Business Tech

It takes time, leadership, and a fair amount of luck to successfully build an open-source community. It also takes money. Lots of it, if IBM's $1 billion commitment to Linux is any indication.

Unfortunately, the return on such open-source community investments may be permanently scuppered by the European Commission's misguided defense of MySQL from Oracle's intended acquisition. If the EC is going to punish successful open-source endeavors like MySQL, will investors still clamor to finance the rise of open source?

In many ways, MySQL is the quintessential commercial open-source success story. On the financial side, MySQL managed to build a vibrant business, doing north of $90 million at the time of its acquisition by Sun Microsystems in February 2008.

Equally compelling, however, is the exceptional user and developer community that formed around the open-source database project, registering tens of millions of downloads and a massive developer community.

This community augmented MySQL's financial fortunes, of course, but it also protected MySQL database users from the whims of the company, as former MySQL CEO Marten Mickos wrote to European Competition Commissioner Neelie Kroes:

Even if Oracle for whatever reason would have malicious or ignorant intent regarding MySQL (not that I think so), the positive and massive influence MySQL has on the DBMS market cannot be controlled by a single entity - not even by the owner of the MySQL assets. The users of MySQL exert a more powerful influence in the market than the owner does.

Unfortunately, the EC seems intent on punishing MySQL--both community and company--for its success. Already the MySQL database project has started to fracture into competing forks, while business rivals like EnterpriseDB and IBM collect confused customers.

More worryingly, the EC's actions may end up diminishing potential returns to investors in other open-source projects, particularly those that take the added time and cost to build global communities.

Technology mergers and acquisitions activity is at a 20-month high. Open-source companies, however, may miss out on this resurgence, particularly those, like Acquia and EnterpriseDB, that build on successful open-source communities (Drupal and Postgres, respectively).

Indeed, based on the EC's actions, perhaps the worst thing these companies could do is foster successful open-source communities. Maybe they should just take the cash and run?

Consider: the EC didn't challenge Yahoo's acquisition of Zimbra, VMware's acquisition of SpringSource, Citrix's acquisition of XenSource, etc. What do they have in common? Rising revenue but, except in the case of SpringSource, much more limited communities than MySQL. (Even the Spring community pales in comparison to MySQL, impressive though it is.)

Granted, the major difference with Oracle/MySQL is that the two are ostensibly competitors, as CNET points out. In the letter referenced above, however, Mickos dismisses such competition. The reality is that MySQL and Oracle compete in two different database markets.

Regardless, as well as MySQL was doing, $90-plus million is spare change in the global database market. The EC, in other words, isn't trying to protect MySQL's business. It's trying to protect MySQL's community.

Such mollycoddling of an open-source community is destructive to all future investments in similar endeavors. Why should commercial entities bother fostering community--the very community that makes them less susceptible to hostile takeover and anticompetitive forces--if doing so simply ends up ruining financial returns?

The EC means well, but it is not doing the right thing for MySQL, its community, or other open-source commercial efforts. Quite the opposite. Just as the commercial open-source community has been pondering a move back to community-controlled open source, the EC threatens to hobble the shift.

The EC may well end up with less competition, not more, by blocking Oracle's proposed acquisition of Sun and its crown jewel, MySQL.

Novell on Monday introduced MonoTouch 1.0, a development framework for Apple's iPhone and iPod Touch that uses Microsoft's .Net with C# and other programming languages.

The MonoTouch framework, available on paid-subscription only, requires Apple's own software development kit and runs solely on Macintosh hardware.

"The vast majority of Windows-centric developers, ISVs, and IT organizations have chosen the C# language and .Net for development," said Miguel de Icaza, Mono project founder and Developer Platform vice president at Novell, in a statement.

"As such, we have seen tremendous demand for tools to build .Net-based iPhone applications."

To date, developers have had to use JavaScript or Apple's Objective-C programming languages to build applications for the iPhone.

MonoTouch supports most .Net functions, with some differences due to the different security model of the iPhone. There is no support currently for Silverlight or Moonlight, the media delivery and scripting functions of .Net.

The iPhone developer license forbids scripting engines or just-in-time (JIT) compilers, which .Net needs to run code.

"As a result, the world of iPhone applications had been previously closed to .Net and Mono developers. Developers can now use MonoTouch while fully complying with these license terms because MonoTouch delivers only native code," Novell said in a statement.

Reaction from developers has been mixed, with many commenting that the Mac-only, paid-for approach is disappointing, given that MonoTouch is built on the cross-platform, open-source Mono.

