The Open Road

Oracle is determined to keep MySQL if it acquires Sun, but the reason likely has little to do with open source and everything to do with Microsoft. Oracle doesn't compete with open source. Not really. Open source is simply a means to an end, and in the case of MySQL, a means to denting Microsoft's rising strength in emerging markets where Oracle's expensive database technology doesn't resonate.

Oracle CEO Larry Ellison has said that he has no intention of spinning off MySQL to win EU approval of Oracle's bid for Sun. This isn't because Ellison has a soft spot for open source, but rather because MySQL helps Oracle compete in markets--like Web applications, small- to medium-sized businesses (SMBs), and emerging markets--where its existing database technology doesn't compete well, but in which Microsoft's SQL Server does.

In fact, in a recent survey by Evans Data, over 50 percent of developers in the emerging markets of China, India, Eastern Europe, and Latin America use Microsoft's SQL Server, compared to 46 percent using MySQL.

Oracle database technology? It's used, but not nearly as extensively.

MySQL gives Oracle a club with which to beat Microsoft. It's not about open source. It's about the MySQL developer community and its competitive price point, two things that Microsoft also has going for it. Arguably, though, open source provides Oracle a strong competitive differentiator against Microsoft in these markets.

Even so, I think we'll eventually see open source aiding both sides in this battle, as Microsoft learns to drop its acrimonious stance toward open source and instead strategically embrace it, as IBM, Oracle, and others have done before it.

Oracle can't afford to abandon MySQL. It's the key to unlocking its ability to effectively compete with Microsoft in tomorrow's big markets.

Red Hat is generally credited as the industry's leading open-source company, but it's a distinction that is as meaningless as it is incorrect. While Red Hat's revenue directly derives from the open-source software it develops and distributes, other companies like Sun, IBM, and Google actually write and contribute far more open-source code. It may be time to stop talking about open-source companies and get back to the importance of open-source code.

Open source is increasingly the foundation upon which software and Web companies depend. MySpace made waves on Tuesday by open sourcing Qizmt, a distributed computation framework (running on Windows Server, intriguingly) that currently powers MySpace's "People you may know" feature. But MySpace, as VentureBeat notes, was simply playing catch-up to Facebook's recent open sourcing of Tornado.

Neither move is an attempt to score brownie points with the "in" crowd. Both moves are motivated by self-interest, self-interest that increasingly requires inviting developer communities to embrace and extend one's Web services/software through open source.

It's also a way to improve software quality. By embracing open-source projects as a foundation for a company's software, and then extending it through its own open-source projects, the collective quality of open source is strong and growing, as Accenture's Kit Plummer notes.

It's this enlightened self-interest and the quality is engenders that has turned open source into essential infrastructure for virtually all commercial software, and which means Red Hat and other pure-play open-source companies are no longer the center of the open-source universe.

The Linux kernel is comprised of 11.5 million lines of code, of which Red Hat is responsible for roughly 12 percent (measured in terms of lines of code changed). Even if we add in JBoss Application Server (another 2 million lines of code or so) and other Red Hat projects, we're still left with far less open-source code from Red Hat than from others.

Take Sun, for example. Sun is the primary developer behind Java (more than 6.5 million lines of code), Solaris (over 2 million lines of code), OpenOffice (approximately 10 million lines of code), and other open-source projects.

Or IBM, with 12.5 million lines of code contributed to Eclipse alone, not to mention Linux (6.3 percent of total contributions), Geronimo, and a wide variety of other open-source projects.

Google, however, is the most interesting company of all, as it's not a software company, per se. I asked Chris DiBona, Google's open source and public sector program manager, about Google's open-source contributions. His response:

Conservatively, we've released about 14 million lines of code. Android tops 10 million lines of code, and then you have Chrome (2 million lines of code), GWT (300,000 lines of code), and about a project released every week over the last five years. Then you have a couple hundred Googlers patching on a weekly or monthly basis.

