Open Source Unleashed

Will MySQL prove to be Sun's fifth element?

Nearly three months back I asserted that Sun might benefit from addressing  the fact that its open source portfolio lacks a unifying theme/brand. Today, news that the company is to acquire MySQL for $1bn triggered thoughts on Sun's new position as an evolving open source vendor. Undoubtedly, the financial/organizational impacts will be discussed across the entire blogosphere as well as mainstream outlets. Yet, I've come to a hypothesis that MySQL might be Sun's fifth element. All inconsequential associations to the 1997 production featuring Bruce Willis aside, it's worth noting that the buyout does nothing but boost Sun's position as a leading platform provider for the Web economy in spite of Java taking a back seat to LAMP, Rails, et al. Moreover, with MySQL under its corporate umbrella, the company is in possession of a potential catalyst for the continued emergence its own commercial open source ecosystem.

Here are my thoughts on the acquisition:

• MySQL should help to stimulate the relevance of Sun's tooling and Enterprise Application Infrastructure. Look no further than Oracle for an example of leveraging market share in the database market to cross-sell middleware. On a related note, the company will follow a similar approach with the newly acquired BEA suite that it has with Fusion middleware. Obviously MySQL is no 800-pound gorilla but it's not outlandish to envision GlassFish, OpenSolaris and Netbeans  benefiting from the "cross-germination" opportunities made possible by the presence of MySQL. How and where to transform this into profitable engine for open source success is up to Sun's management to figure out.
• Sun will run with the MySQL and Data Warehousing. In addition to integrating current MySQL solution providers into its sales channel strategy, Sun is better positioned to grow the MySQL Data Warehouse Scale-Out Solution set into a bigger player across the enterprise data center landscape than MySQL was as a standalone entity. I'm looking for the company to make some noise there first.
• How will Sun play the LAMP angle? MySQL puts the M in LAMP, after all. And while Sun has already shown acceptance of the Rich Internet Applications & Web 2.0 "writing on the wall," see jMaki, the clarity/execution of its vision for harmonizing with MySQL's LAMP momentum will determine the which opportunities  present themselves.
• Sun as a capable rival to IBM in the cloud computing arena. Cote made mention of this already and to his point I would add, the availability of MySQL might give its utility computing arm added mainstream appeal for ISVs already invested in the MySQL platform.

Moving forward this move might potentially represent an inflection point in Sun's maturation process as a commercial open source vendor. However, I fully expect the company to go through the growing pains of integrating a smaller, distributed team into a larger, and admittedly more stuffy, big corporate environment, a la Red Hat with JBoss...although perhaps not as pronounced considering the differences between MySQL and JBoss culture. Oddly enough, as the acquisition rumors swirled about MySQL, Sun wasn't on my buyers short list. However, upon announcement they are the vendor for whom the move made the most sense and is best positioned to emerge as a stronger combined entity. We'll see if this continues to prove true down the road...

Technorati Tags: Sun Microsystems |  open source software | MySQL | LAMP | M&A

The risks of open source focus

My last post addressed the nature of open source evolution and the [increasing] risks of generic strategies within the context of industry maturation. However, I did not delve into an analysis of the risk of focus simply because I felt that the topic might warrant another blog post to itself. Along those lines now, when there is an unprecedented level of activity in the commercial open source sector, more than ever, it's appropriate to work towards an understanding of:

1. What the risks of open source focus are
2. How they are affecting industry maturation
3. Where they fit into the competitive dynamics of commercial open source

That being said, focus of any variety carries its own set of cost-benefit realities. In the case of open source focus at this stage, of what is turning out to be a disruptive period, in the history of the software industry, there is undoubtedly a slice of profitability for vendors that accept both the risks and rewards of the model. However, as the open source marketplace evolves so do the forces enacted upon its participants. As such, the risks of open source focus haven't necessarily transformed, only the associated implications have shifted.

This shift, from my perspective, will serve to create a new class of truly hybrid vendors that develop software in thoroughly open and transparent communities but also offer other products and/or components that are proprietary. Some might scoff at this assertion since what was described sounds exactly what a number of commercial open source vendors have been/still are doing for a while. However, these hybrid vendors of the future won't only look to monetize across different versions of the same product (i.e. community & enterprise) but over a portfolio of offerings that consists of those offerings that are fully open source and those that are closed source...without losing sight of their commitment to the open source software model. This evolution will be driven by the following risks of open source focus:

• Widening cost differential eliminates the advantage of focusing solely on open source.
• Narrowing differences between desired products and services within the marketplace.
• The economics of a one-sided software portfolio. 

