February 07, 2008 | Comments: (0)
Cote is at Sun's analyst event and has two posts that caught my attention.
Cote writes:
"Sun’s story is the same and more eloquent than ever: telcos will accept open-think finally, emerging markets will leap-frog over using closed, hegemonic technology for their IT build-up preferring open, flexible nirvanas, and the tried and true cash-pipe of 1st world enterprise data-centers will see that the combo of Solaris & those perfect looking aluminum-cased boxes are what running data-centers deserve to be like.....
The Sun faithful believe this utopia-bet so much so that they bristle at calling it such. To the Sun faithful, they’re betting on inevitability, the march of time. They’re no doubt practicing the phrase “I told you so” in the shower every morning.
That is the Sun ethos in a nutshell."
Do you think Sun's utopia bet is going to pay off? (Obviously I have my views, but I just found out my new neighbor is VP of Canadian Software Sales so I'll hold my tongue.)
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 February 7, 2008 09:38 PM
December 13, 2007 | Comments: (0)
Easier IT Recruiting with Jobvite
Q4 is usually a time when you're doing your planning for the next fiscal year and looking at staffing up in Q1. The only problem is it always takes longer to hire than you would expect.
Jobvite is an interesting potential solution. It's a software as a service offering that helps companies better focus and manage their recruiting efforts by getting the whole company oriented towards talent acquisition.
While I haven't used Jobvite, it is an interesting offering and it has been used by quite a few Silicon Valley firms, ranging from TellMe to Tivo. Jobvite continues to develop momentum and has recently announced Series A venture funding of $7.2 million from CMEA ventures.
I think its a good sign of how new applications are being tackled successfully as services. This is an increasing trend and should be a part of IT planning for 2008.
Posted by Zack Urlocker on December 13, 2007 03:43 PM
October 09, 2007 | Comments: (0)
The price is right: Next open source business model
2007 is shaping up to be a banner year for open source companies. SourceForge, which hosts almost 160,000 projects, just posted fiscal year 2007 revenues that showed a hefty 35 percent increase over 2006. Red Hat posted a 28 percent revenue increase on the year. And Novell's Suse is valued at approximately $210 million. What's more, numbers like these are bolstered by an unprecedented user acceptance of open source within the enterprise. According to research
conducted by Barracuda Networks (yeah, it's a security vendor), 53 percent of security managers would opt for open source, compared with 47 percent who would go for closed source solutions of equal merit.
This short list of positives could fill more than a few blog pages of course, so much so that it's tempting to declare a full-on open source gold rush. Everyone grab a pan and head for San Francisco! It's no wonder, then, that we're seeing so many mainstream vendors jumping headlong into the open source stream, looking for gold. In just the past month or so, unusual suspects such as Intel, Microsoft (in a way), 3Com, ARM, Autodesk, Adobe, and QNX have announced varied projects and programs based on open source software.
Most of these vendors are not rolling out traditional business models, where customers lay down annual subscription dollars in exchange for support, training, education, and such. Rather, many of these vendors are looking to simplify and lower internal development costs, better support ISV partners, or just buy some street cred for solutions that would otherwise be considered frumpy by open source devotees.
With such happy-happy-joy-joy support for open source infusing the software industry right now, I think the industry and open source is ready, and it's mature enough to move on to a more directly profitable business model. What I'd like to suggest is that the open source industry adopt a new (some may call it old) business model that will garner revenue not just from the enterprise, but also from the average consumer. Call it YEPR, Your Estimated Price is Right open source licensing. Think of it as an individualized equity trade, or fair market value as defined by the individual customer. The idea is a lot like donationware, which Wikipedia defines as:
"A reasonably satisfied user is suggested to compensate the programmer if real value or use is achieved from the program. The compensation amount is left up to the discretion of the user. This amount is based on a value the user estimates they derived from the program."