Zef Hemel, a researcher at the Delft University of Technology, said via Twitter: "I was excited about MonoTouch coming out to develop iPhone apps on Mono, but now that I see the pricing ($399 to $999) I'm not."

MonoTouch costs $399 per year for an individual license, $999 per developer for an enterprise license, or $3,999 for five enterprise licenses. An evaluation version will be made available later this week, de Icaza said.

Rupert Goodwins of ZDNet UK reported from London.

Novell reported on Thursday a 22 percent year-over-year increase in its Linux revenue, topping $40 million. That's the good news. The bad news is that overall, net revenue slumped to $216 million from $245 million for the third fiscal quarter of 2008, with every product besides Linux dropping considerably. From identity and security management (down 16 percent) to systems and resource management (down 15 percent) to workgroup (down 12 percent), Novell is in serious trouble, with at least two potential options:

Turn to the open-source community or Microsoft to fix its failing businesses.

Novell's Open Platform business, of which Linux comprises the majority of revenue, has consistently soared for several straight quarters. Though it has had hiccups, Linux has been a factor in Novell's resilience through the downturn. This is either a factor of Novell's commitment to open source or its partnership with Microsoft, or both.

Whichever it is, Novell needs more of it. Now.

Novell's Workgroup business has been underperforming for years now as the company tries to Band-Aid the declining relevance of its once-leading solutions, like GroupWise. It's time to either amputate (sell off assets) or graft new products onto the product line. Companies like Jive, MindTouch (Disclosure: I am an adviser to MindTouch), Open-Xchange, and others could fill out Novell's Workgroup product offering.

Ever the savvy operator, Novell CEO Ron Hovsepian was able to steer the company to positive growth in operating margin, but now he needs to turn around the company's revenue story. His contention that Novell's "revenue performance was similar to many companies in the software industry" is certainly not true of Novell's chief Linux competitor, Red Hat, which has thrived through the recession, even despite plummeting semiconductor sales, signaling lower overall demand for the servers and personal computers that fuel Novell's business.

That's not to suggest that everything is rosy at Red Hat. As The 451 Group reports, Red Hat's rate of revenue growth has steadily declined over the past few quarters, requiring it to take some action to kickstart growth.

Fortunately for Red Hat, the market has clearly signaled that it welcomes acquisitions, as its highest valuation in the past five years came on the heels of its JBoss acquisition. Apparently, investors would like to see Red Hat grow beyond its core Linux business.

Back to Novell. The company needs a growth strategy, and it has only found two ways to grow over the past few years: open source and Microsoft. One or the other will do. Novell's current strategy of using Linux as a loss-leader of sorts to promote its separate, proprietary products is not working.

Follow me on Twitter @mjasay.

A bankruptcy court judge has denied a request by the SCO Group to sell off part of its business, a move that could have helped it pursue court cases against Novell and IBM.

SCO, which has been in bankruptcy court since 2007, had proposed to sell off most of its Unix business assets to a company called Unxis, the latest in a series of proposals aimed at allowing the company to exit bankruptcy and continue its high-profile Unix litigation.

IBM and Novell, on the other hand, had requested that SCO's assets be liquidated, effectively putting an end to the cases against them.

On Wednesday, U.S. bankruptcy court judge Kevin Gross denied both motions. Instead, he appointed a trustee to take control of SCO and evaluate how the company should proceed in its efforts to exit bankruptcy protection. Part of the trustee's remit will be to evaluate SCO's chances of winning its Unix case, Gross said.

"The 'potential' of the litigation must...be weighed against the reality of the cost," Gross wrote. "A trustee will be in a better position to make that assessment without the personal and emotional investment of SCO's management."

In 2003, SCO launched a lawsuit against IBM, saying the company infringed on SCO's intellectual property by including code from Unix in Linux. However, in 2007 a judge found that Novell, rather than SCO, owns the copyrights covering Unix. As a consequence of that decision, Novell is pursuing SCO in court for a share of the fees SCO received from licensing Unix to Sun and Microsoft.

Gross noted that since 2007, SCO has offered several plans for reorganization and then withdrawn them, and argued that the latest sale proposal "calls into question whether the sale has a sound business purpose and raises doubts of the parties' good faith."

It is now necessary for a third party to take charge, according to Gross. "No one can fairly argue that the court has not been patient with the debtors. The court is now unwilling to continue to wait while debtors' losses mount," he wrote.

SCO had proposed to sell its Unix business for $5.25 million (3 million British pounds), keeping only its mobile applications business, which the judge deemed "virtually worthless." He said SCO's officers had "bet the company" on the litigation, which would be SCO's "sole business" if the Unix assets were allowed to be sold.

