August 14th, 2014 — Software
We’ve recently updated our coverage of OpenStack with a new report, ‘The OpenStack Pulse 2014.’
The OpenStack project continues to be something of a lightning rod and also something of a dichotomy in the industry. On one hand, it has drawn the involvement of hundreds of supporting vendors and more than 17,000 individual members. It ranks highly among priorities, particularly for private clouds, among 451 Research survey respondents.
Yet critics are quick to point out issues: the continued difficulty of installing and implementing OpenStack; the challenges of pushing it to production and fragmentation — including different vendor objectives and agendas. Despite its downsides, one thing remains clear: OpenStack is a major concern and focus for large enterprises and service providers today.
Read the full article.
June 30th, 2014 — Software
Red Hat is famous for its ability to focus squarely on a market and technology and build success from there, as it did with Linux. However, the company increasingly has diverged from its roots and historical laser focus on the enterprise x86 server market with Red Hat Enterprise Linux.
The overarching theme and identity of Red Hat is still open source software, but the main driver for the company clearly is now cloud computing, which is intertwined with open source.
Read the full article at LinuxInsider.
May 22nd, 2012 — Software
451 Research was pleased to collaborate on the Future of Open Source Survey 2012 with North Bridge Venture Partners and Black Duck Software. This year’s survey garnered 740 responses from a variety of vendors and non-vendors in the industry. Overall, the survey highlighted some subtle and sometimes dramatic changes in what is driving open source software. It also made clear that while there is still a good degree of education and awareness yet to occur around open source software, there is a large amount of open source code making its way into today’s enterprise, webscale, consumer and other computing environments.
Some of the key findings:
*The survey reinforced the prominence and influence of open source software in the enterprise and in key trends driving it, as we and others have highlighted for some time with reports such as Seeding the Clouds and Mobility Matters. When asked which technology areas would see the most significant open source software community innovation from, respondents ranked ‘cloud’ highest at 40%, then ‘mobile apps’ (19%) and ‘mobile enterprise’ (15%) for a combined 34%, then ‘analytics’ with 10%. These areas are indicative of where we see open source software projects, communities, vendors and consortia continuing to broaden use of open source software.
*The survey asked what are the top barriers to selecting open source software when compared with proprietary alternatives, resulting in unfamiliarity (48%), lack of internal technical skills (47%), lack of vendor support (35%) and legal concerns about licensing (33%) as the top answers. Although this indicates there is still some trepidation and lack of awareness around open source and commercial options for support, other survey responses indicate open source software is still spreading to new industries and customer categories. When asked about the most important trend for open source software over the next two to three years, respondents identified the top choices as: adoption in non-technical segments such as government or healthcare (42%); enterprise adoption (40%) and growth in industry-specific communities (10%).
*The survey also showed there is a heavy volume of new, meaningful code coming out of open source software’s many communities. When asked what share of their deployed code they anticipate will be open source software over the next five years, about one third of survey respondents (32%) reported open source had already reached major deployment at 75% or more of their code. Another one third of respondents (30%) said open source will make up half to 75% or more of its deployed code. About a quarter of respondents (23%) indicated open source would make up 25-50% of their deployed code over the next five years, while 15% of respondents said the open source share of deployed code would be a quarter or less.
*We also saw a high rate of open source participation from the survey. When asked about community engagement with open source and their preferred method, 49% of respondents said consuming code, 36% said reporting patches or fixes, 31% said contributing new features, 28% said initiating new projects, 25% said contributing through partners or industry alliances. We believe this shows a high rate of open source participation beyond using code, which is also a meaningful contribution. This also indicates a greater willingness to get involved with open source projects and to start new projects.
*The survey also highlighted the changing drivers of open source software in the enterprise. When asked what are the top factors that make open source software attractive, respondents identified freedom from vendor lock-in (60%), lower acquisition and maintenance cost (51%), better quality (43%) and access to source code (42%) as the top answers. While we had seen vendor lock-in fade as a factor and cost as paramount two or three years ago, today vendor lock-in has become much more of a factor for customers. We believe this has to do wtih cloud computing and customers’ desire to maintain flexibility as they figure out how to best leverage cloud resources. The survey also showed that cost, which we also equate to time and efficiency, is always a strong factor, with 62% of respondents identifying reduced cost of development and maintenance as the main reason they use open source or initiate projects.
