Earlier this week OpenLogic announced commercial support for CentOS, a Linux distribution derived from Red Hat Enterprise Linux (RHEL).  The CentOS distribution is ostensibly RHEL source code with Red Hat’s branding and artwork removed.

Some asked if OpenLogic was “stabbing Red Hat in the back”.  OpenLogic positioned the move, not unexpectedly, as healthy competition.  OpenLogic’s Kim Weins explained that OpenLogic customers have been asking OpenLogic to provide Linux support for some time now.

“We do have a value-based approach for OSS support – customers want OSS support, but want it cheaper.

How, if at all, will OpenLogic’s support for CentOS impact Red Hat’s revenue?

Well, Red Hat has already proven itself in the face of Oracle offering a Linux distro based on RHEL.  Novell also offers low-cost RHEL support for up to 3 years during a migration from RHEL to Novell SUSE Linux Enterprise Server.  And yet, Red Hat’s Linux revenue is growing in the 20 percent year-to-year range; very respectable, especially in today’s economic climate.

For some customers, the OpenLogic CentOS offering becomes a negotiation tactic with Red Hat.  But customers already had the option of using Oracle Unbreakable Linux (OUL) during Red Hat negotiations.  And well, Red Hat still sports a 20 percent plus growth rate.

Then there are joint OpenLogic and Red Hat customers.  Based solely on Red Hat’s market share, I’d guesstimate that a large portion, upwards of 70 percent, of joint OpenLogic and Red Hat customers are using RHEL today.  These joint customers will begin to think seriously about their RHEL investments.  Some will begin by categorizing their RHEL deployments into “mission critical” and “less than mission critical”.  RHEL will remain the operating system of choice for the former, while CentOS could begin to displace RHEL in the latter.

The more interesting consideration is how RHEL customers unfamiliar with OpenLogic will react to this news.  Some RHEL customers were surely looking to reduce operating system costs by using CentOS over RHEL.  Until now, there hasn’t been a well established CentOS support option.  For instance, the “Commercial Support” page on centos.org reads:

“This Section or Page is coming soon. This page is a holder for Content that is not yet available for publication.”

While OpenLogic isn’t a market gorilla, they are definitely an established open source support vendor.  Additionally, by now, RHEL customers, and their management chains, are no longer concerned about the “risk of using Linux in the data center”. As such, the price premium for the enterprise Linux market leader, RHEL, is no longer the sacred cow.  Comfort with RHEL and Linux opens up the discussion of moving some workload from RHEL to CentOS in search of lower costs.  Matt Asay pointed out that Orbitz and others are running mission critical applications on CentOS.  While these customers are a thorn in Red Hat’s side, they represent a very small portion of Red Hat’s customer base.

It’ll be interesting to check back in with OpenLogic in 6 months.  Who knows, maybe OpenLogic’s success will make it an attractive acquisition target, maybe even for Red Hat?

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 read two articles yesterday that lead me to believe OpenLogic’s best days are ahead.

First, OpenLogic reported a 41% year to year increase in 3Q09 revenue with a 100% renewal rate.  These are strong results and the renewal rate suggests that clients value OpenLogic’s offerings.

Second, the US Department of Defense (DoD) CIO issued clarifying guidance regarding open source usage by the DoD.  The DoD memo deals with some misconceptions about using open source and goes on to explain that open source software should be considered when it can potentially meet the needs of a given mission.  Of note to open source vendors, the DoD paper states:

“The use of any software without appropriate maintenance and support presents an information assurance risk. Before approving the use of software (including OSS), system/program managers, and ultimately Designated Approving Authorities (DAAs), must ensure that the plan for software support (e.g., commercial or Government program office support) is adequate for mission need.”

The DoD would prefer open source usage to be aligned with “appropriate” maintenance and support.  OpenLogic touts its ability to support and maintain 500 plus open source software projects.  Seems like a perfect match.

While OpenLogic provides support for 500 plus open source projects, the top five projects that customers sought support for in 3Q09 were JBoss, Apache HTTP Server, Apache Tomcat, MySQL and PostgreSQL.  Interestingly, four of these five projects are controlled and driven by well known open source vendors that offer their own support subscriptions.  The fact that customers chose to acquire support from OpenLogic versus going directly to the vendor controlling the project suggests that some customers prefer to consolidate their support contracts and experience.  I suspect that the DoD and other government agencies would see the value of a streamlined support process across tens or hundreds of open source projects used by the DoD.  However, if the DoD wanted to modify and redistribute an open source project without being required to share their changes, a commercial license from the project’s copyright holder would still be required.

Government agencies do tend to purchase though a government-approved systems integrator (SI).  Some of these SIs are already endorsing open source.  I wonder if one of these firms will see competitive advantage in acquiring OpenLogic. Okay, well, maybe a strategic partnership would be a first step.

While the financial services sector is the largest driver of OpenLogic’s revenue, it’s important to note that government is amongst the fastest growing revenue contributors.  I wouldn’t be surprised at all to learn that government becomes OpenLogic’s top revenue contributing sector over the next two years.

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.”

