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The FOSS(ilization) of the supply chain: The risks of a strategy centered on Free and Open Source Software

Written by: Jon Hansen

Article Overview: I recently reviewed (actually browsed as there were only10 PowerPoint slides in total) a Government of Canada presentation to attendees of the September 2006 CIO Summit in Ottawa. Titled “IM/IT Government in Canada . . . Open to Business” the presentation emphasized the fact that “change is the only constant.” Referencing a transformation agenda which highlighted a variety of important areas including internal services such as finance, human resources and procurement, the case for open standards was offered as the best possible way to manage this ongoing evolution. More specifically, the concept of Free and Open Source Software (FOSS) as a viable solution was introduced.

The FOSS(ilization) of the supply chain: The risks of a strategy centered on Free and Open Source Software

I recently reviewed (actually browsed as there were only10 PowerPoint slides in total) a Government of Canada presentation to attendees of the September 2006 CIO Summit in Ottawa.

Titled “IM/IT Government in Canada . . . Open to Business” the presentation emphasized the fact that “change is the only constant.” Referencing a transformation agenda which highlighted a variety of important areas including internal services such as finance, human resources and procurement, the case for open standards was offered as the best possible way to manage this ongoing evolution. More specifically, the concept of Free and Open Source Software (FOSS) as a viable solution was introduced.

Now this is a subject which is of great interest to me personally as I have been tracking the transition of traditional software licensing models to the present day Software as a Service (SaaS) model since 1998 (my recent Ariba interview post reviewed the emergence of SaaS at some length). The question that my ongoing research has attempted to answer is if SaaS is a sustainable model or merely a transitory link or bridge to FOSS? The fact that the City of Houston “shifted” to a FOSS platform in response to Microsoft’s demand that the city change to a $12 million, multi-year licensing plan is certainly worth noting. (Note: all research data at this point in time indicates that both SaaS and FOSS will likely co-exist as they each address unique requirements that are indigenous to their respective business models.)

Incorporating excerpts from an earlier Defence R&D Canada presentation (Free and Open Source Software Issues in Military Computing) by Robert Charpentier and Richard Carbone, the CIO Summit PowerPoint highlighted a number of concerns with the GoC’s intimated pursuit of a FOSS strategy.

While there were several notable risks listed such as the increased reliance on localized resources to ensure “system maintainability” (keep this one in mind as a point of reference for later in this article), for the purposes of this posting I am going to focus on the one involving Procurement challenges and the inherent “lack of imputability when software is developed via internet collaboration.”

FOSS: this decade’s Internet

It should come as no surprise that FOSS’ growing presence is in many ways similar to that of the Internet’s. Steadily and almost imperceptibly at first, FOSS has gained considerable recognition especially within the public sector. As one publication noted, “various governments around the world have begun to take notice of FOSS,” and have “launched initiatives” in an attempt to capitalize on its purported benefits. With an increasing number of white papers and reports advocating a FOSS-centric strategy, the majority of current initiatives surprisingly originate at the local or regional level (i.e. municipalities).

Not surprisingly however is the fact that European Union countries such as the United Kingdom and Germany have what many would consider being aggressive programs already in place. Fueled by papers such as “Linking Up Europe: the Importance of Interoperability for E-government Services,” these governments see Open Standards through FOSS as a means of combating the “closed, vertical, un-scalable and frequently proprietary information systems,” that until recently had dominated the majority of public sector initiatives.

And while there is not currently an official FOSS policy in the U.S., a number of states such as California, Texas and Oregon are in the process of attempting to pass FOSS legislation. As illustrated by my earlier reference to the City of Houston, FOSS initiatives at the municipal level in the U.S. including the City of Largo, Florida’s GNU/Linux program which generated savings of more than $1 million in terms of hardware and software costs, are a clear indication of the potential benefits.

Needless to say, savings both realized and projected provide governments with more than enough incentive to actively investigate and develop a FOSS strategy.

Supply base impact and the use of intermediary resources

Once a public sector organization has determined that FOSS is a viable solution, the process of procurement and in particular key elements involving selection, implementation and ongoing maintenance requires a great deal of consideration. For example, with traditional licensed-based applications in which an ongoing maintenance agreement was an integral part of the initiative, the majority of clients grudgingly paid what they considered to be hefty fees for a service many felt was overpriced and generally ineffective. So even though there are no direct costs associated with the “source product,” value-added services such as customization, implementation and ongoing support from intermediary providers have to be quantified up-front.

The next step is to identify and effectively engage the intermediary supply base. With regards to the GoC’s CIO Summit presentation, this would include determining how the current purchasing guidelines will impact the selection process should they choose to move forward with a FOSS program? And this is where the historic challenges associated with the Way Forward initiative may potentially muddy the waters.

As is often the case a great deal of the IT industry’s innovative spark and expertise resides within the SME community. If this core competency trend holds true in terms of FOSS-centric initiatives (which is certainly a reasonable assumption), concerns such as those raised by Shane Schick in his article “IT industry outraged by Feds’ procurement strategy” (June 14, 2006, itbusiness.ca) are worth revisiting. In particular, the GoC requirement for suppliers to “pass” what was referred to as a “rigorous set of qualifying screens” to even have an opportunity to compete for government business. The main issue with the screening process is that it is generally felt that a large segment of the SME supply base will be disqualified from bidding on GoC contracts. With similar concerns being echoed by associations such as CATA, and crystallized by articles such as the September 5, 2006 “Would Gov’t Procurement Process Neglect FOSS?” by Josh Chalifour, the potential for a continuing disconnect between key stakeholders seems likely. (I think that this would be an ideal time to reference the recent Yes Virginia postings including their success in supply base management.)