*The survey also reinforced our belief that while open source software lays the groundwork and underlies much of cloud computing, the cloud is also giving back to open source by providing vendors a way to differentiate free downloads from paid, cloud-based services. In fact, it seems support and services subscriptions are a much higher priority for open source software vendors than so-called ‘open core’ models that provide software for free and certain extensions, features or support as paid. When asked which revenue generation strategies are likely to create the most value for open source vendors over the next two years, respondents ranked an annual, repeatable support and service agreement as the top answer (52%). Other open source revenue models, such as ad-hoc services and support (41%), value-add subscription (40%), hosted or cloud software services (38%) all ranked higher than a closed-source license or open core model (12%).
For our full analysis on the results of the 2012 Future of Open Source Survey, see our Spotlight report. The results were also presented this week on a panel at the Open Source Business Conference and that presentation is available at the Open Source Delivers blog.
January 20th, 2012 — Podcast
Topics for this podcast:
*Hadoop v1.0 and year ahead
*Oracle-Cloudera deal for more Hadoop
*Oracle’s ‘Sun spot’ with Solaris
*Open Source M&A outlook for 2012
*Our new MySQL/NoSQL/NewSQL survey
iTunes or direct download (28:49, 4.9MB)
December 16th, 2011 — Podcast
Topics for this podcast:
-Cloudera Enterprise Hadoop update
-Hadapt combines Hadoop with db analytics
-Informatica grows its Hadoop work
*HP open sources WebOS
*The GPL fade
*Red Hat acquisition targets
iTunes or direct download (31:41, 5.4MB)
October 5th, 2011 — Software
Red Hat’s $136m acquisition of open source storage vendor Gluster marks Red Hat’s biggest buy since JBoss and starts the fourth quarter with a very intersting deal. The acquisition is definitely good for Red Hat since it bolsters its Cloud Forms IaaS and OpenShift PaaS technology and strategy with storage, which is often the starting point for enterprise and service provider cloud computing deployments. The acquisition also gives Red Hat another weapon in its fight against VMware, Microsoft and others, including OpenStack, of which Gluster is a member (more on that further down). The deal is also good for Gluster given the sizeable price Red Hat is paying for the provider of open source, software-based, scale-out storage for unstructured data and also as validation of both open source and software in today’s IT and cloud computing storage.
This is exactly the kind of disruption we’ve been seeing and expecting as Linux vendors compete with new rivals in virtualization, cloud computing and different layers of the stack, including storage (VMware, Microsoft, OpenStack, Oracle, Amazon and others), as covered in our recent special report, The Changing Linux Landscape.
While the deal makes perfect sense for both Red Hat and for Gluster, it also has implications for the white hot open source cloud computing project OpenStack. There was no mention of OpenStack in Red Hat’s FAQ on the deal, but there was a reference to ongoing support for Gluster partners, of which there are many fellow OpenStack members. OpenStack was also highlighted among Gluster’s key open standards participation along with the Linux Foundation and Red Hat-led Open Virtualization Alliance oriented around KVM. Sources at both Gluster and Red Hat, which point to OpenStack support being bundled into Red Hat’s coming Fedora 16, also reiterated to me Red Hat is indeed planning to continue involvement with OpenStack around the Gluster technologies. I suspect Red Hat is looking to leverage Gluster more for its own purposes than for OpenStack’s, but I must also acknowledge Red Hat’s understanding of the value of openness, community and compatibility. Taking that idea a step further, Gluster may represent a way that Red Hat can integrate with and tap into the OpenStack community by blending it with its own community around Fedora, RHEL, JBoss, RHEV and Cloud Forms and OpenShift.
The deal also leads many to wonder whether or what may be next for Red Hat in terms of acquisition. We’ve long thought database and data management technologies were areas where we might see Red Hat building out. This was also the subject of renewed rumors recently, and we believe it might still be an attractive piece for Red Hat given the open source opportunities and targets around NoSQL technologies such as Apache Hadoop distributed data management framework and Cassandra distributed database management software. We’ve also believed systems management to be a potential place for Red Hat to further expand. Given its need to largely stay within open source, we would expect targets in this area to include GroundWork Open Source, which joins Linux and Windows systmes in its monitorig and management, and Zenoss, which works with Cisco and Red Hat rival VMware in monitoring and managing systems with its open source software. Another potential target that would increase Red Hat’s depth in open source virtualization and cloud computing is Convirture, which might also be an avenue for Red Hat to reach out to midmarket and SMB customers and channel players. Red Hat was among the non-OpenStack members we listed as potential acquirers when considering the M&A possibilities (451 subscribers) out of OpenStack.
