February 2010

I spoke to Sam Ramji a little while back to get an update on Sonoa Systems. Readers will recognize Sam from his previous life as a central figure in Microsoft’s open source strategy team. Sam started the call describing a shift in his work from “open source to open cloud”.

Sam explained that enterprises are increasingly opening access to enterprise applications and services to third party developers, especially mobile developers, through open APIs. The impetus? Increase application content routes to market in an effort to increase revenue potential. The increased routes to market increases the potential load on the core application or service being exposed through the open API. Without careful consideration, the potential load from a third-party application could disrupt the company’s own, likely business critical, use of the application or service.

Sonoa Systems addresses this issue through an enterprise grade platform for visibility, management and governance for cloud services and APIs. Sonoa’s flagship product, ServiceNet is available as a hardware appliance, a virtual software image for private data center or public Cloud deployment.

Sam described a major U.S. retailer whose IT department built and exposed an API to its product catalog as a skunk works project. Nobody knew the degree to which the API would be used, or the extra load to expect on the product catalog service, a business critical IT asset. Today, the API is experiencing significant usage as third party developers have integrated the retailer’s content into a mobile mashup application. Not surprisingly, the mobile application is driving workload to the retailer’s back-end services which must be managed and optimized, a sweet spot for Sonoa. However, the application is also driving new revenue, which can be tracked through the API analytics that Sonoa ServiceNet offers.

The opening up of enterprise applications and services through open APIs is heading in only one direction. Sonoa hopes to accelerate this trend through its Apigee service:

“You have Google Analytics for your website – what about your APIs? And how do you protect your app against a burst of traffic or find out if an API you are using is slowing down your app? (besides hearing from your customers)

Apigee can help you understand API usage, control traffic flow, and protect your apps and back-end from misuse or abuse.”

Sam explained that the explosion of third-party mobile applications is driving interest and use of open APIs. For some companies, this is a double edge sword. Third party use of a company’s APIs increase revenue potential, but also increase risk of core system downtime based on factors beyond the company’s control, whether through misuse or abuse of the open API.

The great thing about Apigee is that companies can use ApigeeBasic, the free offering, to protect the core system through API usage quota, rate limiting and spike protection. This enables companies of all sizes to begin down the path of getting higher utilization out of the core application or service by making it available through a much broader channel than the company’s online presence alone. The ability to track revenue associated with the open API is sure to help business case discussions that may result when infrastructure upgrades are required to keep up with the new load through the open APIs. For most companies, that would be a good problem to have.

Follow me on twitter at: SavioRodrigues

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

Jaspersoft and CEO Brian Gentile released download and community figures that suggest increased traction of Jaspersoft’s open source based business intelligence product line.

Jaspersoft has surpassed the 10 million download mark since late 2001. While I’m always weary of download data after the 1 million mark, 10 million downloads place Jaspersoft in rare company amongst open source vendors. Jaspersoft also counts nearly 120,000 registered community members.

Jaspersoft also provided an estimate of its community contributions to open source, through work on the open source JasperReports, iReport, and JasperServer/JasperAnalysis:

“Ohloh.net estimates Jaspersoft and its members have contributed nearly nine million dollars in full-time equivalent engineering investment to these projects.”

I’m somewhat surprised that Jaspersoft’s open source projects only amount to $9 million in engineering investment. Maybe Ohloh.net is only counting the investment since Ohloh.net was founded?

Another interesting data point is the difference between user and customer geographies:

“Jaspersoft’s community includes members in more than 150 countries around the world, with top ten memberships coming from Argentina, Brazil, China, Colombia, Germany, India, Italy, Mexico, Thailand and the United States. Comparatively, in the last year, the United States, the United Kingdom, Canada, Germany and France ranked among the top five countries with the highest commercial adoption of Jaspersoft products.”

Jaspersoft appears to be monetizing usage in western markets today, while at the same time building a usage base in emerging markets which can be monetized in the future.

With Red Hat’s recent interest in Business Intelligence, and Jaspersoft’s traction, one can’t help but wonder what Red Hat is waiting for in this space. Keep in mind that Red Hat has previously invested in Jaspersoft. However, so has SAP. With SAP’s increasing warm stance towards open source, they represent another potential suitor for Jaspersoft. While SAP’s Business Objects division would compete with Jaspersoft, the combination of an open source, open source based and enterprise commercial product line would be interesting from a competitive standpoint. Additionally, Jaspersoft’s usage in emerging markets could be an opportunity to reach a set of customers that SAP may not reach effectively today.

Interesting times ahead.

