Rise of Polyglot report is out

We recently wrote about a disruptive trend we are following along with cloud computing, devops and open source software in the enterprise. Our 451 Research subscribers also got a preview of our findings in a recent spotlight report.

Polyglot programming is the use of many different languages, frameworks, services, databases and other pieces for individual applications. The trend takes today’s developers and IT shops beyond .NET and Java to node.js, PHP, Python, Ruby, Spring and further still to Erlang, Scala, Haskell and others. Also in the mix are widely used API Web services, such as JSON, REST and SOAP, which are increasingly significant to building applications, as well as developer and user communities. There is also polyglot disruption present at the database layer with MySQL still being popular, but with ample use of the growing number of alternatives (NoSQL, PostgreSQL, NewSQL, etc.), including virtual and cloud-based services. Don’t forget today’s applications will likely pull in effective user-interface technologies such as Javascript, XML and HTML5, whether for internal enterprise, Web, mobile, consumer or converged audiences.

Although there is added pain in programming with multiple languages, benefits such as scalability, interoperability and concurrency increasingly necessitate it for optimal efficiency and quality.

Now we are pleased to present our latest special report, ‘The Rise of Polyglot Programming.’ The report investigates the drivers, disruption, challenges and opportunities from the trend. We also present market sizing and growth implications for polyglot programming, drawing on data and analysis from our Market Monitor service to show how polyglot programming will be part of a growing opportunity worth more than $35bn by 2015.

Red Hat: one in a billion

It looks like it’s time again to ponder on Red Hat’s ability to (nearly) make $1bn in annual revenue and wonder why open source has not produced more billion dollar success stories.

Matt Asay doubts whether there will ever be another pure play open source company with $1bn in revenues. I would go further and state categorically that there will not be.

I have already discussed why that might be the case, in terms of the diverging strategies of pure-play open source and hybrid source, so I won’t go into that again in this post.

Instead I wanted to look specifically at Red Hat and how it was able, and was allowed, to grow to the point where it is on the brink of that $1bn revenue barrier. Red Hat’s strategy was covered extensively in our recent Control and Community report. Some excerpts from that report:

“Red Hat’s position has been achieved thanks to its ability to dominate the market for Linux subscriptions by virtue of its brand status. This in turn has been achieved by having a strong product, good customer support and a commitment to community-led development that has enabled the company to balance its own economic interests with the diverse interests of its community of users and developers…

“Clearly Red Hat has made enough impact among revenue-influencing users to generate significant profits from Linux, as well as its other open source software assets, but maintaining that influence is another factor for open source distributors. Even in those cases where a user does feel the need for a support contract or subscription, the longer they use the software, the less likely they are to require support for non-mission-critical deployments…

“The answer, for open source distributors, is to ensure that they are delivering more value than simply saving time, and Red Hat has led the field in delivering additional ongoing value in its RHEL subscriptions, including the Red Hat Network systems management software…

“Perhaps the biggest problem facing open source distributors, however, is the commoditizing impact of open source software, and the fact that they are attempting to generate revenue at a stage of the value chain that has been commoditized with that very product. Red Hat’s Whitehurst put this into perspective when he described how in order to generate $5bn in revenue, Red Hat would need to displace software that currently costs $50bn…

“That the open source distributor approach will survive is not in dispute. We also do not doubt that Red Hat will be able to maintain its position as the leading open source distributor for as long as it remains independent.”

The point about Red Hat’s independence is a critical one, and explains why I stated above that Red Hat “was allowed” to grow to its current position. Clearly avoiding being acquired is integral to that (and it remains the case that Red Hat could be acquired before it even hits $1bn).

What is particularly interesting about Red Hat is how important its independence was to other companies that have also generated significant revenue from Linux. Returning to Control and Community:

“In his 2003 book The Innovator’s Solution, Clayton Christensen noted that when one stage of the value chain becomes commoditized, the ability to earn attractive profits from proprietary products emerges at an adjacent stage in the value chain. In that context, it can be observed that the biggest beneficiaries of the adoption of Linux were not the Linux distributors, but rather server vendors including IBM, Hewlett-Packard and Dell, which exploited interest in Linux and industry-standard server and processor architectures to rapidly displace Sun Microsystems’ more expensive Unix and Sparc machines.”

The fact is that it was in the best interests of IBM, Hewlett-Packard, Dell and others – including software vendors such as Oracle – *not* to acquire Red Hat. Nobody wanted to repeat the mistake of having multiple competing flavours of Unix. The fact that Red Hat was independent was part of what enabled IBM et al to be successful in positioning their Linux-based products as (to borrow a phrase) “not Unix”.

It was Red Hat’s innovative business strategy that made it the leading Linux distributor, but it was the rest of the industry’s need for an independent commercial Linux partner that elevated it to another level.

Could we see another open source vendor elevated to a similar level of importance in the future? It is entirely possible, but unless is there is a repeat of the requirement to keep the vendor in question independent any successful OSS pure-play will simply be acquired.

The success of Red Hat is based on the conflation of such a large number of factors (not all which have been addressed here), that I don’t think it will happen again.

It’s also worth thinking about whether that requirement to keep Red Hat independent still exists today. But that’s another matter…

Why there are no billion-dollar open source companies

Last week Glyn Moody advised open source specialist start-ups to give up on the idea of ever hitting the $1bn revenue barrier.