Given its recent quarterly earnings report and topping the $1 billion annual revenue mark, Red Hat seems again to be bucking the bad economy. We’ve written before in 2008 and more recently how bad economic conditions can be good for open source software. Red Hat is atop the list of open source vendors that suffer as traditional, enterprise IT customers such as banks freeze spending or worse, fail. However, the company’s deal for Gluster is yet another sign it is thriving and expanding despite economic difficulty and uncertainty.
You don’t have to just look at Red Hat’s earnings or take our word for it. On Jim Cramer’s ‘Mad Money’ this week, we heard Red Hat CEO Jim Whitehurst praised for Red Hat performance and traction where most companies and many economists are throwing the blame: financial services, government and Europe. Cramer credited Red Hat for a ‘spectacular quarter’ and allowed Whitehurst to tout the benefits of the Gluster technology and acquisition, particularly Gluster’s software-based storage technology that matches cloud computing. It was quite a contrast to the news out of Oracle Open World, where hardware was a focal point.
September 30th, 2011 — Podcast
Topics for this podcast:
*Cloud M&A potential around OpenStack
*Oracle’s commercial extensions for MySQL
*Puppet Labs rolls out Enterprise 2.0, hosts PuppetConf
*Basho bolsters Riak distributed data store in NoSQL race
*Our latest special CAOS report, ‘The Changing Linux Landscape’
iTunes or direct download (25:59, 4.4MB)
May 13th, 2011 — Podcast
Topics for this podcast:
*Watching for possible devops deals
*New technology, offerings highlight Hadoop
*Oracle proposes Hudson as Eclipse project
*Red Hat’s latest IaaS and PaaS
*Defining open source
*Big changes in the Linux and open source landscape
*451 Group at OSBC 2011 in San Francisco
iTunes or direct download (36:17, 6.2MB)
November 23rd, 2010 — Software
There is no shortage of implications and questions from the Novell sale to Attachmate, which includes a side-deal for unknown IP assets from Novell purchased by Microsoft-backed participants. Bottom line, it appears as though Attachmate has acquired the SUSE Linux technology and business, based on the fact it announced plans to split SUSE from Novell, which we believe is wise. Still, the deal has significant impacts for the Linux OS, the enterprise Linux market, cloud computing, community Linux, competing vendors and operating systems, partners and more. Below are some thoughts on the impact and some of the questions that remain unanswered.
Novell has always been a major contributor to Linux development. It appears Attachmate sees value in the SUSE Linux business, as it is wisely separating it from Novell’s other technology, which may have been a bit of a drag on the thriving development and use of SUSE Linux, SUSE Studio and OpenSUSE, particularly in virtual appliance and cloud computing scenarios. It was good to see some acknowledgement of the importance of the OpenSUSE community from Attachmate. Though it was not very thorough or detailed, and plans for SUSE Linux, OpenSUSE, the business and customers around it are still very unclear, it’s more than we saw from Oracle on OpenSolaris, which illustrated Oracle’s challenges with open source communities. Nevertheless, the fact that Novell has been such a significant contributor to not only Linux kernel, hypervisor and other software development, but also to market penetration for Linux means that Attachmate, or whoever ends up owning SUSE, has big shoes to fill.
The separation of the SUSE Linux technology and business also leads us to wonder whether it is poised for another sale, perhaps to another third-party that was interested in only the SUSE piece. Amid speculation that Microsoft may have helped make the deal happen to thwart a rumored SUSE buyout by VMware, we believe there is still a possiblity VMware, or other player, could acquire SUSE Linux. However, this appears increasingly unlikely given signals from Attachmate it will keep and run the SUSE Linux business, perhaps more effectively or aggressively in the virtual appliance and cloud computing environments where there is perhaps most opportunity for Linux. We will also be watching vendors such as HP and IBM, which are significant supporters of both SLES and RHEL, to see if the recent deal for Novell has any impact on their Linux positions.