While DiBona was quick to suggest that Google doesn't claim the crown for Open Source Top Contributor ("We'd say we're 'among' the largest [contributors]"), it almost certainly is the world's largest open-source code contributor, especially when one considers its other open-source activities, including hosting perhaps the world's largest repository for open-source projects, with more than 250,000 hosted projects, at least 40,000 of which are actively contributed, not to mention its Summer of Code. After all, lines of code, while useful, is not necessarily the best measure of the value of open-source contributions.

In fact, Patrick Finch of the Mozilla Foundation speculates that Google's best open-source contribution may have nothing to do with writing new code at all:

Google's biggest contribution to open source is arguably not code, but proving that you can scale Linux on whitebox hardware.

It's a great point, and one that underscores the fact that the "open-source company" distinction is somewhat useless. Google doesn't call itself an open-source company, and rightly so. Open source is simply part of its strategy for distributing software that will help it sell more advertising.

Sun attempted to turn itself into an open-source company, but once Oracle completes its acquisition of Sun, Oracle certainly won't take on that label. Not because it's a bad label, but because it's simply not a useful one anymore.

We are all open-source companies now. Which also means that none of us are. Open source is simply a way that we enable some aspect of our businesses, whether we're Red Hat or Microsoft or Google or Facebook.

And given that Web companies like Google don't need to directly monetize open source, we may actually see far more open-source code emerge from these Web companies than we ever have or ever will from traditional "open-source software companies" like Red Hat, MySQL, or Pentaho.

Open-source advocates need to get their stories straight. Are we a big-tent movement, or a parochial club that is hell-bent on limiting membership...and efficacy? Unfortunately, it increasingly seems that the open-source community is determined to be the latter, and has taken positions on various events that are out of keeping with the founding principles of open source.

Take Microsoft. The company has long been a controversial figure in open source, as well as in the broader technology industry, and for good reason. Conviction for abusing monopoly power will do that to you.

But Microsoft has spent the past few years extending an olive branch to the open-source community, only to be criticized, questioned, and rebuffed. Last week the software giant created the CodePlex Foundation, designed "to enable the exchange of code and understanding among software companies and open-source communities." The foundation has assembled a solid core of directors and advisors, including Stephen Walli and Monty Widenius (formerly of MySQL).

"I don't believe it for a minute," thunders Steven J. Vaughan-Nichols, speculating that "Microsoft doesn't mind stealing from open source, but any deals it makes are only good while there's a clear, short-term benefit to Microsoft." This is probably true, but it's equally true of every profit-seeking company on this planet, minus the emotionally-charged (and inaccurate) term "steal."

Do Google, IBM, SAP, Jive, MySQL, Red Hat, etc., use open source to advance their self-interest? You bet they do. They have a fiduciary duty to do exactly that. And do they selectively adopt open source without always contributing back? Of course.

Let's face it: no one--even open-source community contributors--writes open-source software purely out of the goodness of their hearts. This shouldn't be a surprise: open-source luminary Eric Raymond wrote about it over a decade ago.

But it's telling that Microsoft is the company singled out, more often than not. It is very likely that Microsoft could open source every line of its code and still be treated like a pariah by the open-source community.

Or, rather, by a vocal segment of that community. It's the part that doesn't have to meet a payroll. Perhaps the sort of person that Hugh MacLeod was referencing in a tweet he made: "It's easy to spot a purist. They're the ones without any skin in the game."

When your only job is to yell down others, you don't need to pay much attention to what you say.

But Microsoft isn't the only company to get pilloried. Oracle gets its fair share of abuse, too, and often enough on this blog. It seems that abuse is proportional to one's income statement, and the potential to abuse one's market position to the detriment of customers, as BusinessWeek recently wrote of Oracle.

Hence, ever since Oracle announced its intention to acquire Sun and, hence, MySQL, some within the open-source community have been wringing their hands at a frenetic pace. "Oracle will kill MySQL!" they moan.

Gartner rubbishes this concern, insisting that "the fact of the matter is (Oracle) cannot destroy the (MySQL) product." It's licensed under the GNU General Public License, after all, which preserves the freedom to fork the code. In fact, MySQL has been forked several times already.

