Who needs an open-source strategy? You do

It's no surprise that Oracle CEO Larry Ellison is on the prowl to acquire more companies, as reported by CNET, given that it gives him a chance to go shopping on the cheap.

.If times are tough, there are other opportunities...including making acquisitions that cost less... (A)cquisitions that we've been looking at for some time are less expensive for us.

Is Red Hat one of them?

I hope not, but there are plenty of good reasons for Oracle to be looking at acquiring an open-source company like Red Hat, or to be contributing significantly to various open-source projects. Open-source companies like Pentaho, Digium, and others should be attractive buys and open-source projects should be compelling strategies right now, for a few different reasons:

1. Open source provides an efficient way to attract new customers. Oracle, IBM, SAP, and others spend huge piles of cash attracting new customers. Meanwhile, open source keeps making inroads at the departmental level of large companies and is using such beachheads to expand into enterprise-wide use. Sun is using a variant of this strategy with MySQL: MySQL gets the CIO's phone number with a free download; Sun follows to get the CIO's wallet with not-so-free systems.
2. Open source provides a clear up-sell opportunity for proprietary software vendors. IBM for years has been acquiring (e.g., Gluecode) or building (e.g., Linux) low-cost alternatives to its high-priced proprietary offerings, both to serve as "low-end" gateways to its higher-margin proprietary offerings like Websphere.
3. Open source provides a way to maintain existing customers by offering low-cost alternatives in case a customer plans to replace his or her products. There will be a flight to value in this recession, as in others. By keeping that low-price, open-source rival in house, proprietary vendors can ensure that customers seeking lower-priced offerings will find them...on these same vendors' price sheets.

In these ways, open source offers proprietary vendors a way to enhance, rather than to replace, their offerings.

Left to themselves, open-source vendors and projects will continue to eat away the revenue streams of proprietary competitors. It has boggled my mind lately to see proprietary vendors still hoping to compete with deficient software and price tags of $2 million or more for business problems worth $100,000 to $200,000, when the customer is fully aware of superior open-source solutions. It won't continue.

An IBM may be impervious, but most proprietary vendors are not. Not for long, anyway.

[arjenlentz]

Where this idea might be flawed, is that people are wizening up to the traditional "upsell".
Open Source is often chosen for budgetary reasons. Calling the CIO with a (possibly great but) costly auxiliary offering is going to get the "get real" answer rather more often, as the number of open source solutions for those offerings is also on the increase.

That said, Sun indeed appears to have a great offering with its hardware. The x86 servers are very competively priced, and will run either Solaris or Linux very well. It may not be supercheap, but it's not hugely expensive either. I think that's good.

[Pishkado]

It's certainly true that every vendor needs an open-source strategy. In some cases the best strategy might be to do nothing, but that should be a deliberate and carefully-thought-out decision - not just failure to deal with reality.

Some prospects or customers won't want open-source solutions, but some will. For those, nothing a software vendor can do will stop them from getting it. The vendor's only option is to make it possible to get it from them. Failure to recognize this has caused the downfall of many companies, in hardware and software, throughout the history of computing.

(BTW, the first poster might want to look up "wizening" in a dictionary before using it again. I suspect he or she meant "wising.")

[jessiethe3rd]

Great idea... bait and switch - your great open source strategy starts out as free software until you start analyzing the cost to support an open source environment. It means more development time, higher support costs, and higher implementation costs. It's well know that those companies you are speaking about (Oracle, IBM, SAP) have some of the most expensive consultants in the business. Open Source is some what of a trojan horse for these companies. Sure they'll get their hooks in them to "advance the cause", however, companies need to make money in the end. Yes, they are spending massive amounts of money on the technology... that's to get into your door and sell you services and a lot of them down the line.

Names will go nameless but seriously - IBM/Oracle/SAP/Sun... companies are looking to standardize on a platform to keep costs down. Why have many platforms and high support costs to manage a disjointed system all at the sake of having "free" software? It's a bunch of hog wash. Proprietary companies are here to stay.

[odubtaig]

It's complete garbage that F/OSS costs more to support and anyone not relying on MS paid 'studies' knows this. What's best for each company in terms of TCO is 100% situational.

If IBM's upselling to AIX it's in no small part because, company secrets and all, only AIX can take full advantage of the Power 6 architecture which, for those who don't know, makes Xeons look like ZX Spectrums and a subset of which runs those blade servers they're always pushing.