Not that the above risks will bring about the end of commercial open source by 'forcing' vendors to sell proprietary software, only industry maturation will present a number of business opportunities associated with doing so...in much the same way that proprietary vendors are utilizing open source without fully opening up. It will be interesting to see how this affects the definition of what it means to be an open source/proprietary company as well as customer expectation for both.

Technorati Tags: risks |  open source software | generic strategies |  competitve dynamics | industry evolution

Open source evolution and moving past generic strategies

Over the past two weeks or so I've participated in briefings with, but not exclusive to, the following companies: Concursive (formerly Centric CRM), Funambol and Nuxeo. In parallel, I've been preparing my predictions for the open source software marketplace in 2008 which has entailed analyzing industry-wide trends and maturity indicators. Doing so, has led me to the conclusion that there is a decided movement in the shift in the leadership landscape amongst commercial open source business models preparing to move into 2008.

This shift is being driven by maturing business models as well as the dynamics of industry evolution. The outcome is that the generic strategies (along with the associated risks) previously conducive to growth, begin to erode as a defense against competitive forces. As a result, companies move to mitigate these risks through a number of methods. Below is a breakdown of two of the three widely recognized risks of generic strategies (excluded is the risk of focus) as it relates to the open source marketplace:

RISKS OF OVERALL COST LEADERSHIP
Even as open source software continues to be associated with lower costs, the burden of maintaining cost leadership is deceptively difficult...especially as a firm seeks growth and expansion. The risks as they related to open source are:

• The rapid pace of technological change that drives commoditization. What plays the role of disruptor for established vendors can serve also as an inhibitor to market opportunities for newcomers, i.e. price points must start lower and large segments of customers become highly price-sensitive. We're seeing this take place with MySQL as they attempt to continue to grow in the face of the challenges presented by competing in what amounts to a commoditized product category.
• Rising quality of freely available software. As the functional gap between free and commercial open source closes, it becomes increasingly difficult to provide the added value necessary to entice free users into becoming paying customers. Oftentimes this happens naturally as a result of tending a thriving open source community that centers on free versions.
• Becoming too reliant on cost-value proposition. Low costs tend to sell themselves but the nature of open source TCO is multi-varied and the entire value equation shouldn't be brushed aside. Too much attention on lower costs at the expense of being able to identify required product and marketing changes is not a positive.
• A decrease in price differential. Inflation in costs associated with a growing operation can often eat into price differential margins. For open source vendors this does not bode positively for competing against the brand value and/or other evolving approaches to differentiation from far larger vendors. While this is easily offset by maintaining investments in their open source communities, there is no hard guarantee that the cost savings passed to customers will remain proportional to operating expenses.

RISKS OF DIFFERENTIATION

• Cost differential overshadows brand characteristics. Ideally, being open source should never overshadow the value of the software nor the development model. However, oftentimes being openly (see: freely) available turns awareness away from open source brand characteristics and provides a cover for potential customers for whom price is less of an issue to look elsewhere. In this regard, projects like httpd from the Apache Software Foundation (ASF) have walked the thin line between remaining relevant as a leader that just so happens to also be free.
• Buyers no longer need high levels of differentiation. JBoss(Red Hat) has reached a similar point, where it no longer is competing to differentiate itself from other open source application servers.  Buyers and potential customers typically know what to expect from JBoss and aren't necessarily interested in how it does A, B or C better than GlassFish.
  
• Open source narrows perceived differentiation. A perfect example of this is JasperSoft and Pentaho. Mostly these two are grouped side-by-side as open source Business Intelligence (BI) competitors when in actuality there are stark differences between the two platforms starting with business models, pricing and licensing. However, because they're both open source they have to work just that much harder to achieve a comfortable level of differentiation.