OpenLogic shared some of their year end stats with us that I found interesting.  OpenLogic reported that the following projects drove the most customer interest:

  • Tomcat
  • Apache HTTP Server
  • JBoss
  • MySQL
  • PostgreSQL

OpenLogic also reported that their average customer acquires support for an average of 66 open source projects. They also reported a significant uptick in interest for open source software support during the second half of 2008:

  • OpenLogic saw a 2x increase in the number OpenLogic enterprise customers in 2008 (to a total of 75 enterprise customer); over half of these new customers coming on board in the second half of 2008.
  • OpenLogic received more than triple the number of inbound sales leads in the second half of 2008 over the first half of 2008.  More than half of all new deals came from inbound leads from enterprises actively shopping for open source support.

I find it very interesting that customers turn to OpenLogic for support of JBoss, MySQL or PostgreSQL, and even Tomcat for that matter, when the vendors behind these projects offer their own support or enterprise editions.  This goes back to the argument that SpringSource’s Rod Johnson was making about customers only acquiring support from vendors who have substantive control over the code in question.  But if the average customer is getting support for 66 projects, that customer definitely wants a one-stop-shop.  Managing 66 vendor relationships is nobody’s idea of fun!

I get the sense that having access to the developer of the project is no longer the #1 buying criteria for some customers seeking OSS support.  This was bound to happen with the maturity/quality of open source projects and customer’s familiarity with these projects.  Think of the 15% of customers that purchase support and decide not to renew in year 2 because they didn’t make sufficient use of the support offering.  Play this out over several products and it’s easy to see the value of a combined support offering like OpenLogic’s offerings.

So does this mean that the MySQL/Sun’s of the world are going to lose revenue at the hands of the OpenLogic’s of the world?  Nope.  Customers do value the relationship with the vendors behind key open source projects.  I emphasize “key” because out of the 10s or 100s of OSS products in use at a customer, a handful are more critical than the rest.  For example, I want to be sure that the HTTP server or database stays up as these products impact customer experience.  If I keep getting an error with Ant, it’s annoying for my developers, but doesn’t impact the customer experience.  There will always be different use cases and customers have differing needs.  It behooves the open source ecosystem to address these needs as broadly as possible.

OpenLogic announced an evolution to their “aggregated open source support” model today.  According to the press release:

“OpenLogic provides front line enterprise-grade support across the 400 open source packages in its certified library. In 2006, OpenLogic created its Expert Community to provide additional backstop support – paying lead open source developers for support.  Now, with this new partnership program, commercial partners will provide backstop support for their projects and OpenLogic will resell its partners’ enterprise support offerings.”

OpenLogic’s CEO Steve Grandchamp is quoted: “This is the next phase of our open source aggregation model where we partner with leading open source vendors as well as individual open source developers to provide open source support”.

EnterpriseDB and JasperSoft are the inaugural members of the OpenLogic partnership program.

Judging by the use of the terms “front line support” and “backstop support”, it appears that OpenLogic will continue to own the customer relationship.  If the customer has a support question regarding, for example, EnterpriseDB, it appears that OpenLogic staff will work with EnterpriseDB staff on a solution.

On one hand, this seems like a good move for OSS vendors (i.e. JasperSoft) looking to leverage a new channel.  On the other, not having a direct relationship with the customer may pose a challenge in the future.  OpenLogic benefits from being able to offer customers a one-stop-shop for OSS support, while relying on the vendors that know their own products the best.

In any case, good luck to OpenLogic and its partners!

I was pretty excited when OpenLogic announced the Open Source Census. A key aspect of the census was a tool that scanned respondents’ servers to determine which open source products/packages were actually being used. Anonymous data from these individual scans was going to be shared with the public in order to revolutionize our understanding of OSS usage. This would be very important for companies whose IT leaders don’t know that they are using OSS.

However, to date, only ~1300 machines have been scanned.

News from InfoWorld today that Microsoft has also sponsored the Open Source Census is great as this will attract attention to the Census.

If you’re reading this and have not participated in the Open Source Census, why not? What will it take to change your (and your company’s) mind?

I haven’t really followed SourceLabs for a little while now, and yet, strangely enough, they’ve been doing new and interesting things even without me watching ;-). SourceLabs “Self-Support Suite for Linux and Open Source Java” caught my eye, so I thought I’d learn more about it. I watched a demo that began with the slogan: “We’re IT people…we don’t call support”. Made me laugh out loud…

The useful thing about the Self-Support Suite is that it adds diagnostics to your applications. When developers have a support issue, the diagnostics results are used to search for the similar problem *and* the solution from within 16 million data points in the SourceLabs support repository. The repository is constantly updated with information from mailing lists, bug databases, code repositories, security bulletins, etc. There’s only one catch; what if there isn’t a solution available yet?

This is where OpenLogic comes in. (Remember that OpenLogic provides support for hundreds of OSS projects in one convenient support package).

While developers may not (like to) call support, it’s more than likely that their manager or their business would much rather that the support issue is dealt with ASAP. The combination of SourceLabs and OpenLogic would provide compelling value to developers, managers and businesses. The merger (or acquisition) would address the needs of developers wanting to solve problems themselves and managers wanting to ensure there is a safety net for the business when a solution isn’t easily found.

Seems like a win-win-win for OpenLogic, SourceLabs and customers.