10.19.06
Said the commercial software market of course ;-)
Matt Assay, I know you’re a big proponent of open source, as am I, but how about being a little more realistic here.
Red Hat has less than $300mil in total company revenues. While IBM doesn’t publish revenue for individual products, Gartner and IDC have both pegged WebSphere Application Server (WAS) revenue at well over $400mil and that was in 2005.
The revenue growth that the WebSphere Application Server (WAS) family has achieved over the past 5 years, again not public data, significantly outstripped the market growth rate for App Servers. A good proof point to this is to look at the WebSphere growth rate that IBM releases during their quarterly results calls. Yes, the growth rate is for a superset of WebSphere products, and not just for the WAS family. But, WAS is very likely the largest member of the WebSphere family from a revenue standpoint because it’s been around the longest and is the foundation for other products in the family. See the quarterly revenue growth for the WebSphere Portfolio below:
| Quarter | Y/Y Qtr Growth | From: |
| 1Q04 | 24% | Source |
| 2Q04 | N/A | Source |
| 3Q04 | 14% | Source |
| 4Q04 | 18% | Source |
| 1Q05 | 11% | Source |
| 2Q05 | 18% | Source |
| 3Q05 | 14% | Source |
| 4Q05 | 4% | Source |
| 1Q06 | 26% | Source |
| 2Q06 | 17% | Source |
| 3Q06 | 30% | Source |
The growth of WAS revenue has been occurring in the face of much hyped competition from open source vendors like JBoss. But at the end of the day, JBoss is hoping to drive $20mil in revenue this year. The WAS team likely won’t be happy if their year on year revenue growth is 2-4x that number. (Although I don’t see internal revenue targets anymore).
Why has WAS succeeded in the face of open source competition? Well, because we decided to get into the open source application server game also. When we released WAS Community Edition (WAS CE) and threw our support behind Apache Geronimo, we gave our customers another choice in the open source app server arena. Having a product that was part of the WAS family and worked with other versions of the WAS Family and other IBM products was seen as a major benefit.
To say that open source will take over the software world assumes that enterprise vendors are either going to:
(a) do nothing about it
(b) fight open source
The other choice, (c), the one that the IBM WAS team took is to:
Enter the open source game and ensure that customers can choose from a spectrum of products, based on their specific needs and budgets, and that the OSS-based products increase the value of existing and future customer investments in the vendor’s commercial software.
Open source products and the open source business model is great, and I support both of them. But neither will replace the commercial software product or business model anytime soon or wholesale. I say this because commercial software vendors will get into the OSS game and the line between OSS and commercial will blur.
10.27.06 at 11:05 am
Sorry not to reply. The best I can say is, “Wait and see.” It will take longer than a year, but not as much time as I think you’re guessing. It’s evident that open source and its ilk (software as a service, for example, which follows a similar subscription pricing) is having a huge impact on the way software is sold, developed, and supported. IBM was early to the game, but has largely done little since then. I would love to see Geronimo take off at IBM, but I have yet to see much demand for it. (Again, I would love to see it happen - I just haven’t, yet.)
As for proprietary vendors getting into the act, I’d love to see them try. In fact, I have: I helped to steer Novell into open source. Would you call it a massive success? I wouldn’t, and it was a company that had every financial incentive to make it happen. But nothing has changed there. They’re actually killing their primary open source projects now.
It is extremely difficult to change one’s business model and mindset to open source. IBM hasn’t. Novell hasn’t. Oracle hasn’t. Etc. IBM’s hybrid model doesn’t really address the need to change the way one thinks about software. Only Red Hat started from the outset as an open source company, and I think it shows in the way they do business. Give them another billion in revenues, and they will run roughshod through the proprietary vendors.
That will take a few more years, but it will happen. Of that, I’m confident.
06.04.08 at 1:49 pm
[...] our support for Apache Geronimo, and building an IBM product based on Geronimo. Not only has the WebSphere Application Server revenue growth remained healthy compared to our commercial & open source competition, we’ve been able to truly get [...]