However you want to classify or name it, what I'm suggesting is a model where users, in order to download open source, must pay for the code itself. The trick is that users can name the price they are willing to pay. If the software is worth nothing to them (nothing to be ashamed of), users can declare a value of $0.00. If it's worth $2,000, then that's what it's worth, and that's what it should cost. For a non-enterprise customers, perhaps the value of Red Hat's JBoss Application Server is $10, which is $10 Red Hat wouldn't have received otherwise. For an enterprise customer, perhaps this product is worth far more, assuming that value gets applied toward the cost of a traditional support contract. In that way, YEPR looks like a regular open source model for customers choosing to upgrade to subscription servers.
For an early look at how this might play out within the software industry, consider the popular British band Radiohead. Now divorced from the controlling power of EMI, the band has chosen to pre-release its new studio album, "In Rainbows," with an online shopping cart where users can specify the value they're willing to pay to download the new music. If you think the album is worth 1 pound, that's all you have to pay, simple as that. Users who want a little extra can also purchase a traditional CD "discbox," which includes a bonus CD from the recording sessions, a hardcover book, and a two-record vinyl edition of "In Rainbows."
Interestingly, initial reports indicate that more people have opted for the band's discbox than for the potentially free download. Obviously engaged fans want the works, while more casual interlopers, who may not really know Radiohead, may choose not to pay for this album ... then again, if they really like the music, perhaps they'll simply buy the discbox for "In Rainbows," or they'll drop some dollars down the road for the band's next release.
It can and should be the same for open source customers, who should be given the opportunity to place some value upon the excellent software developed these days. Sure, open source is already free, unlike music (outside of newsgroups and Gnutella). But by creating an environment where software can take on value, ideas like YEPR create a more complete value chain for software and give open source vendors a mechanism to earn revenue outside of the traditional subscription model.
Posted by Brad Shimmin on October 9, 2007 03:00 AM
October 01, 2007 | Comments: (0)
As the magazine business is getting disrupted by the web, I've seen countless good magazines fall by the wayside. Intelligent Enterprise, Infoworld, Guitar One (!) and now Business 2.0. One of my favorite columns in Biz 2.0 was by Jeffrey Pfeffer, a professor over at Stanford. The good news is he's collected the best of his essays over the last five years and published them as the book "What Were They Thinking?"
This includes columns on people-centered strategies, the focus of your business, how to retain talent, how not to cut costs etc. He gave an example of how companies have spent millions on Customer Relationship Management (CRM) software, but don't actually spend money on customer relations! That is, in cultivating positive experiences with customers by having better trained and happy employees. Consider this: if you cut the wages or retirement benefits of your retail staff how do you think they will treat customers? That's what Pfeffer calls a "WWTT" moment. Companies sometimes make incredibly stupid short term decisions for cost-savings reasons that do more to hurt the company in the long run. That's why it's probably not a good idea to cut manufacturing costs if it hurts quality. Or to cut QA to save money. Fixing problems in the field is a whole lot more expensive. (And not fixing them is even worse.)
I saw Pfeffer speak over at a Stanford breakfast recently. It was a good presentation, but in some ways he's better in print than in front of a podium. There's a lot of meat in his essays and they require that you engage and think about it. Check out the book!
Posted by Zack Urlocker on October 1, 2007 07:01 AM
September 13, 2007 | Comments: (0)
The Motley Fool has a pretty interesting article on IT analyst firms such as Gartner & Forrester.
I've worked with these firms for nearly a decade and do believe that they provide a valuable service to their customers and the IT market in general.
Some metrics for Gartner:
"Each year, Gartner's 650 researchers attend 18,000 vendor briefings, along with answering 240,000 client inquiries."
Obviously, not every client inquiry is of equal weight, but these numbers work out to 1.5 client inquiries per researcher per weekday.
Let’s set aside the client inquiry figure, which, even if each inquiry was from a different customer we're only covering a very small subset of IT buyers. Even if a company is not a Gartner, Forrester, IDC, RedMonk, 451 Group or Entiva (etc.) customer, the company will be influenced by what these analysts say in the public media.