Follow me on twitter at: SavioRodrigues

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

Matt Asay wrote a well received post about dynamic scripting languages such as PHP, Perl and Python ‘crashing the enterprise party’. While the Indeed.com job trends chart that Matt used is somewhat misleading, the chart isn’t central to his point. I say somewhat misleading because the chart tracks percentage growth of jobs seeking “Java”, “PHP, “Perl”, “.NET” and “Python” skills. It’s not surprising to see languages with little enterprise penetration growing faster than languages, or platforms in the case of .NET, that are virtually de facto standards for non-legacy applications. The ‘absolute’ version of the Indeed.com job trend chart is more reflective of the market demand for Java, PHP, Perl, .NET and Python skills.

In any case, Matt’s concludes:

“No, Java and .Net aren’t going away anytime soon. But then, neither are the dynamic programming languages, which are increasingly blessed “enterprise ready.””

I completely agree. Forrester’s Jeffrey Hammond’s research supports the growing enterprise interest in dynamic scripting languages:

“It’s also no surprise to see that dynamic languages such as Ruby, Python, PHP, and JavaScript are proving most popular with developers in the 45-and-under cohort. Dynamic languages are useful when it comes to assembling components into composite Web applications, especially if runtime composition is important.

The implications? As the development staff at a shop turns over, the new generation will push to adopt these dynamic languages. IT managers must ensure that processes and application life-cycle management tools can handle the changes that these new languages bring to the development shop. “

Hammond’s research also found that developers are increasingly comfortable working on multiple programming languages. Hammond writes:

“Developers used to identify themselves by the languages that they used — “I’m a COBOL programmer,” “she’s a Java developer.” But that’s changing — less than 15% of the developers we surveyed spend all their time writing in a single language. “

I started to wonder if the increase in dynamic scripting language job postings is being driven by companies seeking enterprise developers with multiple programming language skills. For instance, if a job required Java skills and another job required Java, Python, MySQL, Ruby on Rails and PHP skills, Matt’s Indeed.com job trends query would find 100 percent of jobs seek Java skills while 50 percent of jobs seek PHP skills. Clearly, the first job has an emphasis on Java development, with Java coding likely making up the majority of the work week. The second job may also be a predominately Java job, but there may be the odd PHP coding task required. As such, claiming that the second job is a “PHP” job while the first job is a “Java” job is somewhat of a difficult conclusion. This can be remedied with Boolean search operators as I’ve done, as shown in the chart below.

PHP, .(NET or C# or VB or ASP) & PHP, Java & PHP Job Trends graph

The overwhelming majority of jobs requiring PHP skills do not require Java or .NET related skills. My hypothesis that the growth of PHP jobs was a byproduct of companies seeking a Java or .NET platform developer who also knew PHP appears to be unsupported by the Indeed.com data. Java developers tend to be compensated at higher levels than dynamic scripting language developers. Companies may not want to pay a Java developer to work some percentage of her day on PHP coding when a PHP developer could be hired for lower cost. Makes sense, but I would have expected more overlap between Java and PHP jobs or the .NET platform and PHP jobs. You learn something new every day!

Follow me on twitter at: SavioRodrigues

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

Successful open source vendors utilize business models that build a large user base through free software and monetize the adoption through some other product or service offering. In dated business terminology the free offering is considered a loss leader whose business case is supported by other offerings in the portfolio.

I’ve previously written that RIM needs to more effectively utilize open source software in its business practices. Well, RIM just demonstrated that they’re learning from successful open source vendors.

RIM introduced the free BlackBerry Enterprise Server Express (BESX), which offers wireless synchronization of BlackBerry smartphones with Microsoft Exchange or Microsoft Windows Small Business Server. While BESX is targeted at SMB customers, RIM still offers BlackBerry Enterprise Server (BES) as a priced enterprise grade product with additional enterprise-friendly features.

It’s interesting to not that BESX isn’t necessarily being used to build a user base that RIM will later monetize with BES. Rather, BESX is an attempt to build a user base that can be monetized through the sale of BlackBerry devices and ongoing monthly fees. This becomes vividly clear when one considers RIM’s revenue sources.

The “Device” category, not surprisingly, represents revenue from selling new smartphones. The “Service” category represents the monthly fee that RIM receives from carriers for every active BlackBerry device on the carrier’s network. The “Software” category represents revenue from the sale of packaged software such as BES.

While the “Software” category represented over $250 million in fiscal 2009 revenue, a respectable sum by most measures, it represents 2 percent of RIM’s revenue. By making BESX free, RIM hopes to make it more cost effective for small businesses to promote the use of Blackberry devices by their employees. As this occurs, RIM will capture “Device” and ongoing “Service” revenue.

