The Open Road

The European Commission may be taking its time analyzing the competitive impact of Oracle's proposed acquisition of Sun/MySQL, but the industry can't afford to dither. On Tuesday, MySQL competitor EnterpriseDB announced that Red Hat joined its $19 million Series C funding round, which follows IBM's own investment in EnterpriseDB.

Is the software industry, once devoted to MySQL, preparing to shift allegiances to Postgres?

Probably not, but clouds are forming. On Monday, I talked with EnterpriseDB CEO Ed Boyajian, a former Red Hat executive, and he suggested several reasons for Red Hat's investment of "a significant amount of money" in the open-source database vendor, EnterpriseDB. As he told me:

This is a great step forward for our company and for Postgres. Red Hat has done heroic work bringing commercial open source to mainstream enterprise adoption. And it's making a difference: arguably billions of dollars of spend in operating system and middleware has gone back to customers. You want to talk about returning control to users? That's the real yardstick. That's real disruption.

For EnterpriseDB to have the trust and support of Red Hat as a partner and investor is a huge help to our company and I think it gives another strong indication to enterprise customers challenging their old spending habits, that there is more they can do.

It's important to note that Red Hat has been distributing Postgres for some time. It's in every copy of Red Hat Enterprise Linux and Fedora that Red Hat ships. As such, it's already in the hands of thousands of Red Hat customers and users, and is in heavy demand in some geographies, particularly Latin America. But until now Red Hat has not provided robust support for the database on par with its support for Linux and JBoss.

That's about to change.

The change is good for Red Hat customers, but this isn't the only area in which Red Hat has been seeking to expand its influence. Red Hat has been actively looking for opportunities to invest in a variety of open-source companies, most recently investing in JasperSoft.

Red Hat, once content to go its own way in the software industry, is increasingly concerned with ensuring the vitality of its peers. After all, if Red Hat remains the only sizable open-source vendor, that's an indication of the weakness of the model, not its strength.

Red Hat CEO Jim Whitehurst, however, nicely marries pragmatism with idealism, as suggested by his comments on EnterpriseDB's subscription model:"EnterpriseDB is also working to create customer value through a subscription support model. Clearly, this is a model we see as beneficial."

He's right, but it's interesting to hear him laud a model (i.e., a subscription to proprietary and open-source software, plus maintenance and support) from which he distanced Red Hat in Red Hat's Q1 earnings call. ("I certainly hope for and we certainly like to work with other open source companies out there. But those are fundamentally different business then what we're doing.")

He's right the second time (in the EnterpriseDB news release). They are not fundamentally different business models. I suspect his comments on the earnings call reflected an attempt to get out of an inaccurate and misleading question from the ever-entertaining Trip Chowdhry.

Regardless, Red Hat's investment in Postgres vendor EnterpriseDB suggests that it, along with IBM and others, is prepared to bolster alternatives to MySQL in its larger quest to provide real competition in the database industry.

To be fair, Red Hat's interest in Postgres and EnterpriseDB precedes the EU's intervention in Oracle's proposed acquisition of MySQL. The interest is understandable: Postgres is a great choice for a wide variety of database workloads. It's built for transactions and higher-end use cases, like the Oracle and IBM database workloads that it can replace (or augment).

EnterpriseDB plays into Red Hat's overarching strategy of commoditizing key infrastructure, as Whitehurst has noted. Given that the $20 billion database market is concentrated in just three vendors who control 85 percent of the market, databases are ripe for disruption, disruption that Red Hat can feed from a distance.

Red Hat's investment in EnterpriseDB says more about Red Hat's increasing awareness of its larger role in the open-source ecosystem than it does of any competition with MySQL. It's about time.

As the European Commission continues to evaluate the potentially deleterious effects of Oracle's proposed acquisition of Sun Microsystems and its open-source MySQL database, concern is rising that delay will harm MySQL without helping competition.

One who shares this concern is former MySQL CEO Mårten Mickos. On Thursday, Mickos sent a letter to Neelie Kroes, the European Union's competition commissioner, urging that the deal be approved for the good of the market and MySQL. He also spoke with CNET News' Stephen Shankland on Thursday.