This isn't to suggest that Oracle couldn't damage MySQL by slowing its development, or shutting down internal development altogether. Of course it could: Sun/MySQL employs the overwhelming majority of developers who write MySQL. To control them is to control the code.

But if there's any truth to open source's claims that it provides freedom (through the right to fork), then owning MySQL, the company, shouldn't be tantamount to owning MySQL, the code, and Monty Widenius, and others could merrily pick up where Oracle left off.

It's easy to spot a purist. They're the ones without any skin in the game.

--Hugh MacLeod, Gaping Void

That is, assuming we really believe open source is a liberating force. Do we?

I do. That's why I don't worry about Oracle's impact on MySQL. Heck, I figure Red Hat or someone would simply hire the MySQL engineers and start MySQL II if Oracle attempts to kill the project (which I don't think it has any intention to do).

It's also why I welcome, not reject, Microsoft's attempts to open itself to open source. Those with no skin in the game find it easy to point fingers and malign others' imperfect attempts to engage. They forget that it's hard for closed-source companies to open up, as SAP's Dirk Riehle writes, but with the incentives to open up increasingly visible, companies will find a way.

We should be encouraging them to do so, not second-guessing their every move. And we should recognize that there are times when the open-source alternative is not ready to displace a proprietary incumbent, as Esther Schindler notes, which means that we're going to need to learn to get along for many, many years.

I'm not suggesting that Microsoft or Oracle has been perfect. But don't believe that IBM, Red Hat, Alfresco, MySQL, or (insert vendor of choice) has been perfect, either. Each of us is making this up as we go along. Sometimes we screw up, but that doesn't mean it's intentional.

Oracle has much to say to Sun Microsystems customers in a front-page advertisement it placed in Thursday's European edition of The Wall Street Journal.

The advertisement commits to greater investments in Sun hardware and Solaris software, but has absolutely nothing to say about MySQL. Is this a necessary omission to appease European regulators, or is it a sign of Oracle's intentions?

In the advertisement, Oracle commits to the following:

IBM, which has been cleaning up at Sun's expense, gets a warning from Oracle CEO Larry Ellison: "We're in it to win it. IBM, we're looking forward to competing with you in the hardware business."

Sun's business has tanked in the ongoing uncertainty over Oracle's takeover bid. The advertisement is clearly intended to placate customers that might otherwise flee to the apparent security of a relationship with IBM or Hewlett-Packard.

It's interesting, therefore, that Oracle gives no assurances about MySQL. This could simply be a politic action designed to sidestep the ire of the European Union, which has been investigating the effects an Oracle acquisition might have on Sun's MySQL business.

Or it could simply be a recognition that assuaging the fears of MySQL's customers is a comparatively unimportant task. MySQL was doing roughly $100 million in sales at the time Sun acquired the company. Given that Sun stands to lose billions in its hardware business the longer the Oracle bid drags on, losing a few tens of millions from MySQL is pocket change.

Besides, it's not at all clear that Oracle's decision to snag Sun has done anything to slow MySQL adoption. A vocal minority within the open-source development community has wrung its hands over the deal, but I've yet to hear MySQL's customer base, which skews toward the technology-savvy Web crowd, fretting about Oracle's impact on MySQL's business.

Oracle's advertisement is designed to shore up confidence in the CIO crowd that still buys Sun and probably has no clue that their organizations are running MySQL throughout the enterprise. At some point they'll know. But by that time, Oracle's acquisition of Sun should be complete.

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The European Union undoubtedly believes it is taking a principled stance against the specter of antitrust as Oracle attempts to buy Sun Microsystems. As I've written, however, the EU's delay threatens to gift Sun's customers to IBM and other competitors while doing little to no good for its MySQL business. Worse still, the EU may be paving the way for Oracle to drop its bid, only to return to scoop up Sun's software assets at a rock-bottom price.

Think this is far-fetched? Consider the following (increasingly likely) scenario:

Let's say the EU holds up Oracle's acquisition of Sun by four months. In the technology world, this is an eternity. The lack of clarity around the business has already contributed to two woeful quarters from Sun, with Q4 revenue down 31 percent year-over-year.

