Entries Tagged 'M&A' ↓

Tracking open source funding, M&A on this blog

As the open source ‘market’ matures, we are seeing a greater number of funding and M&A (mergers & acquisitions) announcements. To help facilitate access to this type of information for our blog readers, I have added two new categories to this blog – Funding and M&A. The complete list of blog categories is available on the right column of this site. I have covered several items that relate to open source funding and M&A activity in recent 451 CAOS Links postings. I will post a summarization of these announcements today, and will plan to cover these types of announcements individually from this point forward.

Novell to acquire management tools?

IT Week posted an article today quoting Novell’s new CEO, Ron Hovsepian, regarding the possibility of Novell pursuing acquisitions in the management space. While this does not necessarily imply an open source angle, it would not surprise me in the slightest.

Synergies and Cultures

Bill Burke, Chief Architect at JBoss, posted a blog entry this week entitled “Synergies and Cultures” about the Red Hat acquisition and the process of merging two cultures. Take a look.

Oracle-Ubuntu?

As we’re working our way through the world’s Linux distros – see comments to Raven’s post a few days ago for interesting discussion about Miracle Linux – thoughts of some have turned to Ubuntu. Wonder what Mark Shuttleworth would have to say about that? I think we’ll find out soon enough.
And here’s a good roundup of recent goings on by Lisa Vaas of eWeek.

Ellison’s case against open source business models is compelling – or is it?

In the FT interview mentioned by Raven below Oracle CEO Larry Ellison weighs in on the twin topics of software as a service and the long-term viability, or otherwise of open source business models.

In large part the interview is good old fashion Ellison knock-about in which he takes the opportunity to give both JBOSS and Red Hat a kicking after the the acquisition. However the rough and tumble is interspersed with insightful comments and … to be honest… comments that suggest that Ellison hasn’t thought through all of the issues with regard to open source models.

Tomorrow, I’ll look at Ellison’s suggestion that Oracle might create its own Linux distribution. But first a look at his thoughts on the open source business model.

In terms of insight, Ellison is at his best and worst when asked whether open source models could be disruptive to Oracle. His answer?

“No. If an open source product gets good enough, we’ll simply take it. Take Apache: once Apache got better than our own web server, we threw it away and took Apache. So the great thing about open source is nobody owns it – a company like Oracle is free to take it for nothing, include it in our products and charge for support, and that’s what we’ll do. So it is not disruptive at all – you have to find places to add value.”

Spot on… nearly. The 451 Group’s argument has always been that proprietary software companies are negligent if they fail to exploit the good work done by open source projects. Ellison clearly sees the potential to simply grab the good stuff. But as for his assertion that this caused no disruption to Oracle. Really? Nobody from the original team had to be laid of off redeployed? There was no reorganization? Counsel didn’t have to examine the Apache license and decide on its ramifications, there were no discussions on whether to contribute to the ongoing development of Apache or to fork it? Surely there was just a little disruption.

Of course Ellison could have meant that there was no disruption to Oracle’s business model and in that he is right… nearly. His last clause belies the problem: “…you have to find places to add value” he says. Before Apache’s web server came along, Oracle’s own web server clearly did have value, in terms of Oracle-owned intellectual capital. I’m sure the company’s salesforce claimed that the Oracle server was the bees knees in terms of robustness, scalability, performance and whatnot. With the advent of Apache that value evaporated and Oracle had to shift its business model somewhat to find additional value elsewhere. You can see how increasing reliance on open source software would continue to shift and disrupt a business model.

This takes us to his appreciation of the open source business model in general and Red Hat in particular.

Ellison’s general feeling appears to be that he would never spend big money on an open source company because apart from the brand and the people it owns nothing. The technology can be appropriated by anyone and the business can simply be duplicated. He talks about the problem of another company setting up and offering support fot an open source product, cutting the ground from under the original vendor’s feet.

This argument is correct as far as it goes, but misses the fact that companies with pure-play open-source business models are likely to get their money from consulting, service and integration work. His criticisms of the open source model therefore should apply to equally to all consulting and integration firms therefore; bad news for the likes of EDS and Accenture. But since large, well capitalized integrators do exist, we can assume that it should be possible to build large, well capitalized open source-based companies. The companies have a delicate juggling act, balancing the the open source development, with community input and the money-spinning support side, but nothing makes it impossible to achieve. The only problem that open source companies face is that that dominance can only be achieved through excellence, rather than vendor lock-in.

Moreover integration and consulting revenue streams should, by all rights be more accessible to the company that actually spends its time writing the code and building the overall distribution. In other words, while it is always going to be possible for another company to support and integrate Red Hat Linux, Red Hat itself, should have an unfair advantage.

If As Ellison claims, Red Hat is “not supporting the customers very well” that is entirely to do with the specifics of Red Hat and nothing to do with any intrinsic weakness in the open source model. Of course, that could just be some more of Larry’s rough and tumble.

