Open Source Acquisitions

By Subraya Mallya - May 2009 | Topics - Open Source

Over the last decade Open Source technologies have made major strides in maturity and presented a credible alternative to the proprietary software vendors. Just as they make inroads into various aspects of enterprise IT landscape, we have started seeing a spate of acquisitions of those open source companies by those very “nasty” commercial software vendors.

In all these acquisitions, all the focus and noise by press, bloggers have been on the wretched intent of proprietary vendors in acquiring open source projects. “Oracle is acquiring Sun to kill MySQL” – being the classic. As much as I am not a proprietary software person and a self-professed open source evangelist, makes me wonder about those open source companies and their intent.

Open Source represented this sense of anti-establishment, which made people sacrifice their personal time and energy to join the community and contribute to something larger than anything they could have done by themselves. But with increasing number of open source project owners seeking to cash out by selling the project to a commercial vendor I can see things getting a little crazy as we go forward.

  1. People who spend a lot of time on open source projects to contribute only to see the project owner cashing out might have second thoughts spending more time.
  2. With each of these acquisitions, invariably, we see multiple forks of the open source projects getting spawned. This will just prove to be a distraction to progress of the software. Not to mention the headaches the consumer of that software now has to deal with.

If you look at the open source landscape, there are two key equally opposite trends at play here.

Commercial vendors going Open Source

On the one hand we see increasing number of commercial projects going open source. Let us check some vendors have open sourced their products

  • Open Solaris by Sun
  • Java from Sun
  • Ingres from CA
  • OpenFlex from Adobe
  • Foxpro from Microsoft (you may question if this noteworthy?)

Open Source vendors getting acquired by Proprietary vendors

Let us look at some of the open source project acquired by proprietary vendors

  • Gluecode by IBM
  • XenSource by Citrix
  • JBoss by Red Hat
  • Berkeley DB by Oracle
  • MySQL by Sun and now by Oracle
  • SuSe linux IP by Microsoft

Look below the hood and you will see two key drivers here

  1. All the commercial companies that are open sourcing their products are mostly products that have reached a stage where they are not the dominant force and their existence is in question. Yes, this includes Java. Much as I like Java it has not helped its own cause with the complexity. The balancing of the interests of Sun and other constituents of JCP has not helped either. PHP, Python, Ruby on Rails, CakePHP,, Google AppEngine and .NET all gaining traction at the expense of java. If you look at the large software vendors – only IBM and Oracle are behind java and IBM is making up its mind to be a full-fledged software company.
  2. Companies that have failed in the market not able to support their product with resource and financial commitment, decide to open source it. Ingres is a classic example. It seems nothing but a last ditch attempt to hold onto a product nobody wants and get some marketing mileage.

Now if you look at the open source projects being acquired by commercial vendors they are done by large vendors who are trying to either

  1. stop the advances of a vibrant open source project encroaching their customer base.
  2. trying to replace their own lousy product with a better open source project.

For example: Oracle after long trying to create its own version of mobile/light weight database without success acquired Berkeley DB. In the process it got a much better product and eliminated the distraction to the team creating the  “Dreamliner” Oracle 10g or 11g.

Going back to my question of what is the real (hidden) business model behind these Open Source companies.

At the outset I am not a big fan of the Open Source business model (while  I continue to love those products). Majority of the open source companies usually play a bait-and-switch game.  They put out a free community edition and then once they hook the customer, charge for the real product – the “enterprise version”. The balance between the two flavors is always in question.

As a company spending the R&D dollars to build a product, there is no way you can support your business by giving away the source code – especially in these times of commodity support (Think Rimini Street supporting SAP). And consider VCs putting money behind a open source company where the only source of revenue is service and the code is open. Does it really work? If you look at the companies that have chosen this route, very few would be counted amongst the companies doing very well, right about now.

Alternatively, if you are going Open Source from the get go, all you are telling me is that you are not willing to put money where your mouth is. You are banking on community as a substitute for a paid R&D organization. Or resorting to cheap gimmick of making a “Going Open Source” announcement.

So given the trend of community owners milking the goodwill of people and eventually cashing out continues, there will be serious questions asked of the open source projects.  If you go by Dana Blankenhorn’s explanation of how to acquire Open Source, we might see expansion of GPL or the other flavors of Open Source license to include the ownership of copyright to the community and not to the individual who might have just started it.

A final thought: I am sure, as you go through the post, I might sound a tad bit against open source movement. I want to clarify, I am not against the open source movement itself. It has great virtues like reducing overall cost of ownership, better interoperability and better quality of code thanks to the community governing itself. I personally use a lot of open source software – Ubuntu, MySQL, WordPress, Drupal. I love all of them. They are better than anything else their proprietary counterparts have to offer. But the general open source business model itself seems to be flawed.

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