Analysts help customers make purchase decisions. Analysts also educate the market on new technologies. Even in open source land, the IT manager and CIO of a developer using your OSS product is much more likely to take something serious if they hear it from Gartner, Forrester or IDC first. Working with the large analysts will help your OSS business if you want *paying* customers in the enterprise. Boutique analysts like RedMonk, 451 Group or Entiva are going to be crucial in developing/refining your OSS business strategy. However, because of their size, these boutique analysts don't have the reach of a Gartner or Forrester in terms of customer purchase decisions. You'll need to work with both classes of analysts, because each bring a lot of (differentiated) value to the table.
BTW, the article also makes the case against using analysts:
"The current model of analyst-intermediated, opinion-based technology buying and selling produces poor financial returns. Across the world, corporate managers spend more than $1 trillion a year on technology. To help managers invest, and technology marketers persuade, $2 billion a year is spent on technology analysts. Yet 70% of projects fail to deliver a financial return, according to the Standish Group and other commentators."
(Funny enough, Standish Group is also an analyst firm). Should analysts bear the weight of these 70% of projects that fail? Would fewer projects fail if analysts were not involved in the equation? What is the ratio of project failures for similar companies that use analysts vs. companies that don't?
Questions, questions, question...I better call an analyst ;-)
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 September 13, 2007 01:00 PM
August 13, 2007 | Comments: (0)
VMware IPO's tomorrow and is estimated to be oversubscribed by as much as 25x the number of shares available according to MorningNotes (via TheStreet.com).
The 33M share IPO at $29 will bring in $957M, and that's only for an 11% stake in VMware. EMC, who purchased VMware for $635M in 2004, will retain the majority of the remainder. I don't know if the Intel & Cisco investments in VMware are from the 11% or the 89%. In any case, at $29/share, the market is valuing VMware at $8.7B. (Just fyi, this would represent a 100%+ annual rate of return for EMC over the past 3.5 years). Considering the anticipation behind this IPO, it wouldn't be a surprise to see the value increase well into the $10B range before this week is up.
Now here's the fun facts:
- Founded in 1998
- Revenue increased 92% YTY in two most recent quarters
- On track to break $1B in revenue for the fiscal year (a little less than 9 years from founding)
To keep things in perspective, Red Hat was founded in 1994 and is expected to break $1B somewhere between 2010 and 2015 (based on High & Low revenue estimates from Financial Analysts). These two dates represent 16 & 21 years from the founding of Red Hat to hitting $1B in revenue. Yes, I understand that OSS drives revenues on a different timeline than Traditional software. But I doubt this matters much to an investor or a VC who is solely evaluating returns in the shortest period of time. Also, Red Hat's valuation/market cap is $4.21B today and was a maximum of $6.1B in the past.
The VMware valuation of $8.7B+ seems out of this world to me, but I hadn't realized that they were on track to hit $1B in revenues. It'll be interesting to see how VMware reacts to OSS virtualization alternatives. Investors don't seem too worried. But what do they know? :-)
In any case, the excitement around VMware's IPO indicates that the Traditional software market is alive, healthy and not going away anytime soon.
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 August 13, 2007 07:46 PM
July 26, 2007 | Comments: (0)
Responses to "Why Microsoft should buy Red Hat"
Earlier this week I wrote a "what if" post suggesting that Microsoft buy Red Hat. The comments here and on my personal blog were lively to say the least.
Many comments were a variation of the "wow, you're clueless" theme. I approved every single one of these comments.
Some readers suggested that it would never happen because of the DoJ & EU. A valid point that I hadn't even considered when I ended the post with:
"PS: I truly doubt this deal will ever happen, but it’s interesting to think about the possibilities."
Private email discussions I had on the topic suggested that Microsoft's culture would severely limit any hope of a positive outcome. Valid point. But corporate cultures evolve.
