A few days ago I discussed the results of IBM WebSphere’s software division as a proxy to measure the much heralded death of traditional software. (Spoiler alert: It’s not dying).

Matt wrote:

“Why is it that proprietary vendors seem to have to consolidate to survive right now? There are very few winners right now: IBM, Microsoft, Oracle, and SAP.”

“It’s cute to look at IBM as a bellwether of proprietary health, but I think you’re kidding yourself. All I have to look at is the customer wins that my company and others are having. There is a groundswell in motion, and it’s foolish to think that it will raise all boats.”

Awww shucks, I did something cute ;-)

To Matt’s first point, all markets consolidate over time. It’s as simple as that. With or without OSS, we would have seen those some 4 vendors dominate the software market.

We see consolidation in OSS markets also. I seem to recall Matt asking what VC in its right mind would invest in a startup going after “OSS markets that are spoken for” a la Red Hat & Linux. I can’t find the quote, but I’m 99% sure Matt said it…and hey, I totally agree.

I can guarantee (offer not valid in Quebec) one of two things:

  1. There will be fewer than 3 ‘winners’ in the OSS vendor space in 10 years. There will be a decent # of startups, but few vendors in the middle. You’re either a startup swinging for the big 3, or you’re in the big 3. If you’re in the middle, you won’t be for long.
  2. There will be zero independent OSS vendors of significance (i.e. > $750M in revenue) in 10 years. They will have been acquired by one of the leading IT vendors in existence today.

I’m betting on #2, but even #1 makes the same point. The software market can’t support more than a handful of leading vendors. Niche vendors will, in the long run, lose out to vendors that can offer the broadest set of products.

To Matt’s second point: I completely agree that OSS spending is growing and that Alfresco is doing great. Kudos and well wishes. But in the end, it’s difficult to compare 1,000% growth vs. 10% growth without considering the base. For context, OSS is only going to represent 1.8% of total software spending by 2011. Is that good? Absolutely. Is it the end of life as we know it in the software market? Difficult to say, but change happens.  But change is always less pronounced, and often different, that predicted.  Remember, the mainframe’s death was predicted decades ago ;-)