Open Source and the Future of Small Businesses

My friend Phil Simon is writing an interesting book called “The New Small” about how today small businesses are taking advantage of emerging technologies. We started talking about how open source software is affecting small businesses.  I realized that open source has made a fundamental shift in the relationship between technology and small businesses.  Instead of being a tool of large enterprises, technology is helping today’s small businesses leapfrog passed their larger competitors, thanks to open source software.

When Bigger was Better

As recently as a decade ago, technology gave large enterprises the advantage.  They were able to implement large-scale software systems to streamline their distribution, cut prices, and put smaller competitors out of business. Bigger was better, and box stores and “category killers” displaced the “mom and pop” stores.   Small businesses were increasingly pushed out into service sectors, where it was harder to create such large-scale efficiencies.

If you’re into movies, You’ve Got Mail featuring Tom Hanks and Meg Ryan pretty much summed it up: the big bookstore pushing the cute little neighborhood shop out of business, and the small business owner quit retail to become … a writer of children’s books, which was what she knew and loved.

Open Source Changes the Game

Now open source has turned the game around for the technology-savvy small business.  Open source software has not only leveled the playing field between small and large businesses, in many cases it has helped propel small businesses ahead of their larger counterparts. Today, open source infrastructure software such as Apache, MySQL, and PHP help small businesses get online online quickly and cost-effectively. Open source blogging and content management software such as WordPress, Drupal, and Joomla! are the forefront of their fields, and they are helping small businesses create unique brand identities online.  Finally, open source ERP and CRM software such as opentaps now give small businesses enterprise-class management software, but with the flexibility to tailor it to their particular market niches.

In contrast, larger companies in traditional industries have been mired with expensive but outdated commercial software, and it has slowed their progress in the growing online marketplace.  This is why many of today’s most successful online businesses, including Facebook and Google, grew straight past their traditional competitors–they all started as small but nimble companies powered by open source.

Looking ahead, I see open source software empowering many smaller, niche-oriented businesses with unique product offerings and personalities, and together these smaller businesses will take an increasingly larger chunk out of the online marketplace.  The flexibility of open source software allows smaller businesses to create unique products and brand identities for themselves, and the low cost of open source software has lowered the barriers to entry and made it profitable to service smaller niche markets.

A Sequel?

So if we made a sequel to You’ve Got Mail and called it “You’ve Got a Tweet!”, what might have happened? Tom Hanks’s big chain book store might have been bought out or pushed out (hey, there’s always a bigger fish.)  But then they could have started a nice little business selling children’s books online and complemented it with a blog.  It would have a cutesy and quirky look and a loyal fan base.   No Amazon.com, but they’d do well enough to move out of the big city and into a nice country house to spend more time with their family.

And under the surface, it’s all powered by open source software.