Build adoption with free software and monetize adoption elsewhere in the offering portfolio. Seems like a very smart decision by RIM.

Follow me on twitter at: SavioRodrigues

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

This Silicon Alley Insider chart of the day, via Tim O’Reilly, caught my attention.  While Microsoft reports operating profit by division in their quarterly SEC filings, the chart does a much better job of telling Microsoft’s business story over the past 3 years.

Source: Silicon Alley Insider Chart of The Day

When the chart was first posted, the date range spanned September 2006 to September 2009.  Silicon Alley Insider added the December 2009 data after a comment on the blog post.  As a result, you’ll notice that the y-axis doesn’t actually span the size of Microsoft’s roughly $10 billion operating profit in the December 2009 quarter.

It’s no surprise that Office and Windows make up the overwhelming majority of Microsoft’s profits.  The Entertainment and Devices division (E&D) seems to be oscillating between profitability and loss, with profits being highest ahead of and during the holiday season.  However, as a commenter, Se7en, writes on the post:

“Wow. E&D still isn’t even making a dent. All the great press, accolades, bragging about the Xbox360 and how it won the console wars, took the war to the living room, and rejuvenated the company, and that’s what we get? A little blue smudge on the bottom of the graph?”

To which, ex-Wall Street analyst Henry Blodget writes:

“@Se7en: Yes. At least it’s not subtracting $2 billion a year, though. (See: Online)”

Entertainment & Devices and Online Services are two important investment areas for the company, made possible by Microsoft’s impressive profits in the Office and Windows divisions.  Whilst Microsoft has had some success attracting the hearts of users in these market areas, there’s a long road ahead before claiming success versus Apple and Google respectively.  Frankly, one has to seriously ask if these investments will ever amount to being the profit engine(s) for the company.  Note, I’m not suggesting that Microsoft abandon or minimize these investment areas.  Rather, I’m asking whether these divisions stand poised to replace the profits from Office & Windows in the face of open source and cloud-based competitors.

This brings us to the Server and Tools business.  With a healthy $1.5 billion in quarterly operating profit and growth over the 3 year analysis window, this division that could potentially offset erosion to the Office and Windows cash cows.  Keep in mind that Microsoft’s cloud, Windows Azure, recently moved into the Server and Tools division.  With the industry emphasis around cloud computing, and Microsoft’s success with .NET middleware, Microsoft likely its future linked heavily to the growth and profitability of the Server and Tools division.

Time will tell.

Follow me on twitter at: SavioRodrigues

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

I hadn’t paid too much attention to the news surrounding Forrester’s revised blogging policy.  But when two people I know and whose opinions I respect come out, seemingly, on opposite sides of the discussion, the topic makes it to my “read and formulate an opinion” todo list.

First, some quick history.  Forrester currently maintains multi-analyst blogs grouped by topical areas.  This is great if you want to keep track of research about, for example, application development strategy.  However, it’s difficult to filter posts by a certain author within a topical area.  To address this Forrester announced that its analysts will be given individual blogs at Forrester.com.  Analysts will also be required to move any blogging pertaining to Forrester-related research to their individual Forrester.com blog.

Early coverage focused on the personal brands of Forrester analysts. Frankly, I don’t see this policy negatively impacting an analyst’s personal brand.  If rock star analyst Jane Doe leaves Forrester, finding Jane’s new blog and or new employer is, at worst, a Google search or Twitter status update away.  I follow blogs and twitter accounts of people whose opinions I respect.  The fact that they work for Redmonk, Microsoft, Forrester, Amazon, IBM, Oracle or any other entity is secondary.

The larger concern seems to center around the equitable distribution of the value created between Forrester analysts and outsiders who engage in a conversation with these analysts.  This sentiment is captured by Matt Asay’s comments:

“More pertinently, why would I want to purchase Forrester’s expertise if I have no real taste of what the company has to offer? I don’t get that taste by reading teaser blog posts that promise “a wealth of knowledge–but first you pay!”

Why is this important? Because that’s what I’m buying. When I engage an analyst, I’m not interested in paying for what they thought. I’m paying for what they’re thinking. About my business problems.”

Having followed Forrester’s application development blog, read their for-fee reports and engaged in client discussions with Forrester analysts, I have to say I’m not seeing the connection to less value being provided on Forrester.com blogs as a result of the new blogging policy.  Maybe the area of Forrester that I follow is more evolved in its ability to provide good, yet free, content, while being able to monetize the tailored analysis around the content in question.

