rand($thoughts);

Bryan Kirschner over at Port25 has a very interesting graph:

What does the graph show? According to Bryan:

“It’s showing Microsoft’s reported fiscal year revenue, which grew to $51.122B USD in 2007 from $6.075B in 1995

….

During most of this time, we didn’t have Codeplex.
We didn’t have licenses submitted to the OSI.
We didn’t have Port 25.
We didn’t have Bill Hilf, or Sam Ramji, or the rest of the OSS lab.
And we didn’t have http://microsoft.com/opensource.

And Microsoft and open source did grow…”

Dude, couldn’t you create a fancy 3d chart in PowerPoint or something?!? :-)

All kidding aside, great point Bryan!! (And one I’ve been making about the impact of OSS to the application server market that is near and dear to my heart/pay cheque)

Just imagine the possibilities as Microsoft continues to get “more OSS religion”. I’m not saying Gates is going to don a Penguin suit. But if you think Microsoft isn’t going to use OSS to drive their business forward (in some way), then you’re underestimating one of the largest and most successful businesses of all time.

Don’t let history cloud the possibilities at Microsoft’s disposal.

Microsoft may not always play as fairly with OSS as some would like, but rest assured that Microsoft isn’t going to walk off the pitch.

Sun’s Simon Phipps posted about the different roles/stakeholders in an OSS community. Phipps states:

“I’ll be using this model in the coming months within Sun to advise our engineering, marketing and management teams on their community engagements…”

These are the 4 groups Phipps starts with:

• Originators (originating co-developers)
• Extenders (extending co-developers)
• Deployer-developers
• Users

Initially, I contributed minor points to the discussion. This morning I wondered if the discussion is completely necessary. Back when we were doing the Gluecode acquisition, we had to put together a “few” charts educating our execs and the broader team on the stakeholders in the OSS market. That was over 2 years ago. Are there really folks at Sun who don’t “get OSS” today? And if there are, shouldn’t these folks have been “educated” prior to Sun open sourcing their software portfolio? Maybe Simon is pointing out that things have changed in the OSS market since and he’d like everyone at Sun (and in the market) to work from the same definitions.

In any case, take a look at Simon’s definitions and add/subtract to them as you see fit.

We’ve all read about the Windows Genuine Advantage server outage. Dvorak used the event to raise concerns about SaaS.

“All this proves is that these Web-based applications cannot be trusted.”

I am by far the biggest supporter of SaaS, but I do see it as a market inevitability.

The WGA outage proves that when you don’t design a system for five or six 9’s uptime, you won’t magically get that level of availability. As web apps move from “good enough” to “business critical”, these types of outages will be outliers.

Here’s another Dvorak conclusion:

“What is often lost in individual analyses of how to proceed with your data-processing needs is the concept of “being at the mercy of a single company.” “

If you work for a medium to large enterprise, it’s very likely that ADP, one of the oldest SaaS providers in the world, handles your payroll. Your company is very likely at the “mercy of a single company, ADP, when it comes to processing your bi-weekly salary and paying you on time”. And yet businesses choose to use ADP.
Staying with the ADP example: I find it somewhat amusing that “fear of data loss or risk of your data being mistakenly viewed by a competitor in a multi-tenant SaaS environment” are inhibitors to broader SaaS adoption. Isn’t your employee’s salary & privacy concerns just as important as your customer lists or sales records? Sadly, maybe the answer is no…..

In any case, SaaS isn’t going anywhere. It’s been here for decades. A few SaaS-related outages simply make the case for more mainframes! ;-)

Reading Matt’s blog today, I found this press release (via Groklaw) from the FSF.

The title says it all: “Microsoft cannot declare itself exempt from the requirements of GPLv3″

We discussed this a little bit on a previous post. I was corrected that the FSF wouldn’t lead the legal battle, but that the Software Freedom Law Center (SFLC) would. If you recall, I’d looked into the finances of both organizations. SFLC had $509k in assets as of 2005, and the FSF had about $892k in assets as of 2006. (Note: the year for the FSF data wasn’t completely clear).

In the comments to Roy & others, I’d pointed out that Microsoft is essentially saying GPLv3 does not apply to the deal with Novell and now it’s up to the FSF/SFLC to respond.

Today’s press release appears to the part of the reply. Matt suggests that:

“Microsoft is in no position to determine which open-source licenses it respects. If it distributes software under the GPLv3, it is bound to abide by its terms. Period. End of story.