I was somewhat surprised by how strongly readers debated the very notion of such a deal based solely on Microsoft's history towards open source. Don't get me wrong, Microsoft has done plenty of clueless things in various open source areas. But, to judge the possible outcomes of a Red Hat acquisition based only on history is, I humbly suggest, missing the point. (Again, keep in mind that this acquisition will likely never happen, but stay with me for a second longer). For Microsoft to even consider this acquisition, they would have to dramatically change their historical views on open source. For companies like Microsoft, change is a lot easier than holding steadfast to outdated strategies.
Change doesn't happen overnight. However, the impacts of a threat like open source are not felt overnight either. It's taken Red Hat nearly 15 years to get to where they are today, and the open source movement has over 40 years under its belt. The results have not been industry shattering on either front. I am not minimizing the success of Red Hat or the open source movement by any means; I'm only putting them into perspective.
Sometimes we build deep rooted views about technologies and companies that don't allow ourselves to consider situations in which the technologies or companies evolve. Is it really "clueless" to think that over the next 5 to 10 years Microsoft could increasingly adopt open source strategies into their broader corporate strategy?
While buying Red Hat may never happen, what if Microsoft launched a Linux distribution, maybe even based on RHEL? Ahh, but what about Microsoft patents and GPLv3. True, but what if Microsoft realized that the revenue potential from shipping "Microsoft Linux" is 2x or 10x the revenue potential from licensing their "Linux patents"? These are the types of decisions that companies like Microsoft make daily. The point isn't whether Microsoft, its culture, or employees hate Linux/OSS. The point is that Microsoft, its culture and its employees are interested in the future success of the company and making as much money as they can. To date, Linux/OSS has been seen as a risk towards this goal for Microsoft. In the future, Linux/OSS may well be a driver towards this goal.
Change happens.
PS: The *most* surprising thing about my post is that Dave Rosenberg had a similar post encouraging Microsoft to buy JBoss and/or Novell....back in 2005. Sigh…and I thought I was an original thinker.... :-)
PPS: 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 July 26, 2007 02:21 PM
July 23, 2007 | Comments: (0)
Why Microsoft Should buy Red Hat
Some background:
- Matt asked "Why doesn't Oracle just buy Red Hat?"
- I explained why Oracle would not buy Red Hat
- Luis Villa replied to Matt's question: "Because Red Hat employees would leave en masse."
- Microsoft announced fiscal 4Q07 growth of 13% on Thursday (or 16% if you only count their true software revenue - which falls into the "Client", "Server & Tools" and "Microsoft Business Division" reporting categories). Microsoft crossed the $50 billion total year revenue mark with the close of fiscal 2007.
- I compared Red Hat's stock performance over the past year vs. some Traditional software vendors (see below)
If you're still with me....
Red Hat is growing and executing well. Financial analysts expect Red Hat to hit $517M this year (fiscal 2008, ending Feb. 2008), and $631M in fiscal 2009. At this pace, Red Hat should cross the $1 billion revenue mark in fiscal 2011. Red Hat may well be the gorilla in the Open Source marketplace. But after everything is said and done, that marketplace is tiny in comparison to the total software market. If you believe in the stock market's ability to predict a company's future value, one could argue that Red Hat investors are in a "sit tight" mode right now. At a P/E of 72 and PEG of 1.44 (vs. Google's PE of 45 and PEG of 0.99), Red Hat's stock has likely priced in as much growth and "great news" that we could think of. Few doubt Red Hat's position in the overall OSS market, but some may be waking up and asking whether being #1 in 1.8% of the software market is enough to drive the multiples that Red Hat shares enjoy today.
While both vendors have strong operating system franchises, Red Hat isn't really eating into Microsoft's revenues. IDC predicts that the Linux & Windows markets are growing 26% and 9%, with Unix revenues declining by 3% from 2006-2011. Red Hat's Jboss division adds a JEE portfolio that does compete with .NET as the infrastructure for enterprise applications. But here again, it's very unlikely that Microsoft faces off against JBoss in (m)any customer deals. It's more likely that Microsoft competes against IBM WebSphere, BEA WebLogic or Oracle AS, and JBoss only comes into the picture when the customer has already selected JEE. While there is some overlap, Red Hat is much more complimentary to Microsoft's offerings than we'd like to think.