Technorati Tags: risks |  open source software | generic strategies |  competitve dynamics | industry evolution

Sales leads, open source business models and the $100M quandary

The challenge of selling software that is essentially provided without cost is a complex, indeed. Savio Rodrigues and Matt Asay have both posted their thoughts and perspective on a subject that doesn't seem to have a consensus opinion associated with it. Unfortunately (or fortunately), I'm not comfortable attempting to 'clear the air' by expressing something of an authoritative viewpoint. What I am comfortable doing is, examining the varied complexities related to nurturing a business model constructed around open source software. So I'll take a stab at doing just that.

Savio mentioned how the majority of open source software users are "locked into the free price base," which is a well documented reality that isn't about to change overnight. Some might even argue that this free user base is a foundation structure for successful open source and I would have to agree, to a large extent. However, I have to wonder how this affects customer acquisition strategies for commercial open source vendors? Even if an overwhelming majority of customers begin their experience as free users (with a comparatively small number  converting to paying customers), is the transition from free, unpaid user to that of paying customer taken for granted as a natural progression?

In my eyes the motivation for/circumstances behind pursuing a business relationship after engaging an open source community is anything but a natural occurrence. Is it a logical decision? Is there value in doing so? Yes on both accounts. All the same, to consider it a mere consequence of developing good software in the open and distributing it free of cost is a bit naive. For this reason, I have to question the logic behind Matt 's assertion that moving from,

"...isolated, departmental implementations (low dollars) to company-wide deployments (big dollars)...is the natural progression for any successful commercial open-source project."

Matt continues to say that,

"[Invading] the enterprise through free downloads and let[ting] the positive experience percolate throughout an enterprise until the CIO pushes a site-wide license."

This, too, might qualify as a stretch, if not a crass generalization. Yet this is the predominant view of exactly how open source works to win customers and generate revenue. Reality is a bit more complicated than the sort of 'silent penetration' mentioned above. By the time open source has penetrated the enterprise, associated visibility into the evaluation process becomes asymptotic to zero. Follow-ups become next to impossible, and since expiring trial periods are non-existent there are no reliable mechanisms for tracking it. Therefore, as Matt's post attests to, "leads" materialize almost solely based on impetus from the end use spectrum. Which, in a way, takes some of the wind out of the sales process.

These facts are worth considering within the context of debate surrounding the prospect of an open source company reaching the $100 million mark. Reaching that level implies that it's feasible to generate as much revenue with an impaired ability to discern and reach large chunks of an unpaid user base (the most reliable source of potential customers). This ignores the unfortunate reality that software (even open source) is still bought and sold. Yes, proprietary companies are inclined to ramp up sales teams to hawk their products and yes, it is a competitive advantage that open source companies aren't shackled to doing the same, but the $500k+ deals that don't happen by way of traditional engagement [driven by vendor outreach] through a sales team are the minority. Likewise, until the procurement process fully adapts to the realities of open source, relying on technology to sell itself will make the $100 million mark a barrier for most.

Technorati Tags: JBoss |  open source software | business models |  revenue generation

Google, Android/OHA and the Elusive Third Screen

Earlier this week Google found the time to let the air out of one room in the rumor mill by announcing, what most thought would be a single gPhone is actually a platform for building "gPhones" called, Android and the  the Open Handset Alliance (OHA). Despite the expressed pining for another tech-heavyweight to make a splash within the mobile device market, a la Apple, the combination of Android and OHA are actually more ambitious than one phone. The Android team did a colorful yet credible job of breaking down Google's perspective on the subject. My take is that Android (an open source platform for mobile developers) and OHA (an open member alliance) make more sense for Google than a headfirst plunge into the device market even if it has the brand strength to stir up notable buzz surrounding a prospective entry.

Initially I questioned if there is the opportunity for innovation and/or differentiation that would attract a fringe (at best) player like Google? Obviously there is copious room for improving the mobile experience, but is one company going to act as the catalyst? Maybe, but truly kick starting innovation in the mobile device arena won't be a single company's cross to bear. Rather it will fall on the shoulders of an inclusive group of individuals, visionaries, companies and organizations. Hence, the OHA. One point worth considering is the fact that open is well on its way to becoming a buzzword, so the level of transparency in action and approach remains the barometer for OHA's execution of its expressed mission.

