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Don’t fear the reaper. Why FOSS should not fear M&A by proprietary vendorsMatthew Aslett, January 8, 2010 @ 5:38 am ET
This is an issue that crops up occasionally. Usually when a major acquisition has been announced, and the current questioning seems to be driven by the ongoing saga of Oracle-Sun-MySQL, as well as the rumoured purchase of Zimbra by VMware.
While fear of the unknown is understandable, to my mind the concern about open source specialists being acquired by proprietary vendors is driven by parochialism and misplaced assumptions about the rate of acquisitions and the acquiring company’s intentions.
For a start the statistics suggest that acquisitions involving open source vendors have declined in recent years (contrary to our expectations to be honest). According to our preliminary figures there were 24 M&A deals involving open source vendors in 2009, compared to 29 in 2008 and 35 in 2007. Dave Rosenberg makes the case that we have seen less open source M&A than we might have expected.
There is always the fear, however, that a proprietary vendor could acquire an open source rival in order to shut it down. This is a theory we at The 451 Group investigated last year via a TechDealMaker service report asking “Could an open source project survive a hostile acquisition?” (451 clients can access the report here).
Looking at the history of M&A involving open source vendors we were unable to identify a single example of a proprietary vendor acquiring an open source project in order to kill it off.
Another significant fear involving open source acquisitions is that the acquiring company will suddenly change the licensing and/or pricing in order to generate revenue from users open source of the open source project.
To me this is a fear based on a false assumption that the only way to monetize open source is directly. If we look at the strategies used by proprietary vendors to generate revenue from open source (as we did oin our Market Insight Service report “How third parties generate revenue from open source“, which was itself adapted from our Open Source is Not a Business Model CAOS report) we find that they are more likely to do so indirectly via complementary products and services.
In contrast open source specialist vendors have no choice but to attempt to monetize the open source software directly, either through support or proprietary licensed add-ons, and we have observed that this creates an inherent tension.
There is also a false assumption that open source specialist vendors are more committed to an open source “philosophy”. Some are, to be sure, but some simply see open source as a means to an end – treating it as a license tactic that disrupts competitors and expends potential adoption. There is nothing inherently wrong with that, but it does mean that for a great many open source “projects” the idea of the development community is a myth.
In fact, I would suggest that vendors with proprietary selling points elsewhere have more to gain from releasing control of an open source project. Dirk Reihle explained the financial benefits this week with his Economic Case for Open Source Foundations, including sharing development expenses, increasing profits per sale, increases sales, and expanding the addressable market.
The fact that proprietary vendors have proprietary selling points elsewhere means that they are also in a better financial position to trade control for community via a foundational approach, in contrast to open source specialists.
There may well be situations where the acquisition of open source specialists by proprietary vendors might give cause for concern, but I believe it is wrong to assume that the impact will be negative. While many open source specialists might have something to fear regarding increased M&A activity, in the broader context open source software has more potentially to gain from the increased involvement of proprietary vendors than it has to lose.
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