Hunger for open source triggers Alfresco growth

Open source software is enjoying a period of renewed interest as companies dealing with shrunken IT budgets weigh the cost of their proprietary software licences against ‘free stuff’.

That validation is translating into commercial success for several companies at the head of the (highly vocal) open source movement: Red Hat and Novell (with their Linux implementations) and Ingres (with its venerable database system) are well-known examples, but in the market for open source enterprise content management (ECM) software, it has taken until now for one company – Alfresco – to emerge as a leader.

The numbers certainly speak to that point. Despite – or because of – the tough economy, the company’s revenues grew 103% in its year to 28 February, including a 92% surge in its fourth quarter, says Alfresco CEO John Powell, the ex-COO of Business Objects, who together with John Newton, the former CTO of ECM pioneer Documentum, set up Alfresco in 2005 as a direct challenge to Microsoft SharePoint.

Since then, the company’s customer base has grown to include a mix that indicates its product’s horizontal market appeal: the French Air Force, MIT, Fedex, Fox Broadcasting, games companies Activision and EA, Islington and Camden Councils, accountant H&R Block and the NYPD.

More than 270 were signed up in 2008 alone, as downloads of its software crossed the 1.5 million mark.

“The downturn could have really poleaxed us, but we are [still] in a high-growth phase,” Powell says.

A clear indicator of the interest in cost cutting by switching to open source comes from the growth in the number of ‘lead’ registrations that have been appearing on the company’s website: levels have risen 30% in the last three months alone.

“Quite conservative companies, where the mantra has been ‘open source is risky, we’ll go proprietary’, are now looking at their budgets and saying, ‘we need to have a very hard look at open source’,” says Powell.

But it is not just about open source. The company promotes its flagship product, the newly upgraded Alfresco Enterprise 3.1, as “five times faster and ten times cheaper than traditional closed systems”. It also boasts that it can offer “the most experienced team in content management in the world”, after having built an employee base from the alumni of Documentum, FileNet, OpenText, Interwoven and Vignette.

Despite being founded and headquartered in the UK, most of Alfresco’s growth has come from Europe and the US.

“In the US, people tend to be more adventurous and no one vendor controls the market,” Powell says. “People don’t behave that way in the UK, they look for examples and won’t participate until they see their neighbour doing it.” France, in particular with its government backing for open source purchases, has been a strong market.

He is heartened by the UK government’s announcement last month that it would finally be taking open source options seriously during public sector procurement, but explains that the systems integrators really control the purse strings on government contracts.

“Entry into a government project [used to be] beyond anything Alfresco could [justify] because of the resourcing you have to put in to get on the bid. If you don’t have a systems integrator taking you in, you’ll never get through the door,” he says. “The government has now given the [open source] policy more teeth, although it’s not as enforceable as I would like.”

While it might express frustration with the UK, Alfresco has proved it doesn’t necessarily need to conquer the local market to be successful abroad.

“We are seeing a lot of take up in Japan, Australia is a very good market for us and South Africa is just going nuts for open source at the moment,” says Powell. “In that latter case, government has realised that it lets you build IT brain power locally: if you use a Microsoft product in South Africa and you don’t like it, the only person who can change it is in Redmond. If you use Alfresco in South Africa, you can have local citizens change the code or come up with something different. Open source companies build value in the local economy in very different ways to proprietary software.”

With backing by blue-chip Silicon Valley venture capitalists, Accell Partners and Mayfield Fund, as well as SAP Ventures, the investment arm of the ERP giant, Alfresco is developing a growth profile that stands in sharp contrast to the rest of the gloom in IT: while lay-offs fill the industry columns daily, it has been adding staff at an annual rate of 28%.

Pete Swabey

Pete Swabey

Pete was Editor of Information Age and head of technology research for Vitesse Media plc from 2005 to 2013, before moving on to be Senior Editor and then Editorial Director at The Economist Intelligence...

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