Larry Ellison Speaks

The Financial Times published an in-depth interview with Larry Ellison, the CEO of Oracle, on Sunday. From the original article (registration required), Larry sheds some light on a number of interesting topics relating to open source. You can also read a synopsis of the interview from Reuters, but it leaves out some important points. In summary:

* He has been dwelling on the potential and threat of open source.

* Oracle doesn’t have to fight open source, it has to exploit it.

* The Oracle acquisition of JBoss fell through due to its price.

* He finds it hard to pay large amounts for acquiring open source vendors when there are limited barriers to entry for competition.

* Oracle looked at acquiring Novell, due to its ownership of SUSE, but decided against it (some of the news sites are incorrectly reporting that Oracle is considering a purchase of Novell, based on this interview).

* He thinks there is value in ‘one throat to choke’ – providing a complete technology stack for customers from the operating system on up.

Larry again offers us a lot of details to consider. I wish more CEOs were this open in the press!

The Open Source Leader?

If you take a look at the About page on the Red Hat web site, the company claims to be “The Open Source Leader.” In its press releases, Red Hat describes itself as ” the world’s leading open source and Linux provider.” Up until yesterday’s JBoss acquisition announcement, I was somewhat dismissive of Red Hat’s use of this language. Not because of its leadership claim (Red Hat is an enterprise Linux leader), but because of its use of ‘open source’ instead of ‘Linux’.

Yes, Linux is open source, but open source is about much more than just Linux. While this statement may be obvious to you, it’s not universally understood, even within the IT industry. It’s a point of clarification that I make when speaking to groups of IT end users on the benefits of open source. I like to point out that plenty of Windows users are running open source software.

Why is Red Hat not instead claiming to be “The Linux Leader?” Isn’t this more descriptive? It does a better job at communicating its value to the customer, in my opinion. To me, an open source leader would need a much broader product and services offering than Red Hat has provided historically. If you sell fruit, and sell fruit well, why call yourself the food leader? With Red Hat’s acquisition of JBoss, the use of ‘open source’, instead of ‘Linux’, makes sense. Above, I argued that it didn’t – that was in its pre-JBoss incarnation. I guess Red Hat is an open source company, after all.

The Cache Strikes Back

The cache strikes back (or is it the “cash”)? Marc Fleury posted a blog entry entitled “Sun vs Red Hat, who is more Open Source”, on September 28, 2004, in which he stated his opinions on a ‘blog war’ between Red Hat’s Michael Tiemann and Sun’s Jonathan Schwartz. The Register has a story about this today, entitled: ‘Red Hat wraps Linux in sh*t,’ says new exec. It’s not the most flattering title for an article, but the quote was pulled from Marc’s own blog entry.

The important point here isn’t what Marc thought of Red Hat 18 months ago, as much as people will latch on to the content itself. I’ve known Marc for years and interacted with him as a customer, advisor, consultant, and now as an analyst. My first exchange with Marc was as a prospectvie customer in regards to a comment he made in the press that I thought was counter-productive. It’s his style, and it adds character to what is often a fairly muted debate.

The important point is that Marc’s blog entry has vanished from JBoss’ corporate blog. We know that his post existed because of the staying power of the Internet – Google’s page caching mechanism. So was the post removed by JBoss during the courting process with Red Hat or was it asked to remove the entry before the acquisition announcement? This is the question on my mind. Diplomacy or censorship? I’d wager that it was diplomacy.

If it was diplomacy, why bother?! If anyone at Red Hat would have entered ‘marc fleury red hat’ into Google, Marc’s blog posting would come up as the second result. Clicking the main link results in a dead end, but try clicking the ‘Cached’ link – the posting is there in its entirety. Politicians and executives are known to go from competitors to allies, as the prevailing winds shift. What’s wrong with a young CEO of an upstart open source vendor taking on his multi-billion dollar competitors on a blog designed to attract more readers? Yes, his statements are controversial, but if you filter out the jockeying, you may just find some interesting arguments.

Let’s see if the original post re-appears on Tuesday.

From the Blogroll: JBoss Acquisition

One of the unique features of this blog is the extended blogroll (see right column). We not only provide links to some of our favorite open source blogs, but we display links to recent post titles, giving you a sense of the various topics being covered in the “open source blogosphere.”

Here is what the bloggers in our open source blogroll are saying about the Red Hat acquisition of JBoss:

Asay : It will be interesting to see how long (and how well) it takes for Red Hat to fully digest JBoss

Vaughan-Nichols : The immediate release plans for JBoss products and technologies will be unchanged by the Red Hat acquisition, according to company officials

Hinkle : Look out BEA and IBM (Websphere) here comes Red Boss

Martens : But one analyst warned that the tie-up may not prove as tidy as the combined companies hope, due to JBoss’ popularity with users of non-Red Hat platforms, especially Microsoft Corp.’s Windows Server

Please use the contact form to send us a list of your favorite open source blogs. We’ll take a look and may even include them in our blogroll.

