Newsmaker: Taking stock at JBoss

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increasing, it's adoption is increasing.

The venture capital money market recognizes that open source is here and going to stay, and they are saying, "We might as well try to build companies around that movement."

As one of the leaders in the space, along with MySQL and companies like Red Hat, I wish them luck. I want to see them succeed. We need more companies in the open-source space to gain bigger validation, like the older companies did, at one period in time.

The big change with an open-source business model is usually that vendors don't charge for a license. And clearly, the subscription model of charging customers is gaining favor. But is a company sustained by support revenue proven in the software industry?
Fleury: What we're doing and what Red Hat is doing shows that these are very profitable operations.

The speed at which you're forced to do the transition becomes the real management issue. Too fast, and your P&L gets thrown off balance.

It's not surprising that open source focuses on the support and service portion of software, which is the profitable part of software, anyway. The state of software today is that licenses are not profitable but rather cover the cost of sales and marketing. Because we have a much lower cost of sales and marketing, we can do without a license. We know that the financial model is viable--it's just the old model minus the license, which doesn't generate profit, anyway. Will everyone survive? We'll see. Will there be a big company? I sure hope so.

What's the financial picture at JBoss?
Fleury: We are cash flow-neutral. There's more cash coming in than cash coming out, which is the basic financial definition of cash flow profitability. We're funding our growth by operations, as opposed to by equity capital.

Are you planning on going public?
Fleury: We are always operating to go public. That's a goal of any start-up.

I was at a meeting this summer, where you and an IBM software executive had a public debate. And you told the IBMer, "You don't control the time frame." What did you mean by that? Were you saying you're going to commoditize your markets?
Fleury: Everybody understands the end game: a mix of proprietary and open source. I think your blog covered that I'm fond of saying that (eventually), it's going to be IBM, Microsoft and JBoss. And also from a financial subscription model, pure maintenance is the way to go. It's true that IBM, BEA and Oracle still have big license businesses today. IBM still makes $2 billion on WebSphere licenses. How do you transition from a world where you have a heavy dependency on licenses to a world that is purely maintenance? That transition is what can hurt you. The speed at which you're forced to do the transition becomes the real management issue. Too fast, and your P&L gets thrown off balance.

And you want to throw the others off balance?
Fleury: No, I don't want to throw anybody off balance. I'm in the business of building JBoss. But it is a difficult point for IBM. The speed at which we commoditize is an issue. They're comfortable with low-end offerings; they're less (comfortable) with high-end.

The (Microsoft) announcements put the spotlight on the fact that nobody has the monopoly on loving open source. IBM is pushing open source when they really mean to be pushing Linux, because that helps them fight Microsoft. But when it comes to their own software, it's a different story. Microsoft can turn the tables and say, "We love these (JBoss) guys, and now go figure it out."

So open source is a major trend, not just us. You can see a whole cottage industry doing that, and the big guys are seriously thinking about the future and where it goes.  

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