I suspect that if Microsoft pushes this issue, it will find a long list of people happy to fund the FSF’s lawsuits against Microsoft.”

Without any insider knowledge on this topic, I’ll predict that there will be few large vendors (with deep pockets) rushing to generously support the FSF/SFLC in this battle versus Microsoft. There may be individuals who donate to such a cause. Current vendor patrons may even donate for the sake of optics. But I find it difficult to believe that large IT vendors will see this as a good investment of their donations.

Do we really believe that Microsoft is going to sue customers using versions of Linux other than SUSE? I don’t. Whatever you think about Microsoft, they’re not the RIAA. At best, the FSF/SFLC would be able to ensure that Microsoft “truly” / “legally” (whichever you prefer) extends patent protection to any Linux user or customer. If you discount the FUD, aren’t we there already since Microsoft isn’t about to sue individuals or customers? At worst, the Microsoft legal team could work to invalidate the GPLv3. I don’t want to create FUD here, since the FSF states that the GPL has been tested in a court of law. But don’t think that the clever lawyers at Microsoft will lie down and get run over. Whether the Microsoft legal team is successful in their defense or not is a different question.

Yes, I know, it sucks to think of the situation in this way. We’d like to see Microsoft “pay for their treatment of OSS”. But when you look at the cost / benefit ratio, I believe it is not in the interest of IT vendors to back the FSF/SFLC in this battle vs. Microsoft.

But I’m not a lawyer, so what do I know?

UPDATE:

Notes from Ed Burnette’s post today re. GPLv3 & Microsoft:

GPLv3 states:

“…..unless you entered into that arrangement, or that patent license was granted, prior to 28 March 2007.”

Ed states:

“So clearly, GPLv3 will have no effect on the MS/Novell agreement, which was completed in 2006.”

And:

“My guess is, it’ll never come to that, because both sides would be afraid of losing and setting a precedent.”

Score 2 for the non lawyers :-)

PS: I should state: “The postings on this site are my own and don’t necessarily represent IBM’s positions, strategies or opinions.”

I was reading this BusinessWeek article about the recent financial market mess:

“If you don’t trust the value of an asset, you won’t be willing to buy it no matter how cheap your borrowing costs are….What brings this to an end, ultimately, is better information and transparency.”

Apply this idea to the software market, and more specifically, to the software acquisition process.

OSS provides transparency as the code is available in the open. OSS can also be more transparent than Traditional software depending on whether future product discussions happen in the open.

OSS can also provide better information by allowing potential customers to use the product before purchasing support, (or running without support).

Better information and transparency build trust. It goes without saying that building trust was, and remains, a key hurdle for startups. The fact that OSS can help build customer trust explains why so many enterprise software startups choose to incorporate OSS into their business model. Historically, a brand has been the embodiment of the level of trust that a customer places in a vendor’s products. For startups, their brand has yet to be associated with a level of customer expectations. Hence, building trust through better information and transparency is vital to success.

Enterprise software startups can gain customer trust without going down the OSS route. Free (but not open source) software and trials are two alternatives. One could argue that shareware has been around for decades, and yet hasn’t helped the average enterprise software vendor build customer trust in the way that OSS does. There is clearly a transparency benefit (via the source) that helps build customer trust faster than free (but closed) software or trialware does.

A question I’ve been thinking about but haven’t fully developed an answer: Can a vendor drive more revenue by:

1. Distributing 10 million copies of an OSS product and then trying to convert 0.001%-0.01% of the user base into paying support customers
2. Marketing & selling a commercial (non-OSS) product which is able to attract 10,000 paying customers (maybe using a SaaS model?)

Thoughts?

I’m sure someone with better insight than I (evil Geir?) thought this was a great idea.

Schwartz states:

“Most know Java, few know Sun - we can bring the two one step closer.”

I don’t understand why Sun would want to market the fact that while they “own” Java, IBM, Oracle, BEA and even JBoss have all built & grown middleware businesses of varying size with Java. Sun on the other hand was never able to gain any traction in the middleware market. Imagine if Sun had to play from a level field….

To be fair, Sun may drive substantial revenue from licensing Java to devices etc. I’ve never seen that revenue figure, but that shouldn’t mean it’s not substantial (or that it is).

I wonder what will happen when the next “killer language” comes out. At one time, COBOL and C/C++ held the same marketplace position that Java does today. In the technology market, nothing ever dies completely, but nothing ever remains on top forever.