Sun's revenue drop is bad, but it will almost certainly get worse the longer the EU drags out its "in-depth investigation." How much worse? Perhaps 50 percent. Heck, perhaps as bad as 80 percent. IBM and HP, in particular, have been crowing about hundreds of Sun customers jumping ship in the wake of Oracle's beleaguered acquisition. Thirty-one percent may come to seem like the good ol' days.

The sad thing is that the EU will almost certainly bow to the inevitable and withdraw its objections. It will look silly for holding up a deal on the specious grounds of MySQL's health (it's doing just fine, thank you, and isn't in danger of being lobotomized by Oracle, which likely will prove to be a better manager of this asset than Sun was).

The EU, unfortunately, is likely not to notice just how silly its stance was, and we'll see other companies go through the same rigamarole.

Regardless, Oracle isn't a silly company, and isn't going to pay top dollar for a diminished asset. It would not be surprising to see Oracle drop its offer by as much as 50 percent, claiming it's actually a premium as revenues are down by more than that. (There is precedent for this in Oracle's various offers for PeopleSoft.) Sun, ruined by this point, would have little choice but to capitulate.

All of which would make Oracle's acquisition of Sun's software business even better than before. As Larry Augustin noted, Oracle's $7.4 billion offer for Sun effectively valued the software at $0.00. Getting a better price on the hardware business and still buying the software business for $0.00? That sounds like a sweet deal.

After all, Oracle is primarily interested in Sun's software assets. Getting Sun for $3.7 billion would make it even easier to quickly flip Sun's hardware business to Fujitsu or HP at a profit, which some speculate is waiting in the wings to buy Sun's hardware business and which I noted back in March was considering a joint-bid on Sun with Oracle.

"Angelic" may not be the word most often associated with Oracle. "Shrewd" is more apt, and low-balling Sun after the EU scuppers its value is shrewd business indeed.

EU competition commissioner Neelie Kroes probably means well by holding up Oracle's acquisition of Sun, but the only group she's helping with the investigation is Oracle, which may end up getting Sun for half what it planned to pay. I'm sure Ellison will give her a ride on his yacht for her troubles.

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IBM and Hewlett-Packard could not have planned it any better.

The European Union has launched an in-depth investigation into Oracle's acquisition of Sun, potentially delaying the merger by several more months. In doing so, the EU is actually guaranteeing the demise of Sun's hardware business and gifting it to Sun's competitors by misunderstanding the deal's impact on open source, generally, and on MySQL, specifically.

If you haven't been paying attention, the delay on the merger due to U.S. and EU scrutiny has already resulted in two shockingly bad quarters from Sun. Many enterprise customers are already moving to competitors like IBM because of the uncertainty surrounding the future of Sun products, The Wall Street Journal reports.

Further delay will only compound the problem.

Unlike the U.S., which approved the deal, the EU's Competition Commissioner Neelie Kroes is concerned that Oracle's takeover of Sun will end up diminishing competition:

Systems (like MySQL) based on open-source software are increasingly emerging as viable alternatives to proprietary solutions. The Commission has to ensure that such alternatives would continue to be available.

The Commission doesn't have to. MySQL's open-source license already does. It's open source: even Oracle can't put the open-source genie back in the bottle once it has been released, as MySQL has, under the GNU General Public License.

Consider: some of the folks cheering loudest for the EU to clamp down on the proposed merger, like representatives from Monty Program, have already demonstrated Oracle's (and Sun's) lack of control over MySQL. Monty Program has created a significant fork, or derivative, of the MySQL database, and stands to gain much by the EU's obstructionism.

In delaying the merger, the EU isn't helping MySQL. It's helping its competitors, including Drizzle, OurDelta, MariaDB (Monty Program's fork), Percona, etc.

Competition within and around MySQL is alive and well, regardless of Oracle. After all, as former MySQL CEO Marten Mickos has been saying for years, MySQL has never really competed with Oracle, anyway. MySQL serves (and has helped to create) a very different market: the Web database market.

When asked in April if Oracle's bid for Sun would end up hurting MySQL, Mickos responded: "MySQL works for Web-based applications. Oracle is for older, legacy applications." The vast majority of Oracle's revenue comes from enterprise IT. The vast majority of MySQL's revenue comes from Web companies like Facebook, Google, etc.