Of course, uncertainty about the development or direction of SUSE Linux may steer some enterprise customers toward competing operating systems, such as Red Hat Enterprise Linux, Windows, HP-UX from Hewlett-Packard, AIX from IBM, Solaris from Oracle or community Linux distributions such as CentOS, Fedora and Ubuntu (which also comes with commercial support fro Canonical in some cases). However, the Novell deal probably does not come as a surprise to SUSE Linux users, and many of these customers — in financial services, HPC, insurance and other enterprise verticals — are among the most advanced Linux users and are capabile of continuing with SUSE Linux on their own, with Attachmate or both. We see Red Hat as among the big winners in the deal, since it emerges as the only enterprise Linux provider of its kind, but mostly because SUSE Linux does not belong to VMware, which is aggressively competing with Red Hat on several levels, including support of OS, hypervisor and middleware technologies. Microsoft also stands to benefit from SUSE Linux under Attachmate rather than VMware, given Microsoft’s interest in and support for SUSE Linux through a longstanding partnership with Novell. The big question in regards to Microsoft concerns the IP acquired by CPTN, which is backed by Microsoft, for $450m.
While there are numerous customers, vendors, communities and people impacted by the deal, one of the often-overlooked factors is the hypervisor. Novell and use of SLES are a significant part of the Xen hypervisor community. This may be another win for Red Hat, which favors the Linux-integrated KVM hypervisor, particularly if this move for SLES means it also moves more toward KVM and away from Xen.
In conclusion, it was about this time of year in 2006 that Novell and Microsoft announced their landmark partnersip, which over the years has produced greater Windows-Linux interoperability and co-management and large enterprise customers for both. At the time, there were cries that this was the end of SUSE Linux. This was also about the time that Oracle rolled out its own Unbreakable Linux, which was heralded as the end for Red Hat Enterprise Linux. I believe, as these previous lessons and the history of open source software show us, we’ll continue to see significant use and development of SUSE Linux and OpenSUSE, regardless of who is backing them, and that SUSE Linux will continue to be a prominent part of the enterprise IT and enterprise Linux landscape.
NOTE: 451 Group subscribers can read more of our analysis and take on the deal in our report.
June 22nd, 2010 — Software
There was another acquisition involving open source software recently when Consona bought Compiere, but what is perhaps most striking about the deal from an open source software perspective is how little it and the Compiere community mattered in the deal.
By most accounts, including that of fellow open source ERP player xTuple CEO Ned Lilly, who offers an interesting and accurate depiction of Compiere’s changes, acknowledge the movement away from community that occurred over the last few years at Compiere. As discussed in our own recent report on the deal, we are also somewhat skeptical over the fate of what is left of Compiere’s open source community, even though Consona plans to continue offering both paid and free versions. At the same time, we are also wondering whether it will matter much — to Consona, to Compiere or even to its customers?
So how does this jibe, or not, with our views on how M&A deals and valuations involving open source software vendors tend to highlight the value of open source communities?
Community has served to drive up the price in deals stretching back for years (Citrix-XenSource for $500m, August 2007; Nokia-Trolltech at $153m, January 2008; Sun-MySQL for $1 billion, January 2008; VMware-SpringSource $420m, August 2009), but the reality in the case of Consona-Compiere (price not disclosed) is that community, or lack of a vibrant open source software community, may have actually driven the price down.
We must also consider the significance of cloud computing here. Cloud capabilities and possibilities in the enterprise version of Compiere’s platform may have trumped community in this case, but the deal still serves to remind open source software companies, as well as their existing and potential partners and acquirers, that community counts.
January 28th, 2010 — Software
We’re continuing to see signs that the dominant GPL open source license may be fading from favor among commercial open source software players. The latest move away from the GPL comes from content management software vendor Alfresco, which is moving to the LGPL after originally releasing its code under the GPL three years ago. The reasoning for the shift, according to Alfresco CEO John Newton, is the company sees greater opportunity beyond being a software application, particularly given the emergence of the Content Management Interoperability Services standard. Alfresco won mostly praise for its move, and it does make sense given where open source is going these days.
I believe the emerging trend away from GPL and toward more permissive, mixable licenses such as LGPL or Apache reflects the broadening out of open source software not only throughout the enterprise IT software stack, but also throughout uses beyond individual applications, frameworks and systems. More and more open source software vendors are pursuing opportunities in embedded use or OEM deals whereby open source software often must sit alongside or even inside of proprietary code and products. Similar to what we’ve seen in the mobile space — where open source software and development are more prominent than ever, but end products with accessible code are not — open source is broadening out, but it is doing so in many cases by integrating with proprietary code.