Just imagine a Microsoft that could offer customers a choice of Windows/.NET, Linux/JEE or, and here's the magic, BOTH. The fact is most customers have heterogeneous environments, and those that don't today, will likely in the future.
In the face of OSS competition, one of the best moves we made in the IBM WebSphere division was purchasing Gluecode. As I've mentioned (over and over), having a free application server, based on the open source Apache Geronimo project has done nothing but spur the growth of our overall WebSphere Application Server family. In some cases, the customer chooses WAS CE, in other cases, they choose Traditional WAS products. We help customers be successful with their choice and, equally important, ensure that their previous investments in WebSphere infrastructure are protected. This is exactly the scenario that Microsoft could create for themselves. Microsoft would be able to offer Windows, Linux, .NET or JEE in various combinations to solve customer problems. As a competitor, this would be a scary combination.
What's more, Red Hat could help Microsoft gain OSS street cred almost instantly. To me, this would easily become Red Hat's most important contribution to the software industry. Forget being #1 in 1.8% of the software market. How about helping a $50B software company evolve its thinking around OSS in order to become a $75B software company while increasing customer choice and satisfying customer needs? Goosebumps.
I doubt this acquisition will ever take place for three reasons. First, because of vendors such as IBM, HP, Intel and Oracle who have investments in/with Red Hat. Second, because Microsoft wouldn't want to take the risk. I'd argue that there is much less risk than appears on the surface. Sure, there would be some internal friction during product positioning discussions if the deal went through. But internal friction is healthy and shouldn't get in the way of helping customers succeed with your offerings. Lastly, as Luis' comment highlights, Red Hat's culture would also pose a barrier to this deal. But I’d argue that the only thing that these comments do is put a damper on the deal price, which, at the end of the day, is bad for Red Hat investors. One could argue that JBoss employees felt the same way about Red Hat prior to the acquisition. And yes, some left Red Hat, but some stayed. It would be up to Red Hat management to convince employees about the historic importance of their efforts inside of Microsoft, which would be a pretty compelling reason to stay.
A Red Hat marketing slogan states: "truth happens", what about "change happens"? And why not help Microsoft change?
PS: I truly doubt this deal will ever happen, but it’s interesting to think about the possibilities.
Posted by Savio Rodrigues on July 23, 2007 09:17 AM
July 18, 2007 | Comments: (0)
The Demise of Traditional Software - 2Q07
Some of you know that I've decided to track the demise ;-) of the traditional software market on a quarterly basis using IBM's WebSphere branded revenue as the basis. I use the WebSphere division for no other reason than it's the part of IBM that I report into. Here are the 1Q07, 4Q06 and 3Q06 posts if you fancy. IBM announced 2Q07 results today.
A few points of interest from 2Q07:
1] IBM Software grew at 13% (or 9% at constant currency: i.e. if currency exchange rates were fixed to equal their 2Q06 rates)
2] WebSphere branded middleware grew at a very healthy 28%
3] IBM's other Software families grew 12%, 11%, 33% and 21% for Lotus, Rational, Tivoli and Information Management respectively
I stress very healthy because 28% growth is pretty awesome when you're growing from such a large revenue base, which unfortunately, IBM does not make public. But, if you have access to Gartner or IDC data, you can easily get to a ballpark number of total WebSphere branded revenue.
| Quarter | Y/Y Qtr Growth | From: |
| 1Q04 | 24% | Source |
| 2Q04 | N/A | Source |
| 3Q04 | 14% | Source |
| 4Q04 | 18% | Source |
| 1Q05 | 11% | Source |
| 2Q05 | 18% | Source |
| 3Q05 | 14% | Source |
| 4Q05 | 4% | Source |
| 1Q06 | 26% | Source |
| 2Q06 | 17% | Source |
| 3Q06 | 30% | Source |
| 4Q06 | 22% | Source |
| 1Q07 | 14% | Source |
| 2Q07 | 28% | Source |
IBM WebSphere Application Server Results:
Some might reply: "come on Savio, you expect me to believe that in the face of open source competition, the application server business is growing at all? Maybe WebSphere Branded Middleware is growing, but the underlying application servers surely aren't, right?"