For instance, I can read this Forrester.com post to find details on Java vs. .NET adoption. That’s a great factoid.  But this insight from Jeffrey Hammond is more valuable:

“What this data underscores is that we are seeing steady shifts in the application platform technologies developers use. We think the data also shows that it’s increasingly less meaningful to think of the development world in terms of “Java vs. .NET”, because you risk missing the increasing importance and adoption of Web technologies that are “Neither of the above”. “

Now, it’s important to note that Jeffrey adds:

“If you’re interested in digging into this data in deeper detail drop us a line, we’d be happy to discuss what it means to you and your application development strategy.”

The data and some generalized analysis are available for free on the Forrester.com blog.  As a paying customer you can expect the complete data and insight applied to your company’s unique situation.  And yes, you’ll have to pay for that.  Seems to make sense to me, and I don’t see the new Forrester blogging policy changing this approach.

Taking a step back, when I worked in market intelligence 10+ years ago the only way to access an analyst’s thoughts or research was to purchase a research subscription and consulting hours.  Today, virtually every analyst, whether it’s Forrester, Redmonk, Gartner, The 451 Group, IDC or others, give away some degree of their intellectual property (IP) and monetize other elements of their IP, and in different ways.  No one approach works for all analysts.  However, each firm has built or adjusted their business model to the reality of a market in which users expect some value at no cost before becoming paying customers.

Follow me on twitter at: SavioRodrigues

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

Facebook recently open sourced HipHop for PHP. According to Facebook engineers, the technology has been used to reduce Facebook Web server CPU usage by an average of 50 percent. Reading about HipHop for PHP I was reminded about a post from Redmonk’s Stephen O’Grady titled “When Your Customer is Your Competitor: The Return of Roll Your Own“. Stephen argues that the traditional definition of a “software company” is far too narrow.

“Why do you think Facebook would sponsor the Apache Foundation? Because, like Amazon, they’re in the business of producing software. Software like Cassandra.

Ruby on Rails came out of 37Signals’ Basecamp, a Software-as-a-Service project management tool. Django? Extracted From the Lawrence Journal-World’s website. Crane? Derived from Flightcaster. Git? Written by Linus Torvalds to manage the Linux kernel tree.

None of this software, of course, would be all that interesting except for one important change: this in-house developed code is open source, and shared with others. Which has led to entirely new – and entirely unanticipated – business models. “

I agree with Stephen’s claim that interesting and popular software projects are no longer solely the prevue of vendors whose financial future is linked to directly monetizing the software in question. One could argue that vendors in the business of producing software which is directly monetized are at risk of being marginalized by companies offering a competitive software solution without the need to directly monetize the software itself. For instance, who could have guessed that Zend, the commercial vendor behind PHP, would face competition from Facebook. What’s more, Facebook could care less about selling licenses, subscriptions or extensions to HipHop for PHP. Therein lies the catch-22, and potentially, the opportunity.

Note, I’ll use Zend and HipHop for PHP as examples, but the argument could be applied to any commercial software vendor facing competition from an open source project whose sponsor is not in the business of directly monetizing the software itself.

Facebook’s lack of business interest in the project makes it difficult for enterprises to select and purchase HipHop for PHP offerings. As a result, there is an opportunity for a third party vendor to provide commercial support and products around HipHop for PHP. However, without control of the project and the project’s copyright and trademark, it’s difficult to monetize usage.

For instance, who and which company comes to mind when you think about of Ruby on Rails? If you said David Heinemeier Hansson and 37signals, you’d probably be in the majority. David Heinemeier Hansson founded Ruby on Rails, and his company, 37signals, uses it as the infrastructure to build applications that 37signals sells. Several third party vendors offer support and related products for Ruby on Rails. However, none are as well known as 37signals, which does not offer support or commercial Ruby on Rails products.

Next, who and which company comes to mind when you think about Drupal? If you said Dries Buytaert and Acquia, you’d probably be in the majority. Dries founded Drupal and then co-founded Acquia to monetize the software itself. Companies can purchase Drupal support and commercial offerings directly from Acquia, which benefits from the awareness associated with Dries being co-founder.

Since Facebook likely owns the intellectual property I doubt that Haiping Zhao, one of the HipHop for PHP creators, will leave Facebook to follow in Dries’ footsteps. This leaves the possibility of a third party vendor providing support and commercial offerings around HipHop for PHP. However, the vendor will face many of the awareness and monetization challenges that Ruby on Rails vendors face.

With all this in mind, I have to conclude that, while HipHop for PHP is competitive with Zend’s commercial offerings on paper, Zend has little to fear from the project itself.

To generalize, it would appear that software vendor incumbents face minimal risk from open source projects sponsored by vendors who do not seek to directly monetize the software itself. I could be convinced otherwise, but that’s my starting position.

Follow me on twitter at: SavioRodrigues

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

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