We also see some debate about the community and commercial ups and downs of GPL as organizations contemplate the balance of the two and the best way to achieve commercial success with open source software. As Matt highlights, we are seeing a choice of non-GPL licensing in order to more effectively foster community and third-party involvement, but we also continue to see GPL as a top choice to similarly build community.
While the debate about community versus commercial benefit may not necessarily be prompting movement away from GPL, I believe another recent action may indeed do so. The latest series of GPL lawsuits are aimed at raising awareness, profile and legitimacy for open source software. While those bringing the suits — primarily the Software Freedom Law Center — have exhibited a reasonable approach and settled with past lawsuit targets, these suits and publicity may still serve to steer organizations making the choice to other licenses, including the LGPL, BSD, Apache and the Eclipse Public License.
Another factor is the GPL thumping that took place during the SaveMySQL campaign as the European Commission contemplated Oracle’s proposed (and now closed) acquisition of Sun Microsystems and the open source MySQL. I voiced my concern that the SaveMySQL campaign might jeopardize or de-value open source software projects and pieces in M&A, but I believe I’m actually in agreement with SaveMySQL leader Monty Widenius that the deal and process may end up tarnishing the GPL and its reputation in the enterprise.
As stated above, much of the movement we’re seeing away from the GPL has to do with the desire and opportunity to place open source software alongside, within, on top of or otherwise with proprietary software. Non-GPL open source licenses are also more flexible in terms of integrating and bundling with other open source software licensed under other, non-GPL licenses.
We anticipated this fade of GPL as covered in our report, The Myth of Open Source License Proliferation. Given its clout, durability and continued popularity in commercial open source (and with help from continued growth of GPL-licensed Linux) we believe the GPL will endure as a top open source license. However, given their flexibility and the ability to combine with other code, we see a number of other challengers — Apache, BSD, EPL and LGPL — rising while GPL dominance wanes. We’re also watching to see whether the AGPLv3 for networked software will provide new life for GPL-style licensing and community building in emerging virtualized, SaaS and cloud computing environments.
January 22nd, 2010 — Podcast, Software
Topics for this podcast:
*Open source in consumer devices
*VMware-Zimbra deal highlights open source, cloud
*A capitalist’s guide to open source licensing
*Latest on Oracle-Sun-MySQL, M&A implications
iTunes or direct download (24:48, 5.7 MB)
January 19th, 2010 — Software
I have to admit, I was somewhat skeptical of VMware’s interest and outlook with regard to open source software when the enterprise vendor acquired SpringSource in August 2009. Basically, I thought VMware was more focused on cloud strategy and SpringSource’s subscription business in application development and deployment than on its open source nature. However, after its second open source acquisition of Zimbra messaging and collaboration from Yahoo! and talking further with VMware, it is clear the company — once widely known as the proprietary virtualization option juxtaposed against Xen open source virtualization — is an open source believer.
Of course, much of this occurs as Linux and open source dive further under the covers, winning placement but not notoriety in a range of consumer and enterprise uses. Nevertheless, VMware makes no secret its belief that open source software represents the fastest way to reach the widest audience, whether it’s developers in the case of SpringSource, or service providers and other cloud computing users with Zimbra. Similar to our findings for a recent report about customer and user views on open source, VMware sees primarily cost and complexity mitigation benefits from open source software. The company also cites open source as the reason Zimbra has managed growth and popularity, even in the face of Microsoft’s popularity via Exchange and SharePoint.
This is not to say VMware will be making only open source acquisitions and deals going forward as it builds its vCloud stack and story. In fact, in this regard, VMware is in a more flexible position than Red Hat, which is practically more obligated to stick to open source targets or acquire with the intent to open, as we’ve seen with some of its acquired Qumranet technology.
VMware calls the Zimbra acquisition its move ‘up the stack,’ and while additional pieces will not necessarily be open source, I expect the same cost, complexity, flexibility, developer, speed, strategic and other factors that drove the SringSource and Zimbra acquisitions will continue VMware’s focus on open source.
Updated 1/20/2010: VMware has already taken further open source steps with this announcement of vCloud SDKs supporting open source languages.
