April 10, 2006 1:09 PM PDT

Red Hat and JBoss: No turning back for open source

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Szulik said that it will take two or three years to fully judge the wisdom of paying at least $350 million for a company with anticipated revenue of $60 million in 2006.

Healthy business ahead?
However the combination of the two companies works out, the move validates the notion that corporate customers want more than just Linux when it comes to open-source software, analysts said.

Indeed, open-source databases and middleware are two vibrant areas of open-source development, which has prompted entrenched suppliers to change their tactics.

IBM acquired a very small open-source Java application server company called Gluecode for less than $50 million. Oracle and BEA are making their Java server software work well with open-source Java tools.

In the database realm, Oracle sought, but failed, to acquire MySQL, a successful open-source company that earned almost $40 million in 2005. Oracle also bought InnoBase and Sleepycat, two specialized open-source database providers.

Microsoft, too, is adapting to the expansion of open-source practices: It now provides source code for some of its products and has signed partnerships with JBoss and with SugarCRM, an open-source application company.

Some argue that apart from licensing tactics, Microsoft and open-source businesses are a lot alike. Like open-source companies, Microsoft appeals to software developers and has always sought to create an ecosystem of third-party providers.

"Look at commercial open-source companies. How different is Red Hat's business model from Microsoft's? I'd say it's pretty marginal," said Jason Matusow, Microsoft's director of corporate standards, in a recent interview.

Some people, including Don Dodge, an executive in Microsoft's emerging business group, note that only a small number of open-source companies have made the same impact as Red Hat, MySQL or JBoss.

Yet MySQL CEO Marten Mickos last week said he is convinced a billion-dollar open-source company will arise with the same market influence as existing software providers.

"Red Hat is the grandfather...and all the rest of the open-source companies are emulating their business model," Mickos said. "It's important for people behind to see that there's a healthy business ahead."

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