Below is the edited full text of the letter.

---

Helsinki 8 Oct 2009

Mrs. Neelie Kroes
Commissioner for Competition
European Commission, J70
B-1049 Brussels/Brussel
BELGIQUE/BELGIE

Dear Commissioner Kroes,

I am writing to you regarding your review of Oracle's pending acquisition of Sun Microsystems. As I understand it, the EU Commission is concerned about a risk of undue concentration of power in the database market. Having been the CEO of MySQL from 2001 to 2009, and built a business that was serving a new market unmet by Oracle and others, I can agree with the questions posed, but I do not share the concerns that have been expressed. In the following, I will explain why.

In brief, my reasoning is as follows:

1. Oracle has as many compelling business reasons to continue the ramp-up of the MySQL business as Sun Microsystems and MySQL previously did, or even more.
2. 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.

Many expected Oracle to harm MySQL as far back as 2005, when they acquired the InnoDB storage engine that plays a crucial role for many MySQL customers. And yet Oracle increased their investment in InnoDB since that time, making MySQL a stronger player in the market.

For further detail on my views on Oracle's intent, please see this interview with me in Forbes Magazine in April 2009.

It may at first blush seem counterintuitive that control of the MySQL assets does not automatically bestow control of the MySQL installed base. But the free installed base of MySQL--enormous on a planetary scale--is voluntarily but not mandatorily coupled to the commercial market of MySQL. It produces huge benefits to the MySQL business, but it is not controlled by it.

Background

The impetus to write this letter comes from my concern with the talented teams of the MySQL business unit and of Sun Microsystems in general. I am also troubled by certain factual distortions about a subject matter that I am intimately familiar with: MySQL and its business model. Open-source business models are complicated and quite different, and it took many years to fully understand and shape the one of MySQL.

A Finnish citizen, I served as chief executive officer of MySQL from early 2001 to February 2008, when Sun acquired MySQL. After that, I served as senior vice president of the database group at Sun until the end of March 2009. Being the only person to have served as the CEO of MySQL and to have attended every board meeting ever held, I believe I have unique insights into these matters.

To be clear, I resigned from my position in March 2009, and I presently have no commercial or financial interests in the MySQL ecosystem, Sun, or Oracle (or any other vendor in the DBMS market, for that matter), other than my loyalty to Sun employees in general and the MySQL team in particular.

MySQL's Markets and Installed Base

MySQL is the world's most popular open-source relational database, and potentially the most popular relational database of all. It has an enormous influence and impact on the usage and the buying patterns of relational databases (also known as RDBMSs), in particular for Web applications. One might even state that the Internet would not be what it is today, were it not for MySQL. Staffed by a highly talented team of passionate employees, the Swedish company MySQL grew the MySQL business from a small one in 2001 to a massive one in 2008.

"MySQL" refers to two things. On the one hand, there is the huge (community) phenomenon MySQL...On the other hand, there is the business of MySQL...Those two meanings of the term "MySQL" stand in a close mutually beneficial interaction with each other. But most importantly, this interaction is voluntary and cannot be directly controlled by the vendor.

In this discussion, the term "MySQL" refers to two things. On the one hand, there is the huge phenomenon MySQL--an estimated 12 million active installations under a free and open-source software license, millions, if not tens of millions, of skilled users and developers, and tens of thousands of corporations who use MySQL one way or the other.

On the other hand, there is the business of MySQL, which is growing rapidly, thus rewarding the owners of the assets (currently Sun Microsystems).

Those two meanings of the term "MySQL" stand in a close mutually beneficial interaction with each other. But most importantly, this interaction is voluntary and cannot be directly controlled by the vendor.

What I mean is that the vast and free installed base of MySQL is using it of their own free choice, unencumbered by the vendor and under no obligation or restraint. That is the nature of open source. And conversely, the MySQL business is supporting the free installed base of MySQL (by improving the product) voluntarily and in the hope of deriving benefit from the installed base.