January 11th, 2010 — Software
A recent pitch from the folks opposing Oracle’s ownership of MySQL via acquisition of Sun Microsystems got me thinking. The plea, ‘Oracle can have Sun, but not MySQL’ may make sense to some, but to me it speaks to the irony of closing out Oracle or any company or anyone from open source. Upon further reflection and given 2010 is off to a roaring pace of M&A, I also began to wonder what the impact of the ‘Save MySQL’ campaign could be on open source in M&A, particularly if it was to successfully derail the acquisition or somehow decouple MySQL from Sun under Oracle?
What would it mean to carve out the open source projects, components, teams and support from companies involved in mergers and acquisitions over the last few years?
Would Citrix have still bought XenSource if Xen were cut out or somehow separated in any way shape or form from the deal? Would it have paid $500m?
Would Nokia have bought Trolltech and Qt for $153m?
More recently, would VMware have purchsed SpringSource for $420m if some or any of SpringSource’s open source projects, developers or holdings — including its own acquisitions Covalent and Hyperic — were not included?
Oh yeah, would we even be here with MySQL owned by Sun Microsystems if Sun were prevented from fully acquiring the project, code and company despite spending $1 billion two years ago?
Some degree of concern about Oracle’s potential ownership of MySQL or any ownership of open source projects and code is certainly warrented and prudent, but I don’t believe the fear that punctuates the message of the ‘Save MySQL’ campaign makes much sense. This is particularly so in light of the past deals listed here and others where the market has required continued investment and support of open source and provided continued revenue and benefits from open source.
While some of these scenarios may be admittedly implausible, I believe that separating out open source components, parts, projects and subsidiaries from vendors could certainly serve to dull the shine of open source software assets and vendors amid M&A valuations, prospects and strategy.
October 16th, 2009 — Podcast
Topics for this podcast:
*Our take on Q3 and current funding for open source
*OSI part of renewed definition discussion, status suspended
*Our latest special report – Warehouse Optimization
*Get ready for The 451 Group’s 4th Annual Client Conference
iTunes or direct download (23:21, 5.3 MB)
September 18th, 2009 — Links
Citrix joins the Linux Foundation. BonitaSoft raises $3m. And more.
Follow 451 CAOS Links live @caostheory on Twitter and Identi.ca
“Tracking the open source news wires, so you don’t have to.”
# Citrix joined The Linux Foundation.
# Open source BPM vendor BonitaSoft raised $3m from Ventech and Auriga Partners.
# Jaspersoft updated JasperReports Professional with enhanced data visualization.
# US CIO Vivek Kundra outlined the government’s cloud strategy, using NASA’s open source Nebula cloud.
# Infobright claimed to have increased its customer base tenfold since going open source a year ago.
# OStatic asked “Is Open Source M&A Set to Go On a Tear?”
# Savio Rodrigues published “Avoiding pitfalls when using open source code in enterprise software development.”
# Stephen Walli presented a discussion of open source business tactics, and reiterated that there is no open source business model.
# The European Agency for Safety and Health at Work (EU-OSHA) said it has a duty to invest public funds in open source.
# Matt Asay reported on VISA’s adoption of Hadoop, suggesting that enterprise uptake of the Apache project is ready to boil over.
# GroundWork announced integration with Microsoft System Center and joined Microsoft’s System Center Alliance.
# Infoworld asked “would MySQL survive without Oracle?”
# Alfresco launched an Amazon EC2-ready stack and developer kit.
# KnowledgeTree partnered with Zend to deploy version 3.7 of KnowledgeTree’s ECM software on Zend Server
# CIO.com published “five open source project management apps to watch”.
# AccesStream released Version 1.1 of its open source of its identity access management product.
# Sugar Labs and Free Software Foundation teamed up to promote the Sugar Learning Platform for children.
# LIMO Foundation published a white paper uses quantitative techniques to examine economic benefits of OSS.
# Matt Asay wrote “We are all open-source companies now. Which also means that none of us are.”
# Richard Hillesley explored the importance of trademarks for open source.
# MySpace open sourced Qizmt, an internally developed MapReduce-based framework for distributed computation.
# TwitApps is shutting down, going open source.
August 11th, 2009 — Funding, Software
Just when you thought it was safe to go back in the water … another blockbuster open source software acquisition, this time virtualization leader VMware looking to the future, and seeing itself in need of a more integrated, application-centric position. That position, according to more than $420 million in cash and stock from VMware, apparently comes from acquisition of SpringSource. SpringSource itself has grown by acquisition, first for Apache support vendor Covalent in January 2008, then Spring-like Groovy and Grails supporter G2One in November 2008 and most recently in May 2009, systems and application monitoring and management vendor Hyperic, which also focused heavily on cloud computing.