MySQL and Oracle don't really compete. They live in two very different markets.

So, if anything, Oracle's acquisition of Sun helps it leverage MySQL into a market--the growing Web database market--that its own technology is ill-equipped to manage. It also gets a lower-cost product with which to bludgeon its real enemy, Microsoft, coupled with a greater footprint in the rising open-source developer community.

Open source is not the enemy in this deal. Microsoft is.

The EU, however, has made itself an enemy to Oracle, Sun, and MySQL by holding up the merger, a situation that will only get worse due to its glacial pace, as CIO.co.uk's editor Martin Veitch suggests. Customers are not the beneficiaries of its intervention: Sun's server competitors like IBM are.

Though the EU purports to be in tune with open source, its meddlesome muddling reveals a surprising ignorance of open source, and shows a complete disregard for MySQL's true market opportunity.

UPDATE @ 6:59 Pacific on 9/4/09: I solicited comment from Gartner vice president and Distinguished Analyst, Donald Feinberg, who had this to say:

The EU does not understand open source. This is clear by using DBMS (MySQL) to extend the deadline. It also is clear that this is an attempt to use MySQL as a cover-up to a political agenda. It is protectionism at its worst.

The EU is entering deep water here, water that it clearly does not adequately understand.

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What is the value of an open-source asset? Over the past several years, and most recently with SpringSource, we've seen a number of open-source companies acquired at valuations of 10x or better. Did the buyers get their money's worth?

It's a tricky question to answer--and likely depends upon far more data than I have at my disposal. It also depends on the acquiring company executing, which has not been the case with Yahoo (which bought Zimbra) or Sun Microsystems (which bought MySQL). No open-source company can offer a panacea for an acquiring company's failure to execute.

But after talking with a range of the companies involved, it would appear that the answer is "yes"--open-source acquisitions are paying good dividends.

Consider:

• JBoss, bought by Red Hat for $350 million at a valuation 15 times sales (i.e., a 15x valuation), has gone on to grow twice as fast as Red Hat's core Linux business and is the key to its ability to sell strategic value to CIOs, rather than simply commodity Linux servers.
• XenSource, inarguably the richest acquisition at 166x, was doubling its customer count every quarter at the time Citrix bought it for $500 million. This would be less significant except that the company had already pulled in 1,000 customers. Compounding that number...? That sort of growth is hard to hard and continues to feed Citrix today. XenSource's valuation was overly rich but then, it was bought on the heels of VMware's explosive IPO. Some valuation hubris was to be expected.
• Zimbra, which Yahoo paid $350 million to acquire, has largely been buried in the belly of a company that has yet to figure out what it wants to do when it grows up (and out of Google's shadow). Even so, the company, which was doing north of $20 million at the time of acquisition, continues to grow quarter after quarter. Yahoo may not know what to do with Zimbra, but Zimbra's customers apparently do: buy more.
• And then there's MySQL. Ironically, Sun's $1 billion acquisition of MySQL, which was ridiculed as dramatically rich in valuation, has the lowest multiple of the lot, given that MySQL recorded sales of over $90 million the year it was acquired. Despite Sun's myriad problems over the past year, MySQL is growing, recording some of its best quarters ever.

Open-source assets, then, are growth assets. And their growth appears to be hard to check, even in cases of significant mismanagement. Perhaps this is the nature of open source: the company behind it may falter, but ultimately, the success of the project is only a download away, provided that the development community remains vibrant (and, in each of the examples above, it has).

So long as development continues, so will downloads. If downloads continue, there really should be no reason that a company can't benefit from it. It may derive substantial or anemic benefits, but it should benefit.

Looking around, it's hard to find a company that, on balance, isn't happy with its open-source investments. If open source didn't work, we'd expect to see companies exit, but in addition to the companies mentioned above, Oracle (Sleepycat), IBM (Gluecode), Cisco (Jabber), and others have increasingly bought into open source, and none shows any signs of abating its interest in increasing its open-source activities.

