I had an interesting discussion with Marten Mickos at JavaOne last week that I’ve been meaning to blog about.

I was disappointed that MySQL decided to put encryption and compression backup into MySQL Server (GPL license), versus including those features only in MySQL Enterprise (commercial license). Most of you will recall the outrage from “the community” that began when MySQL considered adding these enterprisey features only inside of MySQL Enterprise.

I wanted to discuss this situation with Marten.

I do not believe that Support and/or Monitoring around an OSS product are viable long term value propositions that will convince users to become, and stay, buyers. This has more to do with human nature than OSS leaders have yet acknowledged. Sure you’ll get some portion of your users to pay for Support etc., (which I call Category “C” users). But good luck growing beyond that group.

I know that Simon will disagree. During his JavaOne pitch, Simon mentioned that Sun is benefiting from a large number of adoption-led deals. However, I’ve spoken to many customers who are saying “we bought support for 2 years and realized we just didn’t use it as much as we thought. Also, with the source code being available, my software developers can support our use of product XYZ internally”. It could be that Simon is seeing Category “C” users still and will sing a different tune when trying to convert Category “B” users.

I’d suggest that the MySQL decision described above highlights challenges of trying to grow an OSS business faster than the rate of customer conversion from Category “C” users.

The solution I favor is to sell products that can’t be obtained in any way but through payment. MySQL was walking down this path before “the community” had its say.

Marten reassured me that MySQL may yet decide to add features only inside of MySQL Enterprise (and not in the open source MySQL Server) in the future. I fear that MySQL will be faced with the same outrage from “the community” if and when they try to make this change. This will help proprietary vendors maintain the feature/function gap vs. OSS vendors. Recall that for the majority of single-vendor backed OSS products, there is virtually no cost savings vs. developing closed-source software. To close the feature/function gap, OSS vendors need faster revenue growth to fund this development expense.

The OSS vendor community needs leaders who will stand up to “the community” and make the tough business decisions needed to ensure that OSS isn’t relegated to a small revenue slice of the software industry pie.

SourceForge.net is opening up its awards program to all open source projects this year for the first time (vs. only projects at SourceForge.net).

The open nominations period runs until the middle of June. Finalists will be announced and voting will commence. The awards party will be OSCON in Portland, July 24th.

Categories include:

• Best Project overall
• Best New Project
• Best Project for the Enterprise
• Best Project for Gamers
• Best Technical Design
• Best User Support

Get involved and nominate the projects you want to see recognized!

PS: Kudos to Microsoft for being the “Diamond Partner” for the program.

Like Zack, I too enjoyed Josh Berkus’ tongue in cheek session on how to destroy a community. Josh provided an anti-list for those who would like to encourage a community as follows:

1 Familiar tools
2 Discourage poisonous people
3 Document everything
4 Accessible online meetings
5 Minimize legalese
6 Expert liaison
7 Governance simplification
8 Treat licenses with respect
9 Promote outside committers
10 Communicate
(Source: Josh Berkus as best as I can remember his list from my chicken scratch notes - Used under Creative Commons License)

However, I’d like to respectfully disagree with Josh’s patent-pending list.

I’ll going to go out on a limb and suggest that Josh’s presentation, while amusing and interesting, is not as relevant to the OSS movement as we’d like to think. OSS projects of much lore began as truly open multi-vendor / multi-third-party efforts. This was true of kernel.org, many (but not all) Apache projects, and many (but not all) Eclipse projects. But today, the name of the OSS game is 180 degrees opposite from multi-vendor efforts.

If you’re a startup attempting to build an OSS-based business, you will likely ignore #4, #5, #7 and especially #9. If you don’t want to ignore these steps, rest assured that your VC will “encourage” you to do so. You can ignore these steps because they have minimal impact on your ability to grow a successful OSS business or successful OSS community. You don’t want a multi-vendor project; you want a community of users who congregate around a code base that you control. Don’t believe me? Classify vendors like MySQL, SugarCRM, Zimbra, JBoss (not Red Hat - their business is based around a multi-vendor project), Alfresco, SpringSource, Hyperic, etc. against steps #4, #5, #7 and #9.

Let’s not fool ourselves into thinking that OSS success hinges on the same things that were required when the breadth of multi-vendor and/or third-party participation was the key criteria for a “successful” OSS project.

Like it or not, OSS success is beginning to be measured along the same metric that society (rightly or wrongly) measures success…how much money you can make…and making money starts with power/control (of the project).

I’m sitting here beside Sun’s A. Sundararajan before the JavaOne keynote starts. He is one of the core developers on Sun’s HDcookbook project. I didn’t know this, but all of our Blu-ray players have a J2ME JVM inside. So, if you want to create a Blu-ray disc, you’ll need to write some Java code. A. Sundararajan and team are tying to make this easier by offering libraries and tooling for developers. It’s all under the BSD license, so have at it.