VMware is clearly in need of a story beyond virtualization, even if we are still relatively early on in enterprise adoption. Still, looking into the future, it sees clear skies, and that does not fit with the multi-billion dollar opportunity shaping up in cloud computing. Thus, VMware is willing to invest a significant amount in SpringSource, which does represent a crossover in customers without much, if any, crossover in competition.
VMware is working to address its increasing competition from all sides. While it may seem somewhat odd for VMware to want to get involved in enterprise Java application development and deployment, it may want to take advantage of SpringSource’s relatively quick climb in the enterprise Java development and support business. VMware may also be looking to offset any gain in enterprise Java influence and control by Oracle, which may do so with its more than $7 billion acquisition of Sun Microsystems.
VMware is also facing increasing competition from OS vendors, including Microsoft, Novell and Red Hat, which is among SpringSource’s biggest competitors with its JBoss business. Again, SpringSource may not seem the most likely suitor for Java application development, but VMware may see this as an area where it can most effectively integrate its own technology and talent to differentiate in virtualization and cloud computing.
Although SpringSource’s open source nature has been critical to its developer reach and success, this is likely not as important to VMware, which may view SpringSource more as a subscription software company than as an open source software company. Either way, it seems VMware, similar to Oracle, may have somewhat limited vision when it comes to open source software, seeing it for its development and time-to-market advantages, but missing other community benefits — including user and customer communities, feedback and contributions — that help make things work. This is not to say VMware is doomed with its plans and integration for SpringSource. It made it quite clear on a conference call today it plans to keep the SpringSource team in place as much as possible. Still, it will face the difficult and recurring challenge of a proprietary software vendor taking over an open source software vendor.
May 29th, 2009 — Software
SourceForge, the venerable open source repository and vendor, just got a shot in the arm by agreeing to acquire the newer, more social networking-minded Ohloh for an undisclosed amount.
We’ll be reporting more on the deal as we learn more about it, but it clearly makes sense. Actually, we saw SourceForge and Ohloh coming together already, albeit from different ends of the open source repository and community spectrum and also more competitively in our reports covering both companies. SourceForge holds the most well known and largest collection of open source software, yet it has lacked some of the newer features — both for open source developers and for enterprise and other users — such as cross-project communication and data on projects and activity. Ohloh, on the other hand, was founded more recently in 2004 and, among a new breed of open source developer and code communities, was still building up the size and sources of its directory. Ohloh has nevertheless managed to build up a community of open source software developers, encouraged cross-project communication and collaboration and perhaps most importantly in terms of commercial open source software, has provided the useful data on open source projects, contributions, developers and activity that enterprise users and vendors have been craving.
So will the joining of these two open source-centered companies deliver the best of both worlds? That will be the challenge for SourceForge as it integrates Ohloh’s technology and code, some of which is open source itself. SourceForge, which announced lackluster earnings and pointed to another ‘new strategy’ with its latest quarterly results, will also have to ensure it embraces and elevates the Ohloh approach, which was successful by serving both the communities of developers that it connects and tracks, but also by serving the enterprise users, vendors and investors that want to deeply investigate open source software and trends.
SourceForge is largely a media and e-commerce company with its Slashdot and ThinkGeek properties, and it has struggled a number of times to translate its immense open source repository and brand into enterprise success. There are some indications the company will look to connect its media and advertising to open source developers. I believe the far greater opportunity lies in taking the Ohloh approach and making money by connecting developers and users and providing insight on open source software. This would give SourceForge a good chance of finally seizing this opportunity and also perhaps serve to bridge the history and success of open source software with its future and potential.
April 20th, 2009 — Software
The big news to kick off this week was Oracle’s announced acquisition of Sun Microsystems. There is already a lot of discussion of the integration challenges, how Oracle is getting into hardware (or as Matt Asay describes it, having an ‘iPod moment’) and of course, the implications for open source software. What stands out to me is the fact that the world’s biggest proprietary database player — one of few software giants that still sells and supports primarily proprietary software — will own the world’s most popular open source database, MySQL. It is unclear how significantly MySQL figures into the deal, but given Sun spent $1b acquiring it and further invested in its enterprise readiness and use, it must mean something. What is perhaps even more unclear is what will happen going forward to MySQL and the many other open source software technologies — Java, GlassFish application server, OpenOffice.org to name a few — that are under Sun’s moniker?