In a statement, SCO said it was reviewing the decision and evaluating its options.

Matthew Broersma of ZDNet UK reported from London.

Several open-source software companies and many other allies have banded together in a consortium called Open Source for America to try to persuade the U.S. government to use more of the collaboratively developed software, to participate in its development, and help its practitioners work with the government better.

The group includes more than 70 companies, academic institutions, organizations, and individuals. Among them are Linux sellers Red Hat, Novell, and Canonical; software sellers Sun Microsystems, its would-be acquirer Oracle, Mozilla, SugarCRM, Alfresco Software, Pentaho, Revolution Computing, Zmanda, EnterpriseDB, and Yahoo's Zimbra; and open-source allies including Advanced Micro Devices and Google. The full list, in all its glory, is at the organization's site, along with further lists of its board of directors, steering committee, and technical steering committee.

The group's ambitions are as broad as its membership.

"Open Source for America is bringing together some of the industry's brightest minds, who will work together with policymakers and the public so that technologies enabled by the software freedoms can help make government IT deployment more secure, more cost-effective, faster to deploy, with greater privacy, and the ability to help eliminate vendor lock-in," said David Thomas, principal with Mehlman Vogel and the organization's spokesman, in a statement. "Open-source software may not be a cure-all, but it could save billions of dollars, help foster innovation, and empower our government to work smarter."

The announcement was made in conjunction with the OSCON 2009 open-source conference.

Google's still-nascent efforts to dominate the mobile market, already reeling from Apple's surging iPhone platform, were dealt another blow on Thursday when Intel and Novell announced that they will collaborate to promote Intel's Moblin operating system, a rival Linux distribution for mobile devices.

Whereas Google is initially targeting smartphones with Android (though an Android-based Netbook has apparently been released), Intel is targeting Moblin at Netbooks.

Additionally, Android and Moblin aren't simply two different Linux distributions, in the way that Red Hat Enterprise Linux and SUSE Linux Enterprise Server are. Android and Moblin use Linux in different ways, as Dirk Hohndel, Intel's chief Linux and open source technologist, suggested to me:

Moblin is Linux for mobile devices, (and its) first focus is on Netbooks. Android is an (operating system) for phones that uses a Linux kernel...very different.

Novell's Justin Steinman, vice president of solution and product marketing, said in a follow-up conversation:

Moblin 2.0 is the first open-source Linux software stack and technology framework designed from the ground up for the Netbook device type. Essentially, Moblin plans to start at the Netbook layer of the stack, and then work its way down to the smaller mobile devices. Given Novell's strength in delivering desktops based on Linux, it made sense for us to collaborate closely with Intel to deliver the optimal user experience on Netbooks.

Given Apple's rising dominance in smartphones and Symbian's lingering power in other mobile devices, this seems like a smart, strategic move. The Netbook market is still wide open, with Apple currently disdaining to enter it and Microsoft bleeding cash to hold its ground against Linux.

Though Ubuntu made the first forays for Linux in the Netbook market, could it be Novell and Intel that end up dominating it?

Maybe. Maybe not. The one sure thing, at least for now, is that Microsoft may win the short-term Netbook war, but it still needs a long-term, winning game plan for mobile.

The mobile market is fascinating because it is uprooting long-held beliefs about how and where to compete in software. Intel, Google, and Apple, each fiercely contending for dominance, share a common strategy: they're investing in the operating system but planning to make their money elsewhere (Atom chips, in Intel's case; advertising and revenue-sharing with application vendors, in Google's; hardware and revenue-sharing with application vendors, in Apple's).

Such strategies stand in stark contrast to Microsoft, which persists in trying to monetize its mobile Windows platform.

Small wonder, then, that Microsoft is losing the mobile battle. It's fighting with the wrong ammunition.

Back to Google. While it seems clear that Intel's Moblin initiative is an attempt to fend off Google's looming Android threat, there's probably enough time for Intel and Novell to stake out a strong position in Netbooks that Google will struggle to overcome.

Regardless, the one player left out in the cold in all this activity is Microsoft. Google, Novell, Intel, and Apple are each putting hefty resources into winning the mobile market, but doing so in a way that undermines Microsoft's traditional approach of licensing only the software. Microsoft's Xbox experience suggests that it can do hardware right, but will it be able to catch up if it starts chasing its competition?

Follow me on Twitter @mjasay.

Novell on Tuesday released Suse Linux Enterprise 11, which includes for the first time a full runtime environment for Microsoft .Net applications.

The open-source company said the new version of the data center operating system shows improvements over its predecessors in terms of interoperability, mission-critical computing, and virtualization.