Apparently Canada’s Neil Young is here at JavaOne to make an announcement about Blu-ray…

Captain Canada over and out.

A friend sent this to me…thought I’d share the Fortune list. Funny how vendors like Xerox, TI or even “MEMC Electronic Materials” (seriously, who are they??) get virtually no attention compared to the Yahoo’s & EBay’s of the world.

1. Microsoft: $14.1B
2. IBM: $10.4B
3. Cisco: $7.3B
4. HP: $7.3B
5. Intel: $7B
6. Oracle: $4.3B
7. Google: $4.2B
8. Apple: $3.5B
9. Qualcomm: $3.3B
10. Dell: $2.9B
11. Texas Instruments: $2.7B
12. Corning: $2.2B
13. Applied Materials: $1.7B
14. EMC: $1.7B
15. Xerox: $1.1B
16. MEMC Electronic Materials: $0.826B
17. Nvidia: $0.798B
18. Adobe: $0.724B
19. EDS: $0.716B
20. Lam Research: $0.686B

I learned too much from the audience at last year’s RedMonk Unconference at CommunityOne last year to not attend this year. I got there a little later in the day, so I missed some of the early sessions, especially on TaskTop ;-(

The discussion on Cloud Computing was very well attended and nearly everyone at the table contributed. Interestingly enough the discussion centered on the security of data that lives in a cloud. Someone from the audience made a comment to the effect: “the biggest issue isn’t multi-tenancy, it’s data concurrency; it’s your data sitting next to someone else’s”. Atlassian’s Mike Cannon-Brookes mentioned that they are helping companies take advantage of Amazon’s EC2/S3 to do builds in the Cloud, but that customers were concerned about their proprietary code (i.e. data) being compromised. This is where I think that Clipperz could play a big role. I also learned that the majority of revenue from Amazon’s EC2/S3 is driven by workload that isn’t related to web serving in any fashion. Apparently the New York Times processed a job involving 12 terabytes of data on Amazon’s cloud. The fact that NYT didn’t run this workload on IBM, Sun or HP’s “offering” should be troubling to these vendors.

As a Twitter newbie, I learned a lot about how to effectively use Twitter. James made a great point that “people think Twitter is a publishing platform; that’s b/s, Twitter is a listening platform.” James also described Twitter as a platform for application developers, which I hadn’t thought about before. I can see many uses for Twitter inside the enterprise, especially in the middleware arena. I’ll have to think about this one more.

The RIA discussion benefited from the “industry experts” from Adobe and Sun (i.e. JavaFX) in attendance. Surprisingly enough, we couldn’t agree on a definition for RIA. Adobe’s James Ward suggested that “RIA is anything that lets you interact with computing in a way that you would with the real world”. Someone asked if the Wii was a RIA using James’ definition and James agreed that it was. Others felt that RIA was just another name on things the industry invented 15-30 years ago. Everyone agreed that not all applications should be RIAs. And that a pretty app that is useless is still a useless app.

Some funny quotes from the day…as best as I can remember them:

Sun’s Simon Phipps in response to a statement about Sun’s “execution challenges” in the past:

“We didn’t fail. We succeeded in establishing business models for others”

Dain Sundstorm (ex-Gluecode guy):

“I didn’t say that RIA is a load of b/s. I said this discussion is b/s”

James, Cote, Stephen, thanks for another great unconference! See you guys next year!

I’ve been thinking about this statement from Sun/MySQL’s Marten Mickos:

“There’s a difference between organizations that have more time than money and organizations that have more money than time.”

I coming to realize that OSS users split into three, not two, categories:

• A] An organization that has more time than money
• B] An organization that has more money than time but is used to getting what they need for free and is comfortable enough with OSS to rely on their own skills
• C] An organization that has more money than time

While Marten has grouped categories “B” and “C”, I think it’s important to separate them out. And truth be told, I think category “B” users are more likely to act like category “A” users when a purchase decision to be made. BTW: There is likely an aspect of “how business critical is the application running on OSS” that needs to be overlayed on this user categorization. But that’s for another post.

For OSS vendors, it’s an uphill battle to get a company in category “A” to spend on a product or subscription. On the other hand, nearly all “early stage” paying customers will come from category “C” users. But over time, the growth of users in category “C” who haven’t been converted to customers is outstripped by revenue growth targets that the OSS vendor has. This happens at different points on the revenue curve for different markets (i.e. operating systems vs. app servers vs. content management). I’d venture a guess that the inflection point for most OSS vendors is around $50-100M/year in revenue. From this point forward, the race is on to convert category “B” users into paying customers. Based on my discussion with customers that fall into this category, converting to paid customers is easier said than done. The whole “it’s certified and supported” story falls on deaf ears. These customers have been running the OSS product for years and haven’t found the need for a support contract, so why get one now?