This seems oddly similar to companies that added an “e-” or “.com” to their company name in the early 2000s.

Well, good luck with that,

Sincerely,

e-Savio.com Inc.

PS: I should state: “The postings on this site are my own and don’t necessarily represent IBM’s positions, strategies or opinions.”

Dana’s post on the Sun & IBM deal has two very interesting statements:

“This is part of Sun’s exit strategy from the server business.”

And:

“In many ways, Sun is becoming Red Hat.”

On the conference call, Schwartz & Zeitler spoke about early work to get Solaris running on IBM mainframes. This work is very early and nothing may come of it, but it was apparently kicked off because of customer requests. Keep in mind that RHEL & SLES both run on IBM mainframes already. Maybe Dana’s right; Sun is becoming Red Hat.

Dana’s prediction on Sun’s server exit centers on:

Why stay in the hardware business with X percent profit margins when the software business has nearly 3X the profit margins? (Based on IBM results - See pg. 27/124 )

With KKR’s investment in Sun, this is a question I’m sure has been asked. However, such decisions are never so cut and dry. The majority of Sun’s revenue comes from their hardware business. I wasn’t able to find a HW/SW/Services split of Sun’s revenue. If you take their FY06 revenue of $13.068B and use IDC’s estimate of 2006 Sun software revenue you end up with a little less than 15% of total revenue is driven by Software. What’s more, the majority of Sun software revenue is attached to Sun hardware. While deals like this one with IBM will help to reduce the SW+HW linkage, I suspect Sun software revenues will remain largely (85%+ ?) driven from Sun hardware. Remember that Schwartz claims that Sun isn’t a hardware company, they are a System’s company. If Sun’s goal is to be a System’s company, then there is no way they can “exit the server business”.

I think that this deal is simply Sun’s realization that Solaris is a valuable asset that has been tied to Sun hardware for the most part. This would be fine if the market only used Sun hardware. According to Gartner estimates, in 1Q07, Sun’s server share was 10.3% of the total market spending. Remember when Apple came out with iTunes & the iPod for Apple systems only and then expanded to support Windows to address a larger market. Same story here; it just took a little longer for Sun to consider expanding the market reach of Solaris.

So, maybe Sun is becoming Apple? Nah ;-)

I really try not to write about IBM news but this one is more about Sun than IBM…..

IBM & Sun announced:

“IBM will distribute the Solaris Operating System and Solaris Subscriptions for select x86-based IBM System x servers and BladeCenter servers to clients through IBM’s routes to market.”

This definitely sounds like Sun isn’t competing with Red Hat ;-) Note that I believe that there is nothing wrong with Sun (or anyone) competing with Red Hat. Competition is good for customers and good for vendors.

The deal is essentially an OEM relationship in which IBM sells the hardware and, based on customer requirements, could sell Linux, Windows or Solaris. If customers choose Solaris, the support subscription is delivered by Sun. IBM is compensated by Sun for their part in driving the sale of the Solaris support subscription. Note that the deal is different than what IBM or HP are currently doing with Solaris on x86. Yesterday, neither IBM, nor, HP were able to OEM or sell support subscriptions to Solaris on x86 servers. Today (well in 90 days apparently?), IBM becomes the only OEM vendor for Solaris on x86.

I was pleasantly surprised to hear Schwartz and Zeitler (IBM) that this deal is about customer choice. A few questions on the conference call asked:

“Won’t this deal increase the likelihood of an IBM HW customer who chooses Solaris to later move to Sun hardware? Or a Solaris customer who chooses IBM HW to later choose AIX or Linux?”

The answer from Sun & IBM was:

“You’re better off to meet customers with solutions that they are seeking versus trying to restrict the customer to one stack or another”.

Choice is a wonderful thing.

I was quite busy at work today so I’m only catching up on blog reading now. My arch nemesis has been busy :-) BTW, when do you do your day job? Can I get a job at Alfresco???? :-)

Kidding aside….Matt says:

“$500 million is a hefty premium given XenSource’s revenues, which were still pretty modest (less than $10 million in 2007 and almost $0 in 2006). Citrix, in other words, paid a massive premium (50-500X (!!!)) for the brand and position that XenSource presumably has with the Xen hypervisor.”