IBM provided WebSphere Application Server's yearly growth in 2006, so we can compare that figure to the growth of WebSphere branded middleware in the table above:
From pg. 34 of IBM's 2006 Annual Report :
"Revenue from the WebSphere family of products increased 23.3 percent (22 percent adjusted for currency) and was led by doubledigit growth in WebSphere Application Servers (25.3 percent) and WebSphere Business Integration (22.7 percent) software versus 2005"
Translation: The WebSphere Application Server family revenue growth outpaced the figures that you'll find in the table above.
Yes, even in the face of open source competition, the WebSphere Application Server business is growing at 2-3x the market. How? We're helping our customers address their business needs to achieve success. In some customer situations, we help customers achieve success through the use of WAS Community Edition (WAS CE). In other situation we help customers achieve success through the use of the traditional WebSphere Application Server family.
The results are pretty clear.
Posted by Savio Rodrigues on July 18, 2007 02:11 PM
July 17, 2007 | Comments: (0)
In a recent comment, Savio differs with my opinion on what customers are purchasing. I believe that companies don’t buy open-source products. Rather, I believe, they buy the support services and infrastructure that goes with those products. Savio believes that customers “…want a product, and support is one aspect of a product offering, not the product offering itself.”
This may be a matter of semantics but I think the differences are important. I’ve argued that the proprietary licensing model for software was an important economic innovation when it was first implemented. I’ve also argued that the proprietary licensing model is now obsolete and the open-source model is a fete accompli that cannot be stopped.
When companies like Oracle and Microsoft first started they had woefully incomplete products in a market where database and operating system skill sets were very rare. Most people had not even heard of SQL let alone possess the capacity to understand SQL parsing, optimization or execution. Oracle had a business model where they would collect a relatively small fee from a relatively small number of companies in order to fund the basic R&D necessary to build their products. Many of Oracle’s customers were betting on Oracle’s success and assuming that they would be getting better, more complete products in the future. I would argue that the vast majority of RDBMS innovation came about when there were many RDBMS vendors and Oracle was growing from $400 million/year to $1 billion/year. For the most part, support of the products was an afterthought. License sales were growing so fast that those fees far outpaced the support fees.
In the mainframe world support was a part of the license; if you didn’t pay support you lost the license. With Oracle and Microsoft you could license the product in perpetuity without ever buying support. At some point though, support became a more important aspect of the business. Unfortunately for companies like Oracle and Microsoft they can’t survive if they cut off the license revenue. Today Oracle collects billions in license fees for their database software but I don’t think anyone would argue that billions in new features and capabilities are delivered to the market. The market for licensed software is out of balance.
My statement regarding the product definition was, “…the proprietary bits are no longer the product.” This is true. Today, Red Hat could not sell the bits that make up Linux absent a support contract. Well, not to a very sophisticated customer anyway. Red Hat, instead, sells a support offering – timely, automatic updates, services around implementation, an infrastructure to assure availability of technical alerts and fixes, etc. The bits are freely available to anyone with the patience to assemble them themselves. Many do, but Red Hat is successful because of all the other companies who want a professionally managed operating system infrastructure.
Most of Oracle’s offerings include the same benefits and many of Microsoft’s stated directions imply the same thing. I believe it’s very easy for Oracle to justify their support fees to their customers, it’s the license fees that are, in my opinion, inappropriate.