These questions bring Oracle’s open source citizenship, covered previously on the CAOS blog and in a 451 Group report, into the spotlight. Oracle rightfully deserves credit for its positive participation in the development of the Linux OS and many other open source projects, including Apache, Berkeley DB, Eclipse, InnoDB, PHP, SASH, Spring and Xen.
We’ve certainly emphasized Sun’s open source projects, products and strategy in assessing its value, position and opportunities. Looking across Sun’s assets, the open source holdings have been among the shiniest.
However, this doesn’t really jibe with the view of open source presented by Oracle and its CEO Larry Ellison, a view that I think somewhat misses the point of open source software. Mr. Ellison and his company have showed they value the advantages of open source software development and innovation based on Oracle’s contributions and investments in open source. Still, when asked about having top Linux vendor Red Hat or a similar open source company on his shopping list, Ellison indicated there would be no need to buy an open source company when he could simply take and use their code. In fact, that’s exactly what Ellison and Oracle did with Unbreakable Linux. While it has been taken up by a number of Oracle shops and even some additional customers that see greater value and time-savings in getting their Linux from Oracle, Unbreakable Linux has not exactly broken out. Furthermore, Oracle has always downplayed the commercial and revenue potential for Unbreakable Linux, which has had minimal impact on Red Hat.
So while Oracle has displayed an ability to participate in and benefit from open source software, I think its expectations and aspirations for open source software are limited. You can’t blame a company making billions for not getting too excited about millions, especially when sometimes the millions are simply numbers of users. Nevertheless, Sun is sitting on top of some of the most pervasive, disruptive and popular open source software used in the enterprise today.
With Oracle’s purchase of Sun, we may go from overly high expectations for Sun’s open source software — driven in large part by pressure to right the ship and reward investors — to drastically lowered expectations from Sun’s open source software by an Oracle far more concerned with proprietary software and hardware.
April 8th, 2009 — Funding, IPO, M&A, Software
Yesterday The 451 Group published Open to Investment, the latest CAOS research report, which examines the past, present and future of venture capital investment in open source-related vendors.
The report contains analysis of the history of venture funding in open-source-related firms between 1997 and 2008, based on The 451 Group’s database of more than 370 funding deals.
It also contains results from a survey of investors from private investment firms, assessing their sentiment toward open source and the likely impact of economic conditions on investment in these vendors.
Among the key findings:
- Since the first venture investment in an open source vendor in 1997, $3.2bn has been raised by 163 open source vendors through 378 separate funding deals.
- The report identifies 57 vendors that are most likely to be considering further funding in the next two years based on the length of time since their last funding round and the total raised to date.
- Private investors anticipate that current global financial conditions will accelerate the adoption of open source software in 2009 and 2010 and, given that, they are more inclined to make investments in 2009.
- However, a 100% open source software-licensing strategy is incompatible with the demands and requirements of private investors.
Depending on your perspective that last finding will likely seem blindingly obvious or highly controversial. What we found is that while the investors we spoke to were much more likely to invest in open source-related vendors than proprietary vendors in the current climate, they preferred vendors that take a hybrid approach to software development and licensing.
We also asked investors to choose from between five different licensing strategies for an imaginary startup (hybrid open source/proprietary, hybrid open source/SaaS, hybrid proprietary/SaaS, 100% proprietary, and 100% open source). Not one investor was more likely to invest in a vendor with 100% open source licensing.
The report also covers:
- The likely impact of economic conditions on open source adoption.
- The prospects for M&A involving open source vendors in 2009.
- The seven vendors we think might be best positioned for a run at an IPO in the 12-24 months after the downturn ends.
- A high level view of investment trends between 1997 and 2008.
- The primary benefits of open source, from the perspective of investors.
- The major risks of open source, from the perspective of investors.
- Why private investment isn’t always the answer.
- Detailed analysis of investment in each year between 1997 and 2008.
- Exit strategies: the history of IPOs, M&A and failed businesses.
- The most prolific investors.
The report is expected to form the basis of an annual repeatable service from The 451 Group designed to examine the levels of investment in open source vendors and to identify the changing attitudes among private investors. We will also continue to offer quarterly updates based on preliminary figures on 451 CAOS Theory.
Also look out for details of the a forthcoming webinar, during which we will discuss the findings and research report in more detail.