Still, Google is slated to play sizable role in the evolution of the U.S. mobile 'third screen' which stands at a unique crossroad in the history of the U.S. cellular industry. Currently there are just as many hurdles to be navigated as there is potential to be realized. Presently, mobile operators continue to function as vanguards over the third screen, blocking badly-needed innovation in defense of outdated telco business models. The result has been far too many closed gardens and an unhealthy obsession with extracting value in place of creating it for the end user. Google has demonstrated that it grasps the implications of this status quo and did well to express interest in facilitating a 700 MHz system adjusted to its specifications. However, pending of the outcome of its planned $4.6 billion bid, Google has yet to fully elucidate its plans to establish traction as a front runner in the race for the third screen.

At this point it remains to be seen how a dose of open source disruption will affect the U.S. mobile ecosystem that's ripe for transformation. Specifically, it's important to understand how Android will fit into Google's strategic outlook for gaining momentum within the mobile industry. I see the follow as particularly critical:

• Add mobile-focus to the Google ecosystem. Android should emerge as the epicenter of the mobile side of Google. The trajectory and time line for the development of a healthy layer of partners and participants, i.e. the OHA, is still an unknown.
  
• Follow the widgets (or gadgets). Google refers to them as gadgets but their overriding characteristic is that they have yet to produce much in the way of. However, what passes for useful functionality as it relates to the traditional browser can be introduced as a significant step forward within the mobile arena. Wherein, the ability to inject behavior to data, encapsulate services and add some extra punch to existing applications is sorely needed.
• An uninterrupted Google brand. Unfortunately the tendency to view the mobile Internet as a discrete entity from the Internet still exists. In reality, they are one and the same. Google must own up to the prospect of seamlessly transmitting its presence to the third screen without relying too heavily on the fixed/mobility differentiation. The Google experience in whatever form it takes (not just search) should be Google regardless of the medium through which it is accessed (within reason).
• Emphasize localization. Just like in real estate, for the mobile world it's Location, Location, Location. The possibilities surrounding mobile communities are exhausting but in order for them to flourish the demand for local information and context must be met. Currently the value of these communities is tied to PC-based access methods. As Android matures I can envision the Google platform extending to include an increasing array of services which aid in this direction.
• Redefine mobile innovation. Unfortunately, the U.S. mobile industry has thus far strangled innovation both intentionally and unintentionally. On the other hand, Android is being billed as a type of innovation accelerator so while I'm high on a focus centered on empowering mobile developers, I like its potential to lower the barriers to innovation even more. The first step of which is enabling developers to impart more flavor to the mobile experience.

I'm looking at whether Google has the wherewithal to channel initial waves of experimentation with Android into the larger cohesive OHA community/ecosystem. Unlike some of the company's other open source efforts, this one can't remain in perpetual beta for an indeterminate period of time. While the sheer scale and ambitious nature of its goals require realistic expectations they also entail a sharper, results oriented approach.

Technorati Tags: Google |  open source software | Android |  Open Handset Alliance | mobile devices | mobile innovation

Do Microsoft's open source steps mark a tipping point?

Now that OSI has given Microsoft the thumbs up for two of its licenses, I've got to wonder at what point should Entiva start tracking them as a player in the open source arena. Although with the lines blurring between proprietary and open source such that the standing definition of 'hybrid' isn't as relevant as it used to be, it's more important to determine how a sharp separation between open source and non-open source will exist. Now that Microsoft has made the plunge, there is sufficient motivation to assert that open source is evolving into a competitive feature as well as a differentiator. At some point in the near future perhaps open source will be on the boards agenda out of necessity not merely as a result of suggestion from the forward-thinking crowd.

Does SAP give a closer peek at their open source strategy after fellow giants Sun, Oracle, IBM and Microsoft have tipped their cards in this area? Or does it have too much (see: billions) invested in marriage to proprietary platforms? Microsoft certainly hasn't jumped into the open source innovator crowd just yet, but I've got to think that the company has a definite plan for putting the Microsoft Public License (Ms-PL) and the Microsoft Reciprocal License (Ms-RL) to work. From a strategic perspective it's definitely going to be business as usual for Microsoft. Therefore, the magnitude of this move can't be measured in terms of changes to product lines, sales channels, positioning on the Microsoft side etc. Rather it should be evaluated within the context of industry-wide absorption of the open source model.

