Back in the early days of computing, there was no such thing as a "software vendor." Companies like IBM sold hardware/software integrated solutions and, really, software was developed simply to sell the value of the hardware.
With Monday's announcement that Oracle is acquiring Sun for $7.4 billion, however, Oracle is signaling its own "iPod moment," seeking to compete with Hewlett-Packard, IBM, and others in integrated hardware/software systems.
It's a bold move, and not for the faint of heart. But then, no one would ever accuse Oracle of being faint-hearted.
"I believe this is the first step down a different path," Sun CEO Jonathan Schwartz said in an e-mail to Sun employees, except that it's not, as Gordon Haff points out in a post on CNET.
What is new in the deal is that Oracle finally gets its wish to own MySQL. In 2007 Oracle offered as much as $850 million for MySQL, the third of its offers for the open-source database company.
This time, Oracle effectively got MySQL for free, as the valuation for Sun almost certainly wasn't raised much by its MySQL asset, acquired in 2008 by Sun for $1 billion.
What Oracle will not want, however, is for its customers to get MySQL for free.
Importantly, Oracle's new "systems" approach gives it the ability to digest a host of open-source projects like MySQL that might otherwise struggle to make money, and monetize them heavily by burying them in hardware "systems." It's a smart move driven by a company that knows that open source as a religion faded, and that open source as a key driver of innovative IT is just beginning.
It does, however, potentially give Oracle an antitrust problem in MySQL, as ZDNet's Dana Blankenhorn posits. MySQL's market share in the enterprise database market is negligible, but its share of the exploding Web database market is dominant and exploding.
While I don't expect the U.S. Justice Department or Federal Trade Commission to launch an antitrust action against Oracle relative to MySQL, it's important to note that this acquisition makes Oracle the clear behemoth in databases, past (enterprise) and future (Web).
Ultimately, however, this acquisition is not about MySQL. At least, not yet.
It's about hardware/software systems, primarily, and to the extent that software is involved, it's about Java, as called out by Oracle CEO Larry Ellison. Over time, the MySQL component will become increasingly important, but for now this Sun acquisition gives Oracle exceptional control over integrated solutions for its customers, as well as a software portfolio with massive potential.
The industry just changed. Oracle raised the stakes of the game. The new ante to get into the game is integrated hardware/software systems, and as IBM, Microsoft, and Oracle increasingly demonstrate, open-source software plays an increasingly important role in feeding these systems.
Updated at 10:48 AM PDT with links to interesting commentary:
- Larry Augustin runs the numbers on the acquisition and comes up with Java + MySQL for $0.00. Good analysis.
- The VAR Guy works through whether this could really be about hardware.
- Glyn Moody rightly points out that the acquisition turns Oracle into an open-source company...albeit a somewhat ambiguous one.
- Larry Dignan at ZDNet takes a different slant, arguing "MySQL is toast" since Oracle won't let MySQL mess with its database margins.
Follow me on Twitter @mjasay.
Over the Christmas break, I've watched one of the basic powers of open source in action. Two employees from my Alfresco team did something that is largely impossible in the proprietary world:
They wrote integrations to third-party open-source software, the Apache Hadoop and Drupal projects. No contracts changed hands. No NDAs. Just code.
Open source, of course, is a great way to get one's code in the hands of would-be customers, and then sell them support or other add-on services or software. But it's also a fantastic way to collaborate with would-be partners. Not a single lawyer need get involved until the code is working, and then only to divvy up responsibilities and revenue, if you so choose.
Try the above integrations between two proprietary companies. First you get contacts from both companies (probably the executives, depending on the size of the company, because who has authority to make that kind of a decision?) to start talking about the integration. Then, before any real work happens, the lawyers need to get involved. (While at Novell, I had one of the most distressing experiences in my life trying to negotiate a partnership with Siebel. It's not an experience I'd wish on my worst enemy, much less a partner.) Further work will then need to be done to define the integration, marketing teams will need to get involved to define the go-to-market strategies and whatnot. And so on, until eventually code actually gets written, a year or so later.
With open source, you just need one guy and a week or two of downtime over Christmas. With proprietary software, you need a small army. Which do you think is the more efficient model?
Sometimes "free" is not so free.
I recently discovered this when a large, global system integrator (SI) deployed Alfresco Labs, our free and unsupported product, for a large client in Europe. The SI wasn't a partner of ours, and as the client soon learned when its deployment stumbled, the SI wasn't capable of providing enterprise-class support on the product. Yes, it knew the product well enough to deploy it and get paid over $50 million for its trouble, but when the deployment hit a glitch, guess to whom the SI came crawling for help?
It's not just my company. I know of another global SI that has deployed well over 100 Mule ESB instances, without buying support through MuleSource for its clients for a single one of them. If something goes wrong with those installations, the enterprise clients are going to end up paying a premium for the SI to figure out how to resolve the problems on the client's dime, never mind potential indemnification issues.
