475 or 66%.

Over time, I would invest some of that savings into training resources in the open source technologies so that I could make my own changes to the source code. I don't get PowerSchool's source code. As an example, my state changes its reporting requirements and I have to add a field of change a field. I can have my resources do that instead of paying Pearson $225 an hour to make those changes. Over time, since I have access to the source code and because I have invested in my resources making them proficient in these technologies, I might choose to give up maintenance and support further saving myself $24,000 a year. And because I don't use M$FT products, I am not forced to upgrade my operating system and hardware saving large amounts of money.

While I think OSS has a ways to go, a 66% savings argument is very compelling for a small school district with very limited funds. While I talked about specifically about thin clients and SIS, there are a multitude of products out there that can run much a school district's major functions. In addition to the SIS, there is:

  • Moodle for Learning Management and On-line Courses
  • OpenBiblio to manage your library
  • A variety of open source portals to manage your web site (Joomla, DotNet Nuke, Websphere Community Edition from IBM)
  • Mambo for content management
  • OpenOffice or StarOffice
  • Edubuntu
The list could go on for quite some time, but you get the idea. Are you ready for lower TCO and better control of your IT environment? Time to investigate OSS.



12 comments:

Guy said...

Don't get me wrong, I agree with much of what you say. I am an IT Director for a school district of 1470 students. We use OSS for file and print services as well as other services namely, DHCP, Bind, Dansguardian, Squid and also take advantage of Iptables. The cost savings have been huge. Now about Powerschool, you have inaccurately described the costs of the SIS. First off, Power School is implemented by in house admins with the guidance of pearson support staff. The cost of this service is bundled in the TCO. Secondly the 3 days of training is vary suitable for non-administrative staff as the software is not that difficult to master. Schedulers are given 9 days of training. The cost of this training is included in th TCO. The price of the training depends on the number of staff that you send. Again this is a one time upfront cost. Technical support once implemented and live is also included in the very reasonable annual fee. Changes in state requirements are much more simplified because patches are released at no charge to stay on top of any state requirement changes. while it may take you hours to modify the source code (downtime) it can take only minutes via patches. Some things schools cannot afford to buy cheap, an SIS is at the top of the list.

Casey said...

Guy, thanks for the comments. A few questions:

1. Have you ever wanted to make any changes to PowerSchool to add a functionality or collect additional data that was not collected? If so, could you have done that yourself or would you have had to contract with Apple/Pearson?

2. Did you have to buy new hardware to support PowerSchool or did you repurpose existing or surplus HW? How much did that cost? Did you have resources in house that were knowledgeable with that new HW and OS or did you have to invest time or money to ensure they had adequate skills?

3. How much are you paying for any additional licenses required to run PowerSchool ie Apple OS and are there associated maintenance and support costs?

4. Did Apple/Pearson give you the source code for PowerSchool?

On the downtime comment, one would assume that we would be making changes in a test environment and thoroughly testing those changes before migrating to production. Thus downtime is zero.

My comments are based on a few assumptions:

1. that an open source alternative can provide your district or school with the same functionality

2. that the level of support provided by the open source provider or Apple/Pearson is equivalent.

3. That the open source alternative does not require any substantial HW upgrades over time or far cheaper upgrades than buying a brand new box. One could argue that you could even run these systems on donated equipment from local businesses. Many schools do that already.

If those first two things above are equal and the third is true, then my post is designed to ask the question "why wouldn't you choose the OSS alternative?"

While SIS OSS alternatives are not quite there yet, I do believe that they are getting very close for small school districts. And over time, I think you can successfully show that TCO is lower when all things are considered.

So again, if OSS can give you overall lower TCO, provide you with the same functionality and give you complete control over your application, why wouldn't you consider it?

I think it is a fair question. Take out the training costs I assumed and the data conversion work and I think that you still have $84,000 that you spent for the licenses assuming 3,000 kids. If you chose the open source alternative, wouldn't it be a great story to tell how we saved $84,000 and returned it to the instructional budget?

Casey said...

One more question: Have you done a true TCO study of the implementation and ongoing costs? I would be interested in learning more about the true costs to test some of my assumptions. We could even co-author a blog around it and invite debate. I think it would be an interesting exercise. Let me know if you are interested in such an effort and publishing the results.

Guy said...

the comment system doesn't seem to be functioning. I have now posted 2 comments. One being a lengthy rebuttle. this is my last attempt. I would prefer to talk via phone. email me at gskarin@gmail.com and I will offer you my conact info. I am out of town this week for som Suse training so you would have to call my hotel number or my cell phone. Keep up the good work Corey.

-Guy

Guy said...

Sorry for addressing you by the wrong name. My best friend's name is corey he is an IT Security whatchamacallit for an Insurance company. I am taking a very seriuos look at centre. In fact I have a quote already and a demo setup for next week. You may have saved us about 40 grand. Thanks Corey...I mean casey.

-Guy

Gnuosphere said...

Since when did free software become a "philanthropic" endeavor? I suppose it can be...if one chooses. But there is nothing inherently philanthropic about free software as you imply.