It's a very real possibility that an inflection point has been reached where software vendors actively leverage open source as a business accelerator in parallel to selling proprietary software. A thought that might drive certain free/open source software purists batty, but is more about evolution than it is ideological stances. Either way, this coalescence will take time (see: years) and will inevitably prove fraught with contradictory stances where entrenched policy and strategy will result in oppositional stances to some of the fundamental principles of openness. For some this might invalidate the trend or even point to a form of cognitive dissonance, but in my perspective it is but a single state in a long-term process whose end state has yet to become entirely clear.

One thing is clear, the paradigm shift that until recently has been more told to than witnessed by the mainstream is beginning to demonstrate some very visible signs of existence. So it shouldn't be much surprise that most questions about substantial open source disruption have to do with how instead of if. Where only the additional passing of time will illustrate both the answers as well as the next set of questions.

Technorati Tags: Microsoft |  open source software | OSI |  open source licenses | business models | SAP | IBM | Oracle

Yahoo's acquisition of Zimbra: The value of open ecosystems

Monday's official announcement that Yahoo! would be acquiring Zimbra, a leading open source collaboration and messaging provider, for $350M was (to me) quasi-inevitable and part surprising. I had been keyed off about talks between the two companies sometime back but nothing terribly specific. So when news hit the wire and I scoped the purchase price for Zimbra, my eyebrows raised. Matt Asay already produced commentary on Zimbra's valuation, and I'll only add that I had the company's 2006 revenue pegged at a shade under the $3M mark he has. However, I will attempt to provide some a picture of how Yahoo is going to recoup its $350M as a microcosm of the overall strategic value to be found in purchasing commercial open source software vendors.

The overlying key point that I think characterizes the Zimbra acquisition is that Yahoo didn't just snap up a popular product/service with a robust user audience a la del.icio.us, rather it bought into the company's ecosystem. Yahoo is in a position to funnel their strategy flow through an ecosystem that currently boasts 350 partners and growing. In my eyes, Zimbra stands out as an example of how to rapidly scale with open source as well as the monetary value of doing so. I like Zimbra's potential for even more growth if only because of the forward moving momentum that its On-Demand delivery model will continue to supply. The company's collaboration suite is a natural fit to be hosted off-site through a traditional or usage driven subscription model.

In the other corner, Yahoo made it clear some time back that it wanted to be a media company for the web and took some slack for it. However, as of late its strategic moves have hinted at an emerging identity as a web platform (is anyone really surprised?). Over the long term, Zimbra's ecosystem provides multiple channel entry points for Yahoo to roll traditional messaging and collaboration functions that business currently rely upon into a richer experience that is fully integrated with newer forms of Internet communications and content...think a complete portfolio of supported and maintained Zimlets that covers the gamut of Yahoo information and content systems. In the short term, they will be able to step in and provide the reliability and performance guarantees necessary to push Zimbra Collaboration Suite (ZCS) out as a hosted service atop its own back-end infrastructure. It's possible that eventually SMBs will be able to sign up for hosting, domain registration and hosted ZCS all in one place...not a bad proposition when you think about it.

From a financial standpoint, we're witnessing how two near buzz words, transparency and community pay off not just in terms of winning customers and partners but in terms of shareholder returns. Last year, Zimbra hinted that they would consider going public sometime in 2008 so obviously the Yahoo acquisition was largely as good if not better than the prospect of having to soar through the FY 2007 and into 2008 before even putting an IPO on the discussion table. And Yahoo was evidently confident in, not only the management team, but also the technology, a fact that must have been influenced somewhat by Zimbra's commitment to transparency through open source.

Perhaps I'm reaching here, but its hard to phantom an internet company pouring $350 million in cash into a software vendor without taking advantage of open access to the innards of the product. Have similar closed source vendors been bought at comparable prices by others? Yes, but if you look back to the last software company that Yahoo purchased (Meedio, back in April 2006) as well as its antecedent account of buying software companies it's safe to assume they're not in the business of gobbling up the latest and greatest product company of the minute at premium prices. Therefore, I'm inclined to hypothesize that Yahoo recognized the value of being able to tap into and stimulate the growth of Zimbra's already lively community built on the principles of openness. A variety of community that reduces the risk in establishing the type of great brand extension through which larger companies, like Yahoo, can tie-in already strong recognition with a standalone identity, like Zimbra.