The value of the bits in an open-source product is well established by the market: $0.00/bit. The value of support infrastructure and services is becoming well established by the market. Red Hat, Novell and others are monetizing that market.
Whenever I hear about hybrid open/closed-source business models I shudder. These business models exist only because someone still believes the proprietary bits contain value. It is the trusted assembly, servicing, support and delivery that contains the value. If you think your proprietary bits have value then be honest with your customers and ask them, “How much are you willing to pay me to write this code?” In today’s world, with a more ubiquitous skill set in operating systems, database systems, management systems and applications, I think it very difficult to justify collecting R&D dollars to build a future product. There’s just too much competition willing to collect on the back-end rather than the front-end.
Posted by Dave Dargo on July 17, 2007 07:45 PM
July 16, 2007 | Comments: (0)
Sometimes I just have to look away. Once in a while, I see something that I feel must be embarrassing to the person experiencing it and not wanting to be a rubbernecker I look aside. This happens to me a lot on the golf course when someone is having a particularly bad day and they just can’t seem to find their swing. I am overcome with a sense of empathy as I watch someone flailing about helplessly trying to hit that little golf ball just a few yards further down the fairway.
I get the same feeling when I see some of the business models proposed in the software world. I’ve heard the arguments for and against just about every business model out there and I’m in a constant state of empathetic embarrassment as I watch young companies struggle with how they’re going to monetize their particular market.
What’s particularly frustrating is the seeming inability for companies to step away from the old models. It’s difficult for me to understand why companies trying to change the world with new technologies, new marketing models, new development models and new support models want to retain vestiges of the very businesses they want to replace.
A recent entry in Slashdot highlighted a blog entry from Jeff Gould on XenSource. I think that XenSource has been struggling to find their path towards successfully monetizing their market but what sent shivers down my spine was the discussion about their go-to-market strategy. XenSource wants to offer “a hybrid of open and closed source” to keep other players from taking their product.
I want to look away. I want to scream, “NO, DON’T DO IT!” I don’t understand. I can’t understand. One of the benefits of open-source, to me, is that the proprietary bits are no longer the product. The product is support for your customer’s business, their use of your product and how you, as a vendor, help the customer accomplish things the customer couldn’t otherwise accomplish. If you don’t fundamentally believe that you can provide that better than anyone else then you shouldn’t be in the business. If you truly believe that Red Hat or Novell can take your product and do a better job supporting customers than you can with the code that you’ve written and managed then you should probably let Red Hat and Novell do just that. After all, it would be a more efficient market.
I remember being in a product management meeting years ago and someone on the development team said that implementing a particular feature would “be hard.” I said, “Of course it is, otherwise, everyone else would have done it already. We’re in the business of doing hard stuff.” Whatever your business is it better be hard and you better be the best at doing it. Otherwise, why bother?
Posted by Dave Dargo on July 16, 2007 09:47 PM
June 29, 2007 | Comments: (0)
Via Dana & Matt, The Register reports that the Red Hat Exchange (RHX) "roars like a muted lamb". The Register's point is that RHX has met with a lukewarm reception to date.
After reading the following comment from Matt, with his VP of business development at Alfresco hat on, I wonder if The Register story is missing the point.
"So, again, in terms of traffic, it's not yet on par with Sourceforge and other avenues for us," Asay said. "But it has been surprisingly fruitful given the number of downloads and trials we've had through it. If we had this same ratio of download to trial to conversion on Sourceforge, we'd be IPO'ing tomorrow."
The open source community really doesn’t need another arena for projects to live and be downloaded from. There are plenty of players in this space (Sourceforge, Apache, Google, Codehaus, etc.). RHX isn't intended to drive 1M downloads a day, or hundreds of project ratings. These are functions that developers generally do. Enterprise buyers and decision makers are less likely (not unlikely) to play this role.
RHX appears to be where projects graduate to after they've proven their chops at Sourceforge et al.
