Open Sources | Rodrigues & Urlocker » Marc Fleury is back, and as shy as ever

August 29, 2006 | Comments: (0)

Marc Fleury is back, and as shy as ever

TAGS: Open Source

Marc Fleury is back from vacation (or wherever he was), and kicks off his return with a great (and long) post on his blog. Marc is proof that you can work for a public company and not be a complete drone. At least, not yet. Maybe The Matrix has not yet sucked him dry of attitude and creativity....

Anyway, here are a few of the more interesting points:

One of the nuances becoming increasingly clear to many insiders is that the power of the model rests in the extremely low cost of distribution and sales. We reach millions of folks with free distribution and then monetize this base. It is a very efficient way to acquire customers. The result is that we spend 30 cents for every dollar of maintenance revenue, while the competition, on average, spends $3 for every dollar that ultimately comes in as maintenance. The downside, compared to proprietary software, is that on average we only monetize 3% of our user base for JBoss and roughly 10% for Linux. This low cost of sales we achieve through mass distribution is what makes the model tick. The customer gets to make up his own mind as to whether the software is any good as opposed to having to go through the vendor's pricey and biased salesforce. This enables the OSS enterprise sales force to be very effective since they mostly are targeting highly pre-qualified potential customers.

What I find most intriguing in this section is the conversion rates he assigns to JBoss (3%) and to Linux/Red Hat (10%). Marc doesn't go into this, but it's certain that his conversion rate (and Red Hat's) has gone up over time, as I blogged before. Why? Momentum, brand, sales "push," etc.

What will be very interesting to see is whether JBoss' conversion rate jumps to 10% when it hits the market maturity point that Red Hat currently enjoys, and whether Red Hat's moves to, say, 20%. (Is there a natural ceiling to open source conversion rates? We just don't know yet. Watch Red Hat to find out.) I would imagine that Marc's conversion rate will continue to scale with JBoss' brand and market presence.

Marc, true to form, then refuses to duck the Oracle/Linux rumors:

Let's assume Oracle wants to introduce a NEW distribution, what analysts call "Oracle/Linux." It would take time to assemble: you need Linux engineers, you need OS experience. You also need to build a support structure and you need to make it not suck. None of this says "?Larry can
t do it." It is just that it is all easier said than done. For more background reading on this, and why it's an uphill battle, read Trip Chowdhry of FTN Midwest Research's evaluation report on this scenario.

In fact, the recent rhetoric from the press has now been toned down to "Oracle wants to redistribute and support RHEL instead". From a distance it sounds like this is feasible as RHEL is GPL. However it is a bit more complicated than that, read Baird'?s Steve Ashley's note for excellent background reading on the topic. See, nowhere in the GPL is it said that we must distribute the software to you in the first place. Dion Cornett likes saying GPL != Public Domain. In fact, in the case of RHEL, RedHat doesn't distribute it to anybody, not for free that is.

If you want to have the software, you must subscribe to RedHat Network (RHN) and if you redistribute the patches or RHEL (which you can) you must pay us for every instance, if you don'?t, well, we are under no obligation to give you the future patches and upgrades, in other words, we cancel the RHN distribution to you and you are technically /forking/ RHEL.

Did you catch that? Most people don't. And that's why they fail to see the beauty of Red Hat's business model: people assume open source requires distribution of source code to anyone that asks. Not true. In Red Hat's case, you don't get access to their certified/tested/supported RHEL unless you pay. No $$$, no source code. Just because they write something doesn't mean they have to give it to you. That's not in the GPL I know.

As for Oracle and Linux, Oracle has a great deal of Linux experience. But at some point, you play your game and leave the rest to others. Linux is not Oracle's game. They provide excellent support for Linux, but they're not an operating system company, and couldn't become such simply by wishing it to be so. It's a different beast. It's not one that Oracle should bother trying to tame.

If they did, as Marc writes, and if everyone stopped whining about Red Hat's rising clout and actually acted on it, where would that leave us?

So, today, we are in an interesting situation. RHAT is being perceived as the new kid on the block in the big leagues. Some label us a new "Microsoft" - conveniently forgetting how, in open source as opposed to proprietary software, the inherent checks and balances limit the establishment of anything resembling a conventional monopoly. I, for one, believe that no one has an interest in moving against us here. The ecosystem of open source is a stable environment because of something akin to a Nash Equilibrium. If Oracle moves, what do you think IBM, HP or Microsoft would do? Short of a software industry equivalent of the Hitler/Stalin pact (and we all know how short a honeymoon that ultimately would be), it would really be unwise for Oracle to take that risk as it would only set up a replay of the Unix wars, but this time with Linux.

I believe the future of professional open source probably will be this large INDEPENDENT open source vendor. We are in the top 5 among the large infrastructure vendors, after IBM, Oracle, SUN and Microsoft. They may not like it, but if they move, the ensuing Linux wars will ultimately only benefit Microsoft and RHAT, just as, outside of Microsoft, Sun was the only beneficiary of the Unix Wars, which they used to consolidate their position. Why upset a situation that currently works to everyone's advantage?

Exactly. Great post, Marc. Glad to have you back. (And thanks to Matthew Aslett for reminding me.)

Posted by Matt Asay on August 29, 2006 10:41 AM

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