Companies Gain by Swapping Software
No security alarms went off when ring maker Jostens recently lifted Best Buy's homegrown application integration software. That's because Minneapolis-based Jostens wasn't stealing from Best Buy. It was sharingthrough a "corporate community" called Avalanche Corporate Technology Cooperative.
Avalanche hit its first anniversary in March and so far has 12 members. That's enough to be useful to the dozen companies that joined, but not big enough to be a serious threat to software providers.
Nonetheless, banding together has allowed its mostly Midwestern members to save time and money by using each other's software and donating technology for the good of the group.
Jay Hansen, CEO of Avalanche, describes the co-op as a sort of "plumbing" swap meet. Whatever you call itcommunity source software, shared source software or a gated software communityAvalanche is betting that the future of "open" source code for the enterprise will consist of like-minded companies forming, ironically, closed communities. By sharing code only with partners, they hope to avoid the lack of control and tedious review processes of truly open source code, where any programmer can tweak code.
"CIOs like the idea of collaborating," says Jostens chief information officer Andrew Black, a founding member and original sponsor of the co-op. "There's more to do out there than we have time to do by ourselves. If you're going to do Linux application servers and select a company, why not partner?"
Black says that spending less time on everyday applications allows his company to save its energy for "competitive advantage applications."
On the software taken from Best Buy, Jostens expects to save $150,000 in up-front licensing fees on the first phase of integration and $30,000 a year thereafter in maintenance. Black says the company doesn't expect to save any money on installing the software or its ongoing development.
And if all goes well, Jostens will more than recoup its annual $30,000 membership fee. In addition to simply exchanging software, Avalanche members can partner on research, standards documents and software development.
Jostens is enhancing Best Buy's framework for integrating applications, a suite of standards and software used to connect different information systems. The Java-based framework will support two dozen software adapters to allow Jostens' disparate Oracle database, mainframe sales-force software and manufacturing systems to work together.
The downside? Software and development tools borrowed from another company may be too customized.
According to Black, some of Best Buy's code had to be removed so Jostens could use the software. So it hired Integration Factory, a software developer, to build adapters and tailor Best Buy's code to Jostens' specifications.
Best Buy also supplied the requirements-definition and workflow management tools that Jostens will use to order and keep track of the adapters.
Co-opting existing software will allow companies to take the chassis of existing systems and build applications on top of them, making the tendency to build to a development team's biases less likely, according to Integration Factory's president, Steve Danker.
Minneapolis-based ePredix, a firm that tries to predict the quality of potential employees, joined Avalanche to save money. "All companies are undergoing intense cost controls, trying to do less with more," says Scott Lien, the company's chief technology officer.
The company will save $150,000 in its first year as a member, and at least $100,000 on a single project, a business-intelligence reporting tool it built from a patchwork of open-source projects developed outside the co-op. "The cost of doing this on our own was prohibitive," Lien says.
If it proceeded alone, ePredix could have paid up to $350,000 for development, licensing and consulting. With Avalanche, it will pay $60,000, or half the project's cost. Personnel Decisions International, a human-resources consulting firm, will fund the rest.
The reporting tool can aggregate data from hundreds, sometimes thousands of job applicants and put it into graphical form through a Web portal. Hiring managers use the reports to get a concise overview of an applicant pool as well as its sourcing.
Lien says Avalanche is easier to use than an open-source repository like SourceForge, which has tens of thousands of applications, because the co-op is small. And there are fewer intellectual property concerns in a gated community, he adds. Avalanche ensures members' code won't raise concerns about intellectual property, and allows members to exchange code without working out rights issues every time code is shared.
While Avalanche is young, private collaborating is not new. Businesses within industries have done it for years, according to Forrester Research analyst Michael Goulde, particularly for developing data tags in Extensible Markup Language. What distinguishes Avalanche, Goulde says, is the mix of companies, industries and vendors collaborating on software.
So far, there are several projects in the Avalanche repository. Select Comfort, a mattress retailer in Minneapolis, plans to develop an open-source digital asset management project based on existing code. When asked why the company is using Avalanche, chief information officer Mike Thyken said, "[Doing it yourself is] reinventing the wheel. It's extremely rare that someone hasn't gone down that path."
Most medium-size or large companies have the same challenges when it comes to data-processing, customer relationship management and open-source applications, says Eric Bloom, vice president of business systems at recruiting site Monster.com, an Avalanche member since December.
Monster is considering a jointly developed customer relationship management application for use in some of its smaller divisions.
Avalanche, however, isn't for everyone. Cargill and Medtronic, both founding members, have since dropped out of the consortium.
Hansen attributes the Cargill departure to the firing of its CIO, the Avalanche enthusiast in the organization. Tom Sauer, director of information solutions at Medtronic, says that the medical technology provider "was happy to be a part of the program,'' but now is "focusing on internal systems development and information sharing across business units."
Avalanche can't afford too much churn among its members. It already has to overcome a "not invented here" attitude, reluctance to share applications and difficulty collaborating with outsiders to foster growth, says Goulde, who adds that the co-op needs more members to prove to doubters it has a "truly sustainable idea."
"As numbers grow, assumptions begin to be challenged," Goulde explains. "If they could get 50 companies, they'd start to have something."
- 4 Rules for joining a software co-op
1. Determine the true costs of membership. Code may be ripe for the taking, but project all development and implementation costs before you sign on the dotted line.
2. Seek immediate payback. Have a specific project or projects in mind when you join. Then do the math and see if it's worth the membership fee.
3. Call the lawyers. Avalanche has attorneys to create "corporate-friendly" licensing terms, but know where the potential liabilities are before joining.
4. Avoid needless risk. Unless you have a support team, skip open-source middleware for critical systems. Paying annual maintenance on commercial software may be cheaper.
Source: Forrester Research