This is the paradox of an open-source business, and it took me a long time to truly understand how powerful a force it is. It is unlike any traditional business. The key point is that both the users and the vendors of open source are engaged in a powerful free-market dynamic that cannot be contained by any single entity.

It is in everybody's interest that the two sides of MySQL produce benefit for and derive benefit from each other. But neither group can mandate or control the other one. This is a core philosophy of open-source software and more generally of the "architecture of participation" (as defined by Tim O'Reilly). There is a mutually beneficial voluntary relationship, but there is no control by one group over the other. In more colloquial terms: the owners of MySQL cannot force MySQL users to pay up, and the nonpaying users cannot force the business to subsidize them.

Anyone acquiring the MySQL assets will therefore acquire an ability to control the business aspect, i.e., meaning how MySQL is licensed commercially, but only an opportunity (and no free reign) to derive benefit from the free user base.

This explains how the MySQL business can be valued highly in the market ($1 billion, when acquired by Sun in February 2008) while at the same time providing no way of controlling its installed base. This unusual relationship between market share and installed base is at the core of the topic. The market share is small but controllable, to some degree. The installed base is enormous but not controllable. The installed base is, and can be, hugely beneficial to the owner of MySQL, but only to the extent and for as long as this owner of MySQL enjoys the trust of the installed base.

To put it in numbers, it may be useful to see the usage of MySQL, as divided into three categories:

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IBM is going on the offensive against the pending merger of Sun Microsystems and Oracle.

IBM announced Wednesday that it nabbed 100 of Sun's and Hewlett-Packard's customers last quarter alone for its high-end servers and mainframes, with half the deals worth over $1 million each, as reported by The Wall Street Journal.

The bigger news, however, may be IBM's partnership with EnterpriseDB, the commercial backer of the open-source PostgreSQL database, to embed EnterpriseDB's Postgres Plus Advanced Server technology into IBM's DB2 9.7 database product. EnterpriseDB's technology basically allows applications written for the Oracle database to run on EnterpriseDB's PostgreSQL...and now IBM's DB2.

In other words, through this partnership with EnterpriseDB, IBM has gained the ability to easily migrate customers from Oracle to DB2--seamlessly, painlessly, freely.

This is obviously big news for EnterpriseDB, having the opportunity to work with IBM, but it's also big news for IBM, providing a nice off-ramp from Oracle and an on-ramp to the IBM DB2 highway.

This isn't, of course, the first time the two have worked together. IBM is an investor in EnterpriseDB and has been tracking the open-source database market for some time. This is the first time, however, that the two have banded together to target Oracle.

Expect sparks to fly.

I asked Ed Boyajian, CEO of EnterpriseDB, about the effects of the partnership on Oracle, and its acquisition of MySQL (in buying Sun):

IBM and EnterpriseDB have a shared interest here--to preserve customers' right to choose their database solutions, whether they're making a closed-source decision (DB2 vs. Oracle) or an open-source decision (MySQL vs. Postgres Plus). Oracle's moves aim to limit those choices; our intention is to promote them.

It remains to be seen whether Oracle will bury MySQL post-acquisition, but one thing is clear: the database market just became even more interesting. Arvind Krishna, vice president of database servers and development at IBM, said in a statement that "clients are increasingly taking advantage of DB2 to lower costs while improving the performance and reliability of their business applications."

That may have been the case before. With Oracle-compatibility built into DB2 via EnterpriseDB, IBM has positioned itself to make it happen now.

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While Sun Microsystems' MySQL gets the limelight, with its 55 percent quarterly billings increase, other open-source database competitors like Ingres and Enterprise are also doing well.

Ingres on Tuesday reported a significant uptick in its 2008 revenue, climbing 32 percent to $68 million over $52 million in 2007. EnterpriseDB didn't provide revenue numbers, but it also recently reported a banner year, with greater than 50 percent growth in new customer accounts and "comparable bookings growth."

New Ingres customers in 2008 include Air Enterprises, Allied Express, Banca IFIS SpA, BBP Partners, CondeNast Publications, Connected Wedding, C&K Market, Lechler, Les Salins du Midi, LYNX Services, Volcano, SunPower and the US Coast Guard. Ingres counts over 10,000 enterprise customers, including 136 of the Fortune 500 companies like 3M, BAE Systems, Cypress Semiconductor, and Lufthansa.

