The main reason for choosing open source in a company is to save on software expenses. However, open source doesn't always translate to savings for the company. I will explain when using open source actually leads to cost reduction in a company.
Besides the zero cost (in most cases), the second argument for using open source is the ability to modify software and tailor it to your needs. This is indirectly related to costs, as it requires time (opportunity cost) or spending money on a company or person to implement the modifications.
Definitions
I will start by presenting a few definitions that I will use in this text.
Company sizes:
- small company, 1-50 people
- medium company 20-100 people
- medium-large company 50+ people
The number of people in this division overlaps, as much depends on the type of business, market, stage of development, etc. This division should be treated as guidance in making a decision about using open source in a company, not as rigid criteria.
Implementing software in a company is a process consisting of many steps. The main stages are:
- Analysis of available options, testing, and learning.
- Test implementation.
- Adapting to the needs of the organization.
- Consistent and regular use - software fully implemented.
- Maintenance (mostly updates and security patches)
- Cyclical analysis of alternative options or changes and improvements.
These steps take time. Someone must be assigned to carry out these tasks and devote time to them at the expense of other tasks.
Open source in a small company
A small company has a low budget for all expenses. Such a company often has a flat organizational structure (usually the owner and a few/several employees). For such a company, any software that can streamline processes and is available for free is a great benefit.
However, implementing software also means analysis and testing. This requires time and technical skills. Especially in the case of web software, it is often necessary to set up an appropriate server, database, git repository, etc.
In a small company, testing and analyzing options for software implementation will mostly fall on the owner. They must find time to implement changes. However, they must realize that this time will be limited and often not enough to perfectly customize the software for their needs. Then either the software is rejected, or the company processes are changed to fit what the software offers.
Adapting to how the software works in the case of a small company can often lead to positive outcomes. Open source software is often created based on good practices and the experiences of the authors. If a small company does not have well-developed processes, it can adopt them with the implementation of software that imposes certain processes.
In summary, it is worth considering open source in a small company in this situation:
- we have the time for learning, testing, and implementation
- we are open to changing company processes to align with the default capabilities of the software
Open source in a medium company
In a medium company, there are often already many defined processes that have their metrics, and the company works on improving them. Times for task completion are calculated, among other things, to optimize them and improve productivity. In such companies, open source software will often be compared in terms of costs to SaaS software.
An example of a simple calculation that can be adapted to your company and used in analyzing software costs:
- the average salary in March 2024 was 8,408.79 PLN gross.
- for the employer, this costs 10,100 PLN
- for the company to have funds for marketing, sales, training, development, equipment, etc., it should have a revenue of x2 per employee, i.e., 20,000 PLN
- the average number of working hours in a month, after subtracting vacations, is about 140h
- 20,000 / 140 = 142 PLN
If someone is in an industry with higher salaries, the conversion should be accordingly higher.
If we assume that someone will have to maintain the software for 10 hours a month, it will cost the company 1,400 PLN (counting as the cost of lost benefits, as if that person were working for a client creating products or providing services during that time).
The most common fee for SaaS software is 8 USD/month per user, which is about 30 PLN.
Based on these figures, you can make a comparison and determine what is more beneficial for the company, e.g., 50 people at 30 PLN gives an expense of 1,500 PLN. The SaaS option is a bit more expensive. However, if instead of 10h it becomes 20h to compare, we already have 2,800 PLN vs 1,500 PLN, and then it turns out that SaaS is cheaper.
In these calculations, I did not include the time to implement open source software. Depending on the type of software (e.g., CMS, CRM, ERP, Marketing automation, etc.), the time to implement it can range from a few hours (basic installation and base configuration) to even hundreds of hours. Everyone should analyze this themselves and include it in their calculation.
When considering the implementation of open source in a medium company, it is worth carefully calculating the associated expenses, as much will depend on the specific case.
Open source in a large company
The entire calculation significantly changes with large companies. In a 1,000-person organization, the cost of 30 PLN per person gives 30,000 PLN per month, 360,000 PLN annually, and over 1 million PLN over 3 years. In such an organization, spending around 300,000 PLN on open source to perfectly tailor it to the company (branding, coloring, additional modules, integrations, etc.) is still much cheaper than paying for SaaS. With such implementation, choosing open source makes a lot of sense from a financial benefits perspective. Additionally, there are numerous advantages to customizing the tool for a particular company. No SaaS can meet all the functional requirements of a large organization, and with open source, there is no such limitation.
Another example is CMS/CMF solutions in organizations managing dozens, hundreds, or even thousands of websites. A few examples:
- manufacturers who launch new websites for each product,
- universities that have websites for each branch, faculty, and institute,
- government institutions, e.g., a district court governing regional courts.
In the case of CMS for a single domain, SaaS software is often a more favorable choice, but as the number of sites increases significantly, costs rise sharply. Using multisite/multidomain options in open source solutions (e.g., Drupal) can substantially reduce expenditures associated with the implementation and maintenance of a large number of websites.
Large companies can derive enormous benefits from implementing open source. However, this implementation must be done wisely. Consultations with a firm specializing in the given software will definitely be necessary, along with a well-executed project planning phase. Working at Droptica, I have often seen how such companies, implementing for example, Intranet on Drupal or multisite on Drupal, tailored the systems to themselves while simultaneously reducing the costs that had to be borne for the development and maintenance of previous systems.
Summary
As usual in the IT industry, the answer to the question "is it worth implementing open source" is "it depends". Each case should be individually analyzed using the examples from this text.
When choosing open-source software, apart from functionality, you should also remember to check the license (there are many types of open source licenses), look for implementation examples, and check available support options (whether the software creators or external companies offer such a service) and examine the size and activity of the community around the software (the more active people there are, the faster the project's development usually is).
I also recommend using tools like ChatGPT to describe your implementation and ask what should be considered in the calculation of time and cost of implementation, so as not to forget something in your calculations.