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.