As for EnterpriseDB, in 2008 it added The Los Angeles Times, hi5 Networks, OptionsHouse, LLC, and Backcountry.com as customers. Existing customers include FTD, Moody's Investor Services, TD Ameritrade, Juniper Networks, McKesson, and others.

It's good to see the open-source database market growing, generally, and not merely MySQL. It's not a market if it's owned by one (relatively small) company. But a bevy of such companies...? That's a market worth watching.

Perhaps Sun Microsystems' valuation of MySQL wasn't too far off. Sun acquired the open-source database leader in January 2008 for a whopping $1 billion, a sum that many rational people thought was way too high.

Perhaps they were wrong; $1 billion is beginning to look like a bargain.

Sun's quarterly earnings report for MySQL suggests that the company brought in $81 million in billings for the second quarter of 2009, a 55 percent jump over the $52 million in sales it did during the first quarter.

That is phenomenal growth, and it puts MySQL on a fast track to catch up and perhaps surpass Red Hat, in terms of sales.

Having said that, something seems a bit off in the numbers, as Sun reported sales of $198 million for MySQL and infrastructure in fiscal year 2007. MySQL said it brought in barely a fourth of that in 2007. (Note: The number quoted in this CNET article is for revenue, not sales, but still...there wouldn't be a $150 million difference.) Clearly, Sun is adding something to the MySQL data ("infrastructure"?) that inflates the numbers.

Even so, given the growth in MySQL billings, it's beginning to look as if Sun really knew what it was doing when it tapped into the wildly popular but still revenue-shy MySQL. At the time, MySQL was doing roughly $25 million or less in sales per quarter, but immediately after the acquisition, reported earnings for MySQL started to grow--and at a frenetic pace.

I suggested at the time of the MySQL acquisition that the $1 billion valuation wasn't far off those placed on other open-source companies. There is massive value in adoption, and MySQL has always been the king of adoption. Marrying adoption with monetization, as Sun apparently has, is a winning strategy.

Now what do you think open source is worth?

Note: In case it wasn't clear from the above, Sun is clearly adding to MySQL's numbers with its "Infrastructure" component. It's unclear how much of that $81 million is pure MySQL subscription bookings, but after speaking with a few MySQL executives, the business is doing better than it ever has before. Whether it's $81 million in sales (and, again, that's not GAAP revenue) or something lower, it's still impressive, and demonstrates that there's another big open-source business on tap to complement Red Hat's exceptional business. That's a Very Good Thing for the open-source business community.

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Marten Mickos, SVP of Sun's database group, could be forgiven for resting on his billion-dollar laurels, having sold MySQL to Sun in early 2008 for $1 billion (despite an S1 to go public in the works). But on New Year's Eve, Mickos sent out a missive to "customers, partners, users, colleagues, [and] friends," declaring MySQL's "radical transparency" a commencement and coda for how the open-source database leader does business, pre-Sun and post-Sun.

Importantly, as Mickos calls out, it was Sun's acquisition that brought to a furious boil all the somewhat private tensions and passions that had always made MySQL tick, but which had simmered in the background:

[The Sun acquisition] brought out the passion in people inside and outside the MySQL ecosystem, and for the good and the bad of it, we had a year of fierce debates on free vs. paid, bugs vs. bugfreeness, to fork or not to, release frequency vs. community contributions - and generally on the governance of a leading free and open source software product that is owned by a corporation.

Not that this is anything new to MySQL. Over the years we have seen it as our duty to be a pioneer and to experiment. We know that open source is a smarter way to produce software, but we also know that a company must make money. As Steve O'Grady of Red Monk noted: "MySQL has never shied from being controversial, from being the iconoclast of the open source world."

All of this has paid off, for MySQL and for the open-source ecosystem of which it plays such a key part. Indeed, Gartner recently called out in its "The Growing Maturity of Open-Source Database Management Systems" report that 73 percent of surveyed enterprise buyers are using open-source databases, up from 49 percent the year before. That is amazing growth by any yardstick.