Couldn’t agree with him more. Citrix overpaid. It happens. But this is 100% because XenSource is a virtualization vendor. If, we were talking about the CRM marketplace, I’ll wager a dinner that the multiple would have been an order of magnitude less. With VMware worth over $21B, I’m sure I could sell my in-law’s dog for several thousands by renaming him Virtualization Beagle.

By the way, how many of you have heard or thought about Citrix in the past 5 years? Did anyone know they have revenues over one billion dollars? Exactly. This acquisition is as much a reason for Citrix to get back in the public/customer/investor eye as it is about a technology acquisition. Don’t be surprised if Citrix gets acquired by a larger vendor down the road. Using this deal to assigning a high multiple to OSS is, if you ask me, wishful thinking.

In another post Matt quotes a friend of his who said the following about what the Citrix deal means:

“It is about having new technology in the arsenal to go after older competitors that have not revamped their technology. The lack of investment in technology by both start-ups and the established players in the early part of the decade is now catching up with them by making them exposed to new, open source entrants that were able to survive in the shadows of the dinosaurs.”

This comment just didn’t fell right. Is it really true that open source entrants have new whiz bang technology that larger software vendors couldn’t replicate because the larger vendors hadn’t spend enough on R&D in 2000-2003?. Here’s what the financial numbers show:

Yes, R&D spending was lower in 2000 & 2001, but investments picked up quite quickly thereafter, so I doubt this has a material impact on competitive positions in 2007 vs. OSS.

Correct me if I’m wrong but wouldn’t it take a lot less than $500M to develop competing technology to Xen. Alternatively, it’s open source, so Citrix could have forked Xen and had the technology for next to free. However, building a competitive offering or forking Xen would not deliver the user base of Xen, the linkage with RHEL/SUSE or the Linux kernel in the future. Tell me that this deal had to do with acquiring a brand and a user base / widely distributed technology. Don’t tell me this is about innovation that can’t be matched by larger Traditional vendors.

To be fair, in a previous post Matt did suggest that the deal was driven by brand & ‘ownership position’ of Xen. I’m not sure why he leapt to the conclusion the deal had anything to do with technology innovation.

It is funny how Matt and I can read the same article and come up with different conclusions.

I read this article and thought that Adobe’s entry into the Office applications market has little to do with OSS or Open Standards, so no need to blog about it here.

Matt says:

“The only thing better would be if Adobe, Apple, and OpenOffice could get together….In fact, don’t you think that it makes a lot of sense for Apple to acquire Adobe, given the similar corporate mentalities/competencies? Me, too.)”

Apple, likely the most closed vendor on the planet is supposed to be the “last great hope against Microsoft’s Office franchise”? Maybe Matt is down to half a glass of OSS Kool-aid daily and doesn’t care if he’s supporting a Traditional or OSS vendor in the “good fight against Microsoft’s hegemony”.

All kidding aside, I can’t wait to see what Adobe has in this market. I am a MS Office user. I tried OpenOffice and even Google Docs, but neither seemed to fit my needs vs. the tradeoffs to switch. I wonder if the problem is that OpenOffice and Google Docs feel like they were designed by developers. On the other hand, Adobe products feel like they were designed by designers. Watching an Adobe AIR demo or app created with AIR most of us think “ooh, ahh” (Note: I hate reading text on most Flash websites - I just needed to say that).

As Cote says in the Wired article:

“It’s not a technical question, it’s a cultural question,…All the geeks and everyone like myself would love to play around with an Office competitor from Adobe to see what that would be like. But when I talk to normal office workers who use Microsoft Office, they don’t get all warm and tingly like I do with the prospect of different office software….People who use Microsoft Office are into using Microsoft Office.”

How true.

It’ll be interesting to see what Adobe does here. Putting on my strategy hat: Entering the Office Apps market is only a step towards their broader goal to drive extensive adoption of Flex and AIR. So, look for an open API that allows designers/developers/ISVs/customers to extend the Adobe Office suite. By expanding the reach of Flex & AIR, Adobe can sell tools (not just IDEs) to designers & developers that want to create AIR apps. In essence, AIR (and Flash before it) is a runtime environment just like the Java JDK and MS CLR. It just so happens that AIR is for client-side apps (vs. predominately server-side for JDK) that look sweet and deliver ease of use vs. traditional client-side apps (i.e. predominately MS CLR). As this occurs, I suspect that customers and vendors will start looking for a standards body around the AIR runtime technologies. So, maybe there is a Standards tie to this story after all :-)