Not all SIs act like this, at least not all the time. My own company works closely with Satyam, SAIC, Booz Allen Hamilton, and others, and Accenture sells supported instances of the Spring Framework, but this is the exception to the rule for the large SIs, many of which seem happy to deploy open-source software for their clients without buying support or production-grade versions of the software.
Such SIs seem to believe that life has started raining free lunches.
This is a myopic way to do business, as the large SI in my initial example found: in that example, spending $50,000 (in the midst of a $50 million project) would have saved the SI the embarrassment and cost of trying to support a product that experience proved it didn't know nearly as well as it thought it did. The SI risked the success of a $50 million project to boost its margins by $50,000, only to find that one problem with the software ended up costing it and the client far more than $50,000.
If you're an enterprise looking for a strong SI on a project, here are a few things to consider:
... Read moreWhat do you do when you're trying to unseat an incumbent in your market? You could try competing with the same tools as your competitors, or you could try to disrupt them with open source.
For Siemens, the latter course makes more sense:
Siemens' outsourcing unit is snapping up some of South Africa's brightest open source minds as it readies to offer large-scale open source services to clients. Going, as it does, head-to-head with the likes of IBM and T-Systems, the company is hoping its open source strategy will find a new niche in an already highly-competitive market.
Here in the United States, I've seen rumblings of similar movements within the largest system integrators. Open source gives them a way to offer superior software and service at a lower price.
It's just a matter of time before IBM et al. will have to respond in kind as they see software margins erode. It's one thing to deprecate an open-source solution when it comes from mom-and-pop open-source shop X. It's quite another when it's being delivered by Siemens, Booz Allen Hamilton, Accenture, etc.
I've written before about the huge opportunity that open source presents for EAI (enterprise application integration). Open source doesn't require lawyers to meet before integrating products. It's a question of code, not counsel.
Today I get to see it happening to me or, rather, to my project, Alfresco. Jeff Potts, a third-party consultant employed by Optaros (and a hard-core Alfresco expert), decided to integrate Alfresco with Ringside Network's social networking platform, while Rob Purdie announced the integration of Alfresco with Drupal's excellent web content management system for Amnesty International.
The common thread running between both? Alfresco, the company, wasn't involved in either.
That's open source. The code comes before company, with all the inertia, legalese, etc. that accompanies the company. In open source, the developer comes first. Well, actually, the "itch" comes first. Then the developer to scratch it.
I stumbled across this news from Openbravo this morning, and thought it indicative of the type of contribution typical to commercial open-source projects. Egyptian accounting for Openbravo's open-source ERP platform. No way that a proprietary software company is going to write that, not until every other aspect of the product is already complete.
For organic open-source communities, bug fixes, code contributions, etc. can be expected, though not to the levels commonly expected. It turns out that all (or nearly all) communities are small, even for projects like Linux and Apache. Some, like Drupal, break this mold, but they are the exception, not the rule.
For most projects, including commercial open-source projects, localization and some bug reporting constitute the primary contributions from the community.
... Read moreIn an open-source business, a vendor's biggest competition often derives from a freely available, "community" version of its product. By extension, an open-source vendor's biggest competition comes from the systems integrators that provide implementation services around that vendor's community software.
Crippling this competition--so tempting on the surface--tends to cripple all the benefits that come from it, including facilitated adoption of the software, and lower sales and marketing costs.
The question, then, is how to foster unfettered adoption of one's open-source software while still preventing would-be partners from undermining one's own ability to profit from the software.
Over the past two and a half years, my company, Alfresco, has struggled with this tension and has, I believe, come up with some winning strategies and policies. I share them here, in case they're helpful to you in your own efforts to build an open-source business.
... Read moreEverything is open source these days. Literally. Everything.
I'm not even sure what it means to be an "open-source data quality solution for structured and unstructured data," but that's precisely what Infosolve Technologies has (apparently) released with its OpenDQ Version 2.0.
Except, I'm not sure how it's open source. I can't find the source code anywhere on its website. A search of Sourceforge doesn't find it either.
Maybe it's only open to friends and family? :-)
I do like the premise behind its distribution philosophy:
... Read moreCMS Watch has an interesting article that asks whether systems integrators are the neutral parties that they sometimes make themselves out to be. According to a US federal government suit against Accenture, the answer is "No."
As CMS Watch notes:
[T]he U.S. Department of Justice is suing Accenture for allegedly receiving kickback-like payments from technology suppliers it recommended and/or implemented at DOJ. The alleged fraud was a collusion with big-name IT suppliers (e.g., HP, Sun) and smaller vendors (e.g., Vignette) to defraud the Government.
... Read more
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