While some may justly worry that MySQL's commercialization may lead to less community involvement and impact on the open-source database, Mickos calls out that "with 5.1 the inflow of new bug reports has remained encouragingly stable," suggesting that MySQL's community remains very much engaged with Sun, the company, despite its release of commercial add-ons to its open-source database like Query Analyzer, part of MySQL Enterprise Monitor. You can track MySQL bugs online, something you won't see IBM or Oracle doing anytime soon.

What of Sun's MySQL database business? Glad you asked:

On the business side we have reported stronger sales growth as part of Sun. The bursting of the lending bubble and the ensuing financial crisis did initially affect us as customers pulled the brakes. But in the last weeks we have seen strong growth again with deals in high 7 figures. We signed some of our biggest deals with web properties, our biggest deal ever with an enterprise customer, and a major telecom deal.

This is the critical test. Nice as it is that Mickos and the MySQL team made a large pile of money from Sun, it would be a hollow victory if Sun could not, in return, reap commensurate benefits. A strong MySQL contributes to a strong Sun. It remains to be seen if $1 billion was a bit too rich, but Mickos seems fully engaged to help ensure Sun more than gets its money's worth.

For those who wonder if Sun Microsystems overpaid for MySQL, consider the recent findings by Gartner, and encapsulated in its report "The Growing Maturity of Open-Source Database Management Systems":

• Open-source database use grew 50 percent in 2008. Gartner found that 73 percent of enterprises it surveyed are using open-source databases, up from 49 percent the previous year;
• Open-source database revenue grew 42.4 percent in 2008; and
• The open-source database market will top $1 billion by 2013.

As Zack Urlocker points out on his blog, and as Gartner also finds, "express" editions from Oracle and others have had minimal impact on the torrid growth rates of open-source database usage. Open source really is about more than a price tag.

We know from previous surveys that a significant percentage of open-source MySQL adoption is coming from Oracle's user base. Is Oracle in trouble? Not necessarily, and particularly because Oracle has successfully expanded its core value beyond just the database, such that a decision to rip out Oracle is much bigger than a database question.

Even so, the Gartner research suggests that the open-source database market is doing well, and on track to do very well.

EnterpriseDB CTO Bob Zurek was kind enough to have me on the his Database Radio program, with the audio feed here and the transcript here (PDF), which proved to be fun to record and hopefully an enlightening listen.

Bob asked me to name the top trends in open source. Here's my answer:

There have been two big ones that I've noticed lately. One is the opening up of the Web. Traditionally the Web (infrastructure) was open, but increasingly we have things like applications moving to the Web, things like Facebook, that were proprietary--maybe built on open source, but their APIs were closed...Facebook, Reddit, Myspace--all of these are now competing on "openness," and it's kind of a rehash of what we were doing in the offline world with the Alfrescos and Red Hats of the world over the last 10 years, but it's been at a much faster pace.

And the second thing is, which is something that Tim O'Reilly has been predicting for a long time, open source is just becoming standard furniture in everybody's business...Even companies that were once fighting it are now incorporating it. I think five years from now, even two years from now, open source is going to be thought of as standard plumbing that everybody includes in their offerings, whether they're a vendor or an enterprise customer.

Now (open source has) become commonplace. I think that's good and bad. It's bad in the sense that we may forget just how unique and interesting open source is, and the value that it provides in reducing lock-in. But it's good in the sense that it means we can focus on providing value to customers, rather than on "who's the most pure open-source company." I'm starting to see that that may not be the most productive place to have the conversation.

For the rest, you'll have to tune in. Let me know if you disagree with the points above or others I make in the interview.

Lewis Cunningham is running a survey to discover which databases people are using, and in which contexts. Lewis wanted to do an open survey, meaning not only would the results be published but all of the data behind the published results would be open, as well.

It's a noble effort. I'm not sure this blog is the best place to find a balanced demographic when it comes to open source, but presumably if he can get it published in DB2 and Oracle mailing lists, as well...?