Realistically, I see this acquisition as a hedge against the growing compulsion to at least consider Google's web productivity suite and as a ready-made entry point into a strong channel ecosystem that Yahoo has lacked until now. The question remains, not if, but, will Yahoo capitalize on the potential avenues of augmentation to be realized through Zimbra? Or will they keep it as a competitive wild card to be used against Google and Microsoft?

Technorati Tags: Zimbra |  open source software | Yahoo |  messaging and collaboration suite | ecosystems | M&A activity | openness

Analyzing Microsoft's open source commitment

Pushed by a fair share of commentary, dialogue and opinion, news of Microsoft's decision to submit its shared source licenses to the Open Source Initiative for approval has taken a life of its own. There is no doubt that Microsoft's action towards a formal entry into the open source arena is indeed significant, not only as an indicator but also as a potential market marker. However, I'm of the opinion that the move is best understood through the same lens which shapes the strategic outlook for a company like Microsoft. A lens framed by a competitive view of the entire software industry as well as the open source marketplace.

Considering the inconclusive nature of this announcement (nothing has been finalized/approved, yet) it is best classified as an expressed commitment to better adhering to the principles of open source. Not to be confused with a promise or obligation, an expressed commitment is nonetheless a critical element in the development and execution of competitive strategy. Particularly, this one is vital not only because it hints at a 180 degree turn in Microsoft's acceptance of the open source model, but also because of its affect on the competitive landscape. The purpose here is to have the implied communication of a wider open source strategy simulate the effects that a verifiable set of actions would have had, as thus far Microsoft has yet to provide evidence (proportional to its size and available resources) of having truly begun to internalize the value of choice, collaboration and openness.

In order for any expressed commitment to be classed as credible there must be:

1. Mechanisms to carry out the commitment quickly
2. A clear intention to make good, including a history of carrying forward with previous commitments.
3. An inability or moral resolve to back down
4. The ability to gauge compliance to the terms of commitment.

I put a check next to both 1 and 4, as Microsoft always has had the brains and brawn to not only execute on a viable open source strategy but also figure out where, how and what changes need to be made. However, there just isn't enough body of work to support 2 or 3. Accordingly, I find it very difficult to classify this move by Microsoft as anything more than the submission of a set of licenses to the OSI, let alone assign credibility to any implicit commitment.

I also don't see it removing "...considerable roadblocks in better executing these strategies in coming years," as Gartner analyst Mark Driver stated. My question is how exactly does this remove any roadblocks? Especially since most of these exist as a result of the structural realities of being an entrenched market leader. More so, if the licenses are rejected do the roadblocks reappear out of thin air? In essence, armed with the existing knowledge of facts, it's basically possible to assert as much/as little about Microsoft's open source strategy as it is from a run-of-the-mill press release.

The counterpoint might be that the media/public/influencers would never be so easily lulled into mistaking announcement for actual deed. Nevertheless, when coupled with the attention afforded Microsoft's OOXML (DIS 29500) bid to become an ISO/IEC standard this year, in addition to the 2006 Novell patent deal it becomes clear how and why there are some who proclaim that Microsoft  is well on the way to truly supporting open choices. Granted, I agree that progress has been made to an extent far exceeding what a great number of anti-Microsoft folks were predicting. And efforts like CodePlex and the Shared Source Initiative indicate a step up from what was previously an anti-open source tone set by the company. Yet considering the gravity of the competitive threat posed to Microsoft interests by open source as well as activity by other industry leaders such as IBM, Sun and BEA, the aforementioned endure as little more than footnotes in the grand scheme of things.

The crux of the matter remains that embracing open - anything isn't a one foot in, one foot out proposition. There are, of course, steps which need to be taken towards an end goal but it really needs to be embraced completely from the onset. As a result, larger outfits with quite a bit invested in being closed will continue to find it a challenge to balance ever-present profit motivations and pressures with the act of facilitating the growth of open models. And often for good reason: strategies and perspectives for one side are often diametrically opposed to those on the other. Ultimately, success lies in grasping the implications of this certainty and allowing them to sustain as active guidelines (see: IBM). On these grounds Microsoft is getting warmer, but not warm enough, just yet, to herald dawn of a proven open source strategy.

Technorati Tags: Microsoft |  open source software | open standards |  Open Source Initiative (OSI) | competitive analysis