Basing his argument on an observation made by Red Hat CEO Jim Whitehurst, Glyn argued that:

“all other open source companies really need to stop chasing that $1 billion dream – the idea that if they try hard enough they will break through the magic nine zero barrier. It isn’t going to happen, for the very reason that open source will take over from proprietary software at most levels of the enterprise stack: because it strips away the traditionally high profit margins and leaves the money with the customer.”

My initial response was to ponder what impact that this will have on the valuation of open source specialists. It stands to reason that potential investors will be discouraged from investing in open source vendors if they consider that their software licensing strategies place a ceiling to their potential for revenue generation.

It later occurred to me however that the situation Glyn is describing is not a potential future for open source specialists but a description of the market forces that have led many of them to adopt hybrid licensing strategies that mix open source and proprietary software.

Rather than stop chasing the $1bn dream, many open source specialist vendors instead stopped chasing the idea that they could get there with open source software alone.

Recognising that, as Whitehurst put it, “selling free software is hard” many vendors looked for others methods to generate revenue from open source software and (rightly or wrongly) decided that selling complementary proprietary software products and extensions was an easier route to generating revenue.

At the same time proprietary software vendors also recognised that they could use open source software to disrupt competitors and also lower the development costs of their proprietary packages – leaving some money with the customers while maintaining some of their profit margins.

Which is not to say that all open source specialists will end up selling proprietary software – the likes of OpenNMS, Sourcesense, Sirius and many others prove that it is perfectly possible to run a successful, profitable business and remain true to open source software licensing.

I would argue, however, that all these companies have long-ago made the decision not to chase $1bn and have structured their businesses – without venture capital funding – accordingly.

In fact, as we discussed in last year’s Open to Investment report, a number of open source vendors take the view that by avoiding institutional investors, they have a better chance of achieving their business goals. (Or, as Simon Phipps put it: “some of us don’t believe in VCs…”).

Glyn’s post suggests, and in the comments section he makes clear, that what he is describing is “open source as leading the way… to understanding that we don’t need to be growth junkies to create viable companies/industries”.

This is a suggestion that has come up before – Dave Neary’s post from 2008 springs to mind. As he stated: “Free software doesn’t get developed like proprietary software, why should the free software industry look like the proprietary software industry?”

He, and Glyn, are quite right: the free/open source software industry shouldn’t look like the proprietary software industry. It is perfectly possible to run successful and profitable open source software businesses that don’t have VC funding are therefore won’t adopt proprietary licensing in order to chase revenue and profitability targets.

It is also clear, however, that proprietary software vendors are increasingly using open source as a means of maintaining their profits and disrupting competitors and that, given the option, many (former) open source specialists are more than happy to compromise their commitment to open source software licensing in order to compete.

Perhaps this is a short-term approach and Glyn is right that “open source will take over from proprietary software at most levels of the enterprise stack” but in the meantime a lot of proprietary and hybrid software vendors are going to make $1bn (and many of them a lot more than that) with the help of open source software.

See also our previous post discussing how Christensen’s law of Conservation of Attractive Profits can be used to explain why open source vendors are increasingly turning to hybrid development and licensing strategies to generate revenue from open source.

Sun full of open source and skepticism

Sun continues to take a performance pounding, and the rumors of replacements, layoffs and revamps are beyond swirling and now perpetuating skepticism of the company. It strikes me as odd that Sun, which has embraced open source and is also the defacto leading corporate open source software contributor, is continually dogged by doubts about its transitions and tenures despite well-respected technology and participation in open source. Part of this lies in the company’s continuing dichotomy in strategy — a reference to tepid support for Linux and continued preference for and focus on Solaris. This is a large part of Sun’s ‘handicap,’ IMHO when it comes to Linux and open source. Sun has its own OS, and therefore is in the same category as the dreaded Microsoft for many.

However, Sun has a longstanding, solid history with open source. OpenOffice, OpenSolaris, OpenSparc, Java, etc. While the company has generally benefited from its move to make Java open source under the GPL, its OpenSolaris and Solaris OS under the CDDL have been a somewhat different story. Nevertheless, Sun knows how to do open source right and continues to participate effectively in a variety of open source software communities, projects and enterprise products.

Let’s also not forget that it was Sun that started off this year with a billion dollar bet on open source, MySQL and its database software and business. When Jonathan Schwartz and co. were on the conference call for the acquisition in January, there were many references to Sun’s belief in the LAMP stack (along with the expected reference to the possibility of a SAMP stack that includes Solaris). And therein lies the dichotomy again.

Does Sun want to support and see success from Linux? Or does it want to see success from Solaris (and OpenSolaris)? The company may want to have it both ways and while it’s certainly possible and practical to support multiple operating systems in this day and age, Sun needs to make it clear whether it wants to fan the flames or fight the fire that is Linux. Let’s consider Novell. Is it putting much investment or roadmapping into Netware? No, the company is focused on Linux and integration of NetWare and Linux in Open Enterprise Server since it acquired SUSE in 2003. While an acquisition spurred the Linux embrace in Novell’s case, Sun does not necessarily need to buy a Linux vendor (there are fewer of those, too with Xandros’ recent purchase of Linspire).

The bottom line is that many if not most enterprise Linux wins come at the expense of Solaris and other Unix software. Sun would be wise to recognize this and it could go a long way toward clarifying its achievements and objectives with open source and getting its house in order.