In wake of financial downturn open source software appears attractive to many public sector organisations. Built on a licensing model that avoids binding contracts or financial obligation, it permits like-minded developers to share source code and collaborate in the continuous improvement and enhancement of software. Open source software reduces dependencies on software vendors, is continuously evolving, and does not pose any possibility of running the user into the blind alley or dead-end of development trajectory. This paper presents the findings of a study conducted in three Australian state governments. Purpose of this study was to assess the organisational readiness and potential of open source implementation in government agencies. It identifies the level of open source utilisation in these agencies and also highlights the barriers involved in utilisation of open source at a larger scale. The study concludes that success of OSS in government agencies is contingent upon critical aspects such as, its implementation enabling technical and economic value; its maintainability and adequate support available to sustain its utilisation.