It's unfortunate to think that when someone decides to start a business to make money through software service and support (primarily) that they get labeled a "philanthropist" running an "unsupportable and unsustainable model".

I hate to play the "name the economic model" game but if one must, FOSS is extremely capitalistic and proprietary software is actually mercantilism. Free markets are a key aspect of capitalism. Proprietary software is about monopolies and the restriction of trade. But since most people think of capitalism as "make as much money as possible" regardless of how, it's easy to see why the economic labeling is often presented askew.

Regardless, when you start your post with "In case most people have forgotten, we live in a capitalistic society" a warning flag immediately shoots up. What is your understanding of "capitalism"? What "society" are "we" living in? Surely you speak as a human being first...not a shareholder or nationalist, no? So "we" must include me and everyone else on this planet with access to a computer with software. Any other "we" falls short of the mark. How does one reconcile the divisiveness of the proprietary licensing model with "we"? Or to you, is "we" simply a particular company with a monopoly on technology or a particular group of citizens under a nation's flag? Am I a part of your "we"? With free software, there is no question of who "we" are as anyone is free to join us.

I think these questions are extremely important. Perhaps you will write them off as questions of an unrealistic idealist?

Casey said...

Some excellent comments and I am always one to learn from others. A lifelong student in that sense. Son on to the continuing the debate. A capitalistic society is one that produces capital goods and then exchanges them in a market for currency right? I would say that pretty much defines the majority of world economies in the majority of the world's countries. So in that definition, can we find an example of an organization, that without some form of monetary backing, has produced a sustainable effort over a period of years giving away something for free? Linux would likely be the best candidate and I think you can argue that Linux, in many cases has become a market unto itself.

So to FOSS, which the last time I checked means Free Open Source Software or a product that is not exchanged for capital. It is only my opinion, but I personally do not think that FOSS is sustainable as a model that continually produces a product that changes to fit the needs of its clients as their needs change. In education, in the U.S. at least, legislation changes, reporting requirements change, some new test is given requiring continual updates to the software that collects and reports that data. My debate is that the FOSS model will not successfully support that environment.

On to philanthropy. Philanthropy is defined as good will toward fellowmen or an effort to promote human welfare. I doubt that anyone can dispute that developing free software that can perform a specific function and then giving it away who wants to use it is not an act of good will. One could also argue that by using the free software, and thus saving the money, we could redirect those savings into activities that improved the welfare of fellow men, like getting more kids into a free and reduced nutrition program.

So in that line of thought, if I give away a free product (philanthropy) and then sell a service to support or improve it that some customers want to pay for (capitalism) that results in a lower total cost of ownership and delivers the same functionality, isn't that a good thing?

I have to correct my example of the PowerSchool model because I was, as correctly pointed out by a reader, wrong on some of my assumptions about additional training and what was included in support. But still, the open source approach in that example represented over a 50% TCO for the initial purchase of the software, assuming that the maintenance, support and functionality were equal. Over time, because I am not running on a proprietary software model, I am not forced into upgrades of that proprietary software, I am not forced into related HW upgrades and I begin to take complete control of my IT environment and realize even greater savings. And sooner or later, as many districts in Florida have done withe TERMS student information system, I can drop the paid support further reducing the TCO because I can now support my own system.

In summary the entire argument was not about free software, it was about lower TCO and control of the IT environment enabled by a philanthropic model where I give away something and then charge for an added service that has value for those who are willing to pay for it. Those monies can then be invested into continuing development of the free product that can truly produce a viable alternative to commercial products. Imagine, if we could produce a new SIS that reduced TCO by 50% like our PowerSchool example and it was good enough for every school or district. I knwo of districts that over time have invested between $25 and $50 million into their SIS. Imagine returning $25 million to the operating budgets and directly impacting instruction of the student.

So to your comment about idealism, the underlying message is that by reducing the TCO of your administrative applications, you can return money to processes that directly impact the education and achievement of your students. After all, it is truly about the kids.

Gnuosphere said...

"So to FOSS, which the last time I checked means Free Open Source Software or a product that is not exchanged for capital."

No. Free refers to liberty. It has nothing to do with price. English has two distinct meanings for the word "free". And in this case, it has been (for over 25 years) that free refers to your freedoms when you obtain a copy of free software.

See here.

Gunnar said...

You great under estimate the cost of modifying source code to add or fix functionality. $105k is a drop in the bucket. When the software is running the "enterprise", the only responsible thing is to approach software engineering in a professional way, which is to hire competent software engineers, and perform a QA cycle before deploying it to your school district. This is going to cost a lot more than 105k. That's a very small software project. You're changing your business from education to software. Fools rush in where Angels fear to tread...

Anonymous said...

i love jojo and alex so much, they are the best girlfriends i have ever had:) <3

martin zhao said...

Get open source codes and modify it.
Thinking it is cheap and easy...
About as stupid as you can get...

John Michle said...

Its really good to know about that the facts and the other informative points given here are quite considerable and to the point as well would be so far better idea to look for more of these kind.

Field Service Management Software