One might think that buying an open-source asset, rich in adoption but relatively light in monetization, would be a poor investment. Based on the data I've seen, however, this supposition is wrong.

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The big news coming out of Sun's JavaOne conference this week is that Sun (soon-to-be Oracle) is trying to outbid Microsoft as the world's biggest photocopier company. ("Redmond, start your photocopiers.")

No, Sun isn't actually building photocopiers but, like Symbian, Microsoft, and others, it is playing catch-up to Apple's App Store with its new Java Store, as The Register reports. The store is intended to be a central repository for Java and JavaFX applications, but it's unclear how it will distinguish itself.

As a consumer, I don't care if an application is built in Java. I just want to know whether it's any good, and whether it will run on my iPhone (Blackberry/Palm Pre/whatever). The Java brand matters to developers--it doesn't matter at all to end users.

Not to be outdone in imitation, Oracle CEO Larry Ellison used JavaOne to reassure Java devotees that Oracle's commitment to Java is strong and to drop a hint that Oracle/Sun may get into Netbooks, those ubertrendy devices that everyone is talking about but few are actually using.

Back to the App Store. Or, rather, app stores....

Sun isn't alone in copycat tactics. Nokia is also getting into the App Store clone wars, and Symbian has its own planned app store. Google launched its Android Market, and Microsoft, photocopiers at the ready, is beefing up its Windows Marketplace.

Pretty soon, consumers will have scads of choices of where to buy their applications...and so won't have a clue as to where to buy them.

It's not that application stores are a bad idea. It's just that it's not clear that we need a myriad of them, or that vendors will get the mileage from them that they expect, as Joel West points out.

Google Wave showed the industry that innovation is still possible, but requires vendors to discard existing paradigms for what is possible and how to deliver software.

In a similar fashion, platform vendors need to figure out novel ways to emulate the best of what Apple has delivered in its App Store, but reinvent the concept for their own customers. We don't need App Store clones. We need new ways of delivering and consuming applications.

Unless the industry is ready to declare Apple the sole source of inspiration, then different vendors should pave different paths.

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Dan Baigent is senior director of corporate development with Sun Microsystems. He's also one of the most candid inside observers on the failures that brought Sun to the point that it had to be bailed out by Oracle in a $7.4 billion acquisition, down from Sun's bubble-era peak of a $200 billion-plus valuation.

In a series of blog posts, Baigent starts to identify Sun's top 10 failures, and their consequences, as he seeks to describe how Sun got to this point.

Actually, he only managed to get his first three reasons posted before the posts were pulled down. However, Google cached them and you can find them below.

I can understand why Sun might not want to highlight its failures, and there may be Securities and Exchange-related reasons for shuttering the posts, but Baigent's commentary is insightful and helpful. I hope Sun will allow Baigent to post his remaining seven reasons.

• Reason No. 10: Failed to understand the x86 market. "We approached the market in the only way we knew how - as an extension of our high-end, low-volume, high-value approach to network computing. And not just in terms of product features and capabilities, but in terms of sales, partnerships, channel programs and supply chain management."
• Reason No. 9: Messing with the Java brand. "(N)umerous attempts by well-meaning marketing folks at Sun to try exploit the value of the Java brand itself and how that ultimately reduced the very value they tried to exploit. To some degree, this is as much about the lack of value in the Sun brand (at least outside our loyal customer base) as it is about Java".
• Reason No. 8: Fumbling Jini. "The real problem was that the engineers had built this technology using the latest Java platform...and had incorporated specific changes into J2SE 1.2 to support the Jini requirements. When launched, Jini could not run in anything smaller than a device with 64MB of memory and a Pentium-class processor.... Meanwhile, Marketing and PR were off describing uses of the technology that were all about small devices (cameras, printers, cell phones, etc.) that were completely unable to run RMI, nonetheless the Jini on which it was built.

I find that I tend to learn much more from my failures than from my successes. I'd be grateful for the chance to learn from Sun's, too. Sun, please let Baigent continue his countdown. It allows Sun to constructively chronicle its own failings, rather than allowing others to do so in less generous terms.

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