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Open Sources | Rodrigues & Urlocker » Comments on The 451 Group's Database Report & Red Hat's 4Q revenue

March 27, 2008 | Comments: (0)

Comments on The 451 Group's Database Report & Red Hat's 4Q revenue

I want to thank Matt Aslett & The 451 Group for being brave enough to publish this report on the impact of open source databases on the DB market. An excerpt:

"One of the key findings is that open source software has had a superficial impact on the enterprise database market in that adoption has been widespread but shallow. While open source databases have been widely deployed for Web-tier applications, there has been minimal adoption in the enterprise application tier, and adoption for enterprise applications is at this time limited to certain specific application workloads."

Matt "the OSS glass is overflowing, go get another glass, oh man, it's overflowing, get a bucket, oh man, get a hot tub" Asay believes the report to be a "glass half empty" assessment. (Matt, I'm teasing; the world needs more optimists like you).

When data refutes "obvious truths about OSS", we often hear one of three responses.

  1. The data is flawed.
  2. You're measuring revenue, and OSS companies will always make less than proprietary vendors because of the nature of the business model.
  3. Just you wait; the OSS market is still young.

Let me address #2 & #3 using recent revenue results from two vendors we all know. Red Hat released revenue results today. They grew fourth quarter revenue by 27%. Not bad at all. Two days ago Oracle reported a 21% increase in quarterly revenue. The only difference being that Red Hat grew from a $111.4 million base, while Oracle grew from a $4.42 billion base. Younger businesses, addressing younger markets (i.e. the OSS market), should be growing substantially higher than their older counterparts, addressing older markets. Shouldn't they?

I don't want to sound like Red Hat's growth is not impressive. It is. I only want to provide some perspective...a $100M business *SHOULD* grow much, much, much faster than a $4.4B business.

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

Posted by Savio Rodrigues on March 27, 2008 07:04 PM


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No offense taken, Savio. It was a good report and on one hand does suggest that open-source databases aren't having a negative impact on the proprietary database vendors.

But (glass is half-full comment on its way :-) how do you explain MySQL doing as well as it has? Forget the $1B valuation. It was doing very well in its own right. Now, granted, it's just one vendor and even if it were doing $500M (as Red Hat is, roughly), that's still a drop in the proverbial bucket, given that none of the other open-source database vendors have yet matured to the point that they're doing MySQL levels of revenue.

No, I think we're seeing two things:

1. Open source is still very, very new. We can be doing fantastically well and still not cause a ripple in the proprietary water. But at some point something's got to give. I sell this stuff every day and advise 10 other companies that do the same. All the signs are positive. Every company is experiencing significant growth every quarter. At some point that starts to crimp proprietary revenue, or it stops and the proprietary world wins. But you know which side I'm rooting for....

2. Open source is truly creating new markets. Google couldn't be Google with Oracle or DB2. It simply couldn't. The economics and the licenses wouldn't give it the flexibility and innovation (from Google, not necessarily from MySQL) to grow when and how it wishes. Google needs MySQL. MySQL owns this web world.

Granted, it's a world that doesn't like to spend a lot of money today. But when the old-line retailers/etc. go online, they'll do it with MySQL and they'll be much more willing to pay. That's how markets work. The early adopters pay little but push you into the mainstream, and the mainstream pays.

I think your skepticism is healthy. It's very possible that I sometimes share it. In fact, almost certain. But I've seen enough to suggest that near-term skepticism will invariably get mowed over by long-term opportunity. I've been actively involved in open source for a decade, and I've watched my own skepticism and disbelief routinely fall flat when the market said "More."

It will happen to you, too, Savio. :-)

Posted by: Matt Asay at March 27, 2008 10:12 PM

Thanks Savio. While the statement you quoted is undoubtedly glass-half-full, we do also have some positive things to say about open source databases! Ultimately we were trying to take a realistic, independent, view of open source database adoption, and our survey of database purchasers (not developers or admins, but the people who write the cheques) suggested that the current situation is not going to change any time soon. Now admittedly, not all open source database deployments have a cheque associated with them, but as we're talking about enterprise applications, they should. We do see a bright future for the adoption of open source databases for enterprise applications but progress is, and is likely to remain, slow.

Posted by: Matthew Aslett at March 28, 2008 06:21 AM

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