Certainly a letter written by the Canadian Linux Users Exchange’s (CLUE) Policy Coordinator Russell McOrmond in late August 2006 would seem to foretell the possibility for a continued strain in the relationship between the GoC and the associations that represent its vast supply base.

In his correspondence McOrmond cites the similar challenges faced by FOSS companies and those of the CATA membership in which “the government wants to skip intermediaries when procuring products from a single source.” Besides overlooking the value added component of these intermediary relationships, McOrmond contends that a single source vendor who also offers related services results in the GoC “bypassing” the very policy that is intended to protect competition. If this is in fact the case (note my caveat), then the GoC strategy contradicts the emerging trends highlighted in a number of reports including an April 2007 U.S. Federal Government summary of three studies which revealed a noticeable shift in Federal contracting practices.

New trends that benefit small business

As a result of the backlash over the utilization of sole-source contracts with large companies in Afghanistan, Iraq and the Hurricane Katrina clean-up, studies by three independent groups have identified an emerging trend in the U.S. Federal Government’s contracting practice.

Referred to as a “major and growing bonanza for small business firms, particularly those run by veterans, women and minorities,” the data indicates that a dramatic shift in favor of small business in three key areas; Information and Technology (IT); Operations & Maintenance (O&M); and Architecture, Engineering Construction & Environmental (AEC) has put them “back on top of much of the federal contracting world.”

For example, the number of federal IT contracting opportunities available to small business increased from 35% in 2002 to 46% in 2007. And while “larger firms still tend to dominate more of the advertised IT opportunities,” the overall IT opportunities for large contractors declined from 71% in 2002 to 62% in 2007.

The upward trend for SME’s also extended to include Pre-RFP contracting set-asides for small businesses which saw opportunities in this area increase from 40% in 2002 to 52% in 2007. Conversely, the number of full and open opportunities, (which tend to favor the larger organizations) decreased from 65% in 2002 to 55% in 2007.

Of the five emerging small federal contractor trends identified in the summary the two that are most relevant to this posting are the “demise of sole-source contracting and a resulting focus on heightened competition.” Besides validating McOrmond’s position regarding the GoC’s purported circumvention of intermediary suppliers when procuring products from a single source, this shift in U.S. Government contracting policy will clearly create more opportunities for small business.

The second is an actual reversal of a recent trend whereby more “big” federal contracts will be “unbundled” for small contractors. Initiatives by agencies such as NASA, whose breaking up of a number of their mega-contracts into more manageable opportunities for small businesses and small business teams, is an example of how the “new shift to smaller contractors will take place.”

And it is here that the tie-in to the procurement challenges that were raised in the 2006 CIO Summit presentation comes into play. Challenges which I might add are not unreasonable given the nature of the FOSS development community.

In a 2006 editorial paper on FOSS development processes, several thought leaders from various institutions throughout the U.S. and U.K., made an interesting observation. In the paper they stated that the “enactment of complex software development processes” was mostly being performed by a “loosely coordinated group of software developers and contributors,” who are “globally dispersed.” (Does anyone else notice the similarity with how Service Oriented Architecture is defined?) This “loose” coordination has led some organizations to pay their own internal software development staff to work on FOSS projects as part of their overall job.”

Three choices?

Obviously concerns which go beyond the procurement process itself to include version control, system maintainability and the adjunct need to increase localized resources, higher levels of technical skill and potential limitations in terms of integration and user-friendliness (it sounds more like SOA with every sentence) need to be addressed. The question that remains is how? And this I believe is where the GoC faces its most difficult, certainly most politically sensitive issue with FOSS. Given the above, I believe that the GoC has three choices.

The first is to “fall back” into a reliance on a large vendor who may offer the illusion of security associated with a one-stop shop (does anyone recall the old precept – no one ever got fired for buying IBM?). This was the Foss(ilization) to which the title of this post refers.

Another alternative would be to follow the lead of the U.S. Government and in particular NASA and really cultivate the expertise of a more localized supply base such as is available through the SME community. (An important byproduct of this option is domestic cluster development as outlined in my August 28th post, Public Sector Procurement Practice and the Principles of External Economies, Clustering and the Global Value Chain.)

The third option is to assess and develop where necessary an internal capability along the lines of the organizations referenced in the editorial paper. As a firm believer in recognizing and utilizing the expertise within one’s own organization (see Acres of Diamonds – not my paper, but the actual story by Russell H. Conwell), this is both an interesting and viable alternative.

That said there is actually a fourth option which is a combination of two or more of the three. However, given my belief that the days of being outnumbered in the boardroom by white shirts in blue suits is long gone, the most likely scenario (if pursued) would be a combination of SME cultivation with an internal capability that keeps the GoC in control of the ship.

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Article Tags: business models, canada presentation, charpentier, city of houston, day software, foss, goc, government of canada, ongoing research, open source software, point in time, point of reference, powerpoint slides, present day, richard carbone, software issues, software licensing, sustainable model, traditional software, viable solution



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