As I see it, RHX is intended to serve the needs of an enterprise decision maker that is already using RHEL and wonders: "okay Red Hat, what else do you recommend I try?" or "what CRM app should I use with RHEL?" Try answering either of these questions at Sourceforge.
The higher conversion rate that Matt alludes to on RHX should be the key metric for evaluating the success of RHX.
Posted by Savio Rodrigues on June 29, 2007 11:46 AM
April 11, 2007 | Comments: (0)
In the early days open source was all about lower costs, but these days the apps have matured to such a point (on par or better than proprietary) that the conversation is shifting to value - getting more from your applications at a lower cost and enabling your developers to be more efficient. Since I am most familiar with the Integration/SOA market I will use that as my example.
Typical enterprise software vendors in the SOA space are looking to sell services as much as they are software. In Tibco's case 56% of their revenue last quarter came from services. The main thing this says to me is that the software is entirely too complex for the user base. Basically when you buy Tibco a consultant shows up with 4 CDs and you pay for 3 months of professional services. Maybe at the end of the 3 months you have your proof-of-concept done, but odds are your team are not that well versed in the technology. If you look at the net gain vs. the cost of developer time and professional services it seems very difficult to quantify. Contrast this with the open source approach, using Mule as the example.
Typically we see developers download Mule and be up and running within a few hours. The developer already has Java skills (which are common, unlike Tibco, Webmethods, etc) and if they spend 3 months working with the product they will become extremely well versed in the technology, enhance existing development skills and complete the POC all by themselves. And if they want to make changes, extensions etc. to the software, they can. Open source is about empowering and enabling developers - and making it less expensive for businesses to run their IT shops.
Meanwhile back at the POC, your consultant probably did a great job, but you'll never get that knowledge in-house and your development team will be at a disadvantage being stuck with proprietary tools.
One interesting thing we are working on is determining exactly how much time it would take to create a similar Mule function to just writing it in Java, or using an App Server like WebLogic. So far, all of our tests are showing that using Mule is somewhere between 1-10% of the development time. That's a huge gain for developers just by using a well-designed product. The fact that it's open source means that you can customize it without having to get in line and pray that the proprietary vendors are going to meet your needs.
I don't want this to read like an advertisement, but I can only speak from my experience. If your company (open source or otherwise) has any data on this I would be happy to post it.
Posted by Dave Rosenberg on April 11, 2007 08:19 PM
March 20, 2007 | Comments: (0)
Evaluating new geographies for open source products
One of the more interesting things I get to do these days is determine what geographical markets make sense for us to target the Mule towards. Today I spent several hours with a Japanese partner that has been helping us evaluate the opportunity and the reality of doing business in a country notorious difficult to crack.
Typically you would make a list of everything you want to know, some examples include:
-Total addressable market for relevant software
-Size of your specific software market
-Competition, and success of competition in that market
-Barriers to entry, monetary or otherwise (in this case language barrier)
With open source you also have to look at other aspects, some examples include:
-Adoption of Linux and Apache (these are really key to determining market timing-if the market is not using Linux then it's too early. If they are using Linux and Apache at any level of volume (say greater than 40%) proceed.
-Awareness of open source in general
-Market perception of open source/Linux-in many markets Linux and open source are perceived as one thing. A market that recognizes that they are different will make your life much easier.
As we looked at open source in Japan we found that the total addressable software market is very large, but the fact that IT departments are very conservative means that the market has big potential but questionable immediacy. Odds are that Japanese customers will pay for open source but generally are not flocking to it. Contrast that to Europe where users are flocking to OSS but not looking to pay for it.
Side note: someone asked how we get all this information. We do a lot of market research and talk to literally anyone we can about the markets that we target. A few companies back when I was still on the technical side I didn't understand the value of the research department but now that I am a business-jerk I wish I had hired someone months ago to figure all this stuff out.
Posted by Dave Rosenberg on March 20, 2007 09:56 PM
January 24, 2007 | Comments: (0)
Dave in Japan: Vista and Cellphones abound
I am in Tokyo this week for partner meetings and