One of the key enhancements in Suse Linux Enterprise 11 is its Mono Extension. Mono is an open-source project that aims to create a .Net-compatible set of programming tools, including elements such as a C# compiler. According to Novell's product director for the EMEA region, Holger Dyroff, the addition of commercial support for Mono means Suse Linux Enterprise 11 users can migrate their existing .Net applications across to the Linux platform.

"We have an online tool for customers to test their .Net applications and see if they run on Mono," Dyroff told ZDNet UK on Tuesday. Microsoft's rich Web media technology, Silverlight, is now also supported with the inclusion of Moonlight, the Mono project's open-source alternative to Silverlight.

Novell has overseen Mono since it bought the developer Ximian in 2003. Asked why it took so long for Novell to provide commercial support for the project, Dyroff said it had in fact provided commercial support to some customers for a while, as part of Novell's consulting work.

"We needed to be convinced that Mono was completely enterprise-ready," Dyroff said, adding that Novell also had to be sure it could provide full support for the product. "The feature set is now rich enough to run most of those .Net applications--the success rate is now above 50 percent without changes, which is a big step forward for our Mono offering. It is important that, when we make a certain promise to the customers, we need to be knowledgeable enough and sure it's really going to run."

The Mono extension is joined in the new version of the platform by the High Availability Extension, a clustering product that will, according to Dyroff, "allow customers to run their mission-critical workload in a high-availability clustered way." The benefit of this feature for Novell, he said, was that it would allow the company to further tempt the Unix market to migrate to Linux.

"Customers running (Unix platforms such as) Solaris have told us they would turn away from that Unix platform if they had a high-performance, feature-rich high-availability offering in the Suse Linux portfolio," Dyroff said. "Unix-to-Linux migration still (brings) the most common new customers into the Linux platform."

Dyroff said IBM's rumored desire to buy Sun had been helpful for Novell, by making Sun's customers wonder "what will happen in the future with the Solaris platform, the Sparc processor and so on."

Collaborating with Microsoft
Asked whether Novell's close collaboration with Microsoft weakened Suse's position as a challenger to Windows, Dyroff claimed such co-operation made it easier for customers to adopt Linux.

"I do think that the collaboration we're having on a technical level does not in any way influence the competition we are experiencing on a business level," Dyroff said. "We are fighting hard. We are working with customers and (independent software vendors) to put (products) together that attack areas which are Microsoft strongholds."

"Customers have a need to run Microsoft Windows and Suse Linux Enterprise or other Linux offerings side by side," Dyroff said. "Therefore, that technical collaboration is important to be able to do seamless migration and integration, and compete on a value level rather than disappointing the customer."

Novell said in a statement Tuesday that Suse Linux Enterprise 11 is optimized to run at "near-native" performance on major hypervisors such as VMware ESX, Microsoft Hyper-V, and Xen--the new Xen 3.3 hypervisor is included in Novell's new distribution.

The distribution will also be certified and supported for Amazon's Elastic Compute Cloud (EC2), making it possible to run Suse-based virtual machines in the cloud.

Novell has also released ZenWorks Linux Management 7.3, a management tool for desktop and server systems. This, along with Suse Linux Enterprise Server 11, Suse Linux Enterprise Desktop 11 and the Mono Extension, is available now.

The High Availability extension will be released in the second quarter of this year.

Novell also announced Suse Linux Enterprise JeOS ("just enough operating system") on Tuesday, along with a set of tools that it said will allow independent software vendors to "assemble a virtual appliance with just the pieces of Suse Linux Enterprise necessary to support their specific application." That product will become available in April.

The company also said that later this year it will release updates for Suse Linux Enterprise Point of Service, Suse Linux Enterprise Real Time Extension and Suse Linux Enterprise Thin Client.

David Meyer of ZDNet UK reported from London.

This was originally published in ZDNet's Between the Lines.

Novell's fiscal first-quarter results were a mixed bag, and Linux invoices fell sharply as the company failed to sign big deals.

For the first quarter, ended Jan. 31, Novell reported non-GAAP earnings of $24 million, or 7 cents a share, on revenue of $215 million. Those results were a penny better than Wall Street estimates. Net income for the first quarter was $11 million, or 3 cents a share.

On the surface, Novell's quarter told a familiar tale. Open platform sales, which are dominated by Linux offerings, were $35 million, up 24 percent from a year ago. Other units had a mixed performance. Novell CEO Ron Hovsepian said that "invoicing was below our expectations in this weak economy."

