As has been noted elsewhere, a report published recently by The 451 Group about opportunities for mergers and acquisitions of an by open source vendors is now freely available via The New York Times.
The report is a more formal write up of some of thee issues discussed on this blog in November and updated with the latest VC funding figures and more supporting information, not to mention recent thinking on emerging business strategies.
I didn’t want to go over all the arguments again. Here, instead, is a list of the fundamental reasons why I think we’ll see more opportunities for open source M&A in 2009:
Proprietary vendors see open source as a means of entering adjacent markets.
Proprietary vendors see open source as a mean of expanding reach and potential source of up-sell opportunities.
There is expected to be an increase in ‘bolt on’ acquisitions in 2009, transformative deals are off the agenda.
We expect to see more community open source software usage.
Converting downloads to paying customers will remain hard, and perhaps get even harder.
As conditions improve there will be an opportunity to up-sell community users to commercial support or proprietary alternatives once customers start spending money again.
Commercial open source vendors that did not raise funds in 2008 will find it harder to do so in 2009.
Commercial licensing strategies provide the opportunity for growth but are relatively expensive to develop.
As proprietary vendors will be looking to open source to extend their reach into new potential customers, many open source vendors will be looking to proprietary technology as a means of converting community interest into revenue.
For further explanation see the full Sector IQ.