Red Hat, not Oracle, buys JBoss

When I talked to Shaun Connolly, JBoss’s vp of product development a few weeks ago, he danced around the Oracle-JBoss acquisition rumors, suggesting that JBoss was on the IPO track and any company that did want to acquire it would have to respect its business model. Apparently, one company that would respect JBoss’ business model is Red Hat, which pretty much inspired the JBoss business model. The companies announced earlier this morning that Red Hat was buying JBoss in a mixed cash-and-stock deal, worth $350m initially with the potential to add an additional $70m to the deal based on performance.

Red Hat and JBoss call the deal a “complete fit”–business model, channels, service delivery and culture. Red Hat, best known for its Linux servers and related management technologies, gains entry into the middleware space, which the company, by all appearances had made little headway in to date. Red Hat had offered an open source Java application server based on ObjectWeb’s JOnAS technology but had done little to actively market or develop the technology beyond the initial release in August 2004. JBoss, beset by competition from heavyweights like IBM, BEA Systems and Oracle, as well as open-source upstarts like LogicBlaze, gets a larger corporate backer and access to its sales channels. A win-win? Well maybe not. Open source is so much more than Linux today and now one of the companies at the forefront of today’s open source movement gets swallowed up by an old-line Linux vendor.

We’ll have more indepth coverage and analysis of this deal in our Market Insight and TechDealmaker services.

Miura leaves LogicBlaze

Tom Miura has left startup open-source SOA platform vendor LogicBlaze after he had been the company’s first CEO. Miura, a former executive at IBM and Versant, has given way to Winston Damarillo, who heads Simula Labs, LogicBlaze’s incubator. Damarillo is officially known as LogicBlaze’s “executive chairman” and appears to be running the company, which offers a technology stack and subscription services for ActiveMQ and other Apache Software Foundation projects. The former Gluecode Software founder is also CEO of Simula’s other company, Mergere.

We tracked Miura down at open-source networking infrastructure company Vyatta, where he’s currently on a short-term contract project. Miura would not comment on his departure from LogicBlaze, and LogicBlaze did not respond to requests for comment on Miura leaving or on whether a new CEO would be hired for the company.

But his departure raises questions. Is LogicBlaze being groomed for a sale, perhaps to IBM? Damarillo sold Gluecode to IBM and LogicBlaze now bundles the WebSphere Application Server Community Edition, the IBM offering that emerged from Big Blue’s acquisition of Gluecode, in its Fuse SOA platform. Is there room at Simula companies for outside chief executives? Are the Simula companies really separate or just different programming teams working under the same management? We’ll be watching the developments at Simula and LogicBlaze very closely.

Is it secret? Is it safe?

It was tempting to make my first post here about the alleged inability of enterprise CIOs to distinguish between code quality and the developer’s footwear when evaluating software. But I’ve managed to resist… nearly.

Instead, here’s an issue which has been tickling my cranium every now and then and on which I would like to collect some opinions. Can you really keep in-house software, base on GPLed code private in a modern company where outsourcers and contractors abound?

I’ve spent a good deal of time in the past telling people that being scared of the GPL is stupid, that using the word “viral” is stupid and that instead, they should actually read the license and the GPL FAQ, see what it actually means and then decide dispassionately, whether it makes sense for them. I’ve also told people that one place where the use of GPL code is absolutely “safe” is within their enterprise: ‘As long as it’s not being distributed externally, you can keep the source code and your company secrets up your sleeve’, say I. But am I actually right? The GPL FAQ itself is clear on the matter: In answer to the question: “Is making and using multiple copies within one organization or company “distribution”? it says:

No, in that case the organization is just making the copies for itself. As a consequence, a company or other organization can develop a modified version and install that version through its own facilities, without giving the staff permission to release that modified version to outsiders. However, when the organization transfers copies to other organizations or individuals, that is distribution. In particular, providing copies to contractors for use off-site is distribution.

The license itself is entirely quiet on the matter: as far as it is concerned, if you distribute a GPL-based application then you have to distribute the source code too, full stop (or period, for U.S readers). The FAQ’s interpretation is based on the legal view of the corporation as person: distributing within an organization is akin to distributing it to yourself; ergo you’re not distributing it.

But in these days of outsourcing and, external contractors working in-house and loosely affiliated operating groups, I become slightly concerned. The GPL clearly states that you cannot impose further restrictions on recipients to stop them from distributing code; so adding a contractual clause with contractors to say: ‘our GPL software stays strictly in-house’ would appear to be a no-no.

This doesn’t mean that I’m altering my advice about the safety of in-house GPL use. From a purely practical view, I think it highly unlikely that a GPL software author or the FSF will attempt to enforce distribution of source in the situation envisaged above; particularly since the FAQ interpretation is regarded as canon. Even if a contractor really demanded the source of a company application (a career limiting move) and managed to pushed it all the way, the worst likely to happen would be for the original license to be revoked. The in-house company might have to re-write the app so that it didn’t use GPL code, in order to avoid handing over the source. But even that worst case scenario seems unlikely.

Nonetheless, the question makes my thumbs prick: it seems to me to be a slight disfigurement to the otherwise elegantly simple GPL structure. And if a disgruntled employee did start externally distributing an internally developed GPL-based program, together with source code things could get messy.

I’m interested in your thoughts.