Hovsepian elaborated on Novell's earnings conference call. Linux, viewed as Novell's growth engine, sputtered in the quarter. Hovsepian said:

Our Q1 Linux performance did not meet our expectations as our pipeline coverage and conversion was overly reliant on direct sales and sales cycles lengthened. Going forward, we are focused on building our pipeline with and through partners and we will be aggressive on pricing to gain market share.

Novell CFO Dana Russell noted:

Linux invoicing was $23 million, down 42%. As we have stated before, our Linux business is dependent on large deals which may result in some fluctuations of our quarterly invoicing. This quarter we did not sign any large deals, many of which have been historically fulfilled by Microsoft certificates. Today we have invoiced $199 million or 83% of our original $240 million agreement.

Add it up and it appears that the Microsoft reselling agreement that put Novell's Linux business on the map has played itself out. Meanwhile, an aggressive pricing strategy-for services attached to free software-can't be good for profit margins going forward.

On the bright side, Novell said it is rolling out Suse Linux Enterprise 11 later in the quarter. That rollout may improve Novell's Linux invoicing fortunes.

Needless to say the Microsoft agreement gravy train was the big topic among analysts covering Novell. A few nuggets gleaned from Novell executives:

• Russell said that "customers certainly are price-sensitive" and Novell expects that the prices for Microsoft-Novell Linux certificates are not going to hold.

• Demand generation for Novell's Linux business is the company's responsibility-not Microsoft's. The big problem was that Novell was relying on big deals that failed to materialize.

• Invoicing for Novell's Linux certificates appear to be moving back to historical norms, said Russell. If that's the case then the first quarter hiccup will be an aberration.

For years, Microsoft has insisted that open-source vendors acknowledge that its patent portfolio is a precursor to interoperability discussions. On Monday, Microsoft shed that charade and announced an interoperability alliance with Red Hat for virtualization.

The deal includes several key components, all related to virtualization:

• Red Hat will validate Windows Server guests to be supported on Red Hat Enterprise virtualization technologies.
• Microsoft will validate Red Hat Enterprise Linux server guests to be supported on Windows Server Hyper-V and Microsoft Hyper-V Server.
• Once each company completes testing, customers with valid support agreements will receive coordinated technical support for running Windows Server operating systems virtualized on Red Hat Enterprise virtualization, and for running Red Hat Enterprise Linux virtualized on Windows Server Hyper-V and Microsoft Hyper-V Server.

Pretty straightforward, as interoperability should be, and driven by customer demand for Microsoft technologies running alongside Red Hat's, according to Mike Neil, general manager of Virtualization Strategy at Microsoft. The top Linux vendor partnered with Microsoft: this is a major win for customers.

Crucially, Red Hat's interoperability deal with Microsoft does not include any patent covenants, the ingredient that torpedoed Novell with the open-source community:

The agreements establish coordinated technical support for Microsoft and Red Hat's mutual customers using server virtualization, and the activities included in these agreements do not require the sharing of IP. Therefore, the agreements do not include any patent or open source licensing rights, and additionally contain no financial clauses, other than industry-standard certification/validation testing fees.

Red Hat has long argued that patent discussions only cloud true interoperability, which is best managed through open source and open standards.

While Red Hat has flirted with such interoperability before by joining with Microsoft in the somewhat toothless Vendor Interop Alliance, this is its first direct interoperability initiative with Microsoft.

What most people don't know is that Red Hat had been discussing interoperability initiatives with Microsoft for a year before Novell and Microsoft tied the knot, but Microsoft ultimately derailed the talks by trying to introduce a covenant not to sue over patents, similar to what it ended up negotiating with Novell. Red Hat rejected this unnecessary inclusion, left the bargaining table, and Microsoft connected with Novell to use interoperability as an excuse to attack open source.

Monday, Red Hat and Microsoft have together demonstrated that interoperability can exist independent of back-room dealings over patents. Microsoft has increasingly been forced to open its stance on patents by the European Commission, anyway, proving Red Hat's resolute stance against patents was the right one. But this announcement suggests that Microsoft is maturing in its views on how to interact with open-source vendors.

It also suggests that Red Hat is maturing in its realization that it must interoperate with the old world of proprietary software even as it attempts to forge a new one of open-source software. Red Hat has long depended upon proprietary software: Red Hat Enterprise Linux's success has derived from its support for Oracle and other proprietary vendors.

Both Red Hat and Microsoft on Monday lowered their guns long enough for customers to win. They did so without encumbering interoperability with patents, which will be critical to ensuring that Microsoft can lower its guard further to welcoming open-source solutions to the Windows fold as a full partner.

Follow me on Twitter at mjasay.