Recently MySQL was in the news for implementing a strategy squarely focused at category “B” users (even if Marten and team wouldn’t classify the move as black and white as I do here). But look around and virtually every leading OSS vendor (SpringSource, Zenoss, MuleSource, etc) has implemented some form of an “incentive” to convert category “B” buyers. In most cases it’s a product that is only commercially licensed or only available to paying customers.

There is absolutely nothing wrong with this strategy. I am actually a fan of it because it’ll drive an order of magnitude more revenue than trusting in the goodness of user hearts (…you know the companies who have money but you’ve taught them they don’t need to spend with you). I’m sure some OSS purists will tell me that I’m wrong. I could very well be. Or maybe their company is still selling into category “C” users? I’d say time will tell, but the shift towards closed-source, or otherwise gated offerings from open source vendors leads me to think I should bet a beer on this one.

What do you think? Is Marten correct, or are there 3 buyer groups as I’ve described?

BTW…I respect Marten’s thinking around OSS enough that being proved wrong at his hands or his thinking won’t leave scars ;-)

Via Nick Carr’s posting today. The McKinsey survey suggests:

• The software industry technology innovations of the past 2-3 years are nothing compared to new technologies we’re about to see
• This innovation is likely driven by SaaS/PaaS and Web Services/SOA with 31% and 25% of respondents selecting them as the most important trend impacting their business. Open source received 8% of the votes from 857 respondents, just above 7% for “Software industry consolidation”
• Currently 65% of software spending is through traditional license/maintenance models, with 19% coming from subscription/on-demand. These figures are “expected” to shift to 58% & 21% respectively by 2009.
• The majority of this shift toward subscription-based models is coming from companies with <100 employees.
• The top three criteria for selecting SaaS vendors are: “deployment speed, ease of Integration”, “vendor track record in SaaS” and “Costs”.
• Overall, control of software decisions split 83% / 17% between centrally controlled vs. business unit controlled. This split grows as the company size increases. For example, it’s down to 67% / 33% in companies with > 25,000 employees.

Lots of other good info (you can read more here). I wonder that last data point will impact OSS adoption. It’s probably a net positive for applications that business users interact with. Not sure if a business unit decision maker cares as much about middleware decisions though.

In a move that makes perfect sense, Black Duck Software acquired Koders. Most of you know Black Duck as a company that helps businesses manage the legal risks around using OSS inside of their company or product. In many cases, Black Duck really helps managers and corporate lawyers get a handle on just how much OSS is being utilized at their company. According to Black Duck,

“…for example in technology M&A, where from 2005-2007 Black Duck products and services were used for due diligence of transactions with a total value exceeding $30 Billion.”

That’s a shockingly high figure. Wow. Kudos to Black Duck.

The Koders acquisition makes sense because more and more developers are developing by reusing code from external code repositories like Koders. Being able to tap into this source of code (pun intended) will help improve Black Duck’s code scanning capabilities. As a result, this acquisition will improve the level of information (and protection) that companies using OSS have at their disposal, whether the source being leveraged is from a traditional OSS project or an online code repository such as Koders.

This Wired story has some very interesting comments on Amazon’s Web Services (AWS) business. The first point was news to me:

“And the idea that AWS is mostly about wringing extra bucks (especially off-season) out of Amazon’s data centers? “We’ve far exceeded the excess capacity of our internal system,” Amazon’s Jassy says. “That ship sailed 18 months ago.”

….

“I’d be surprised if no one else does this,” Bezos says, pausing for effect. “It’s a really good idea!” And there may be an ace up his sleeve. Any economist will tell you that a commodity business — storing and processing data, for instance — is a mug’s game, with prices that plunge inevitably toward the cost of production (in the case of bits, pretty close to zero). That’s music to Bezos’ ears. “Commodity businesses don’t scare us,” he says. “We’re experts at them. We’ve never had 35 or 40 percent margins like most tech companies.”"

…

Wall Street’s best guesses for AWS’s 2007 revenue don’t even reach $100 million.

I scoured Amazon’s 2007 annual report to see if there was any additional data on the size of the AWS business. No luck. About all I could find is that Amazon’s expenses for “Technology and content”, which is where AWS expenses would be counted, were up to $715M ($818M if you include the cost of stock compensation to employees in the “technology & content” group). If the AWS business has grown beyond using the excess capacity of Amazon’s internal systems, it wouldn’t surprise me if 5-10% of that figure was associated with AWS. And based on the comment from Bezos, I’d probably uplift the expense estimate on AWS by < 25% to represent gross profit. All told, we’d be around [717M x ((5% + 10%)/2) x 125% =] $67M in revenue by my back of the envelope estimate. Not bad for 2007 (if my math is close to reality)…would love to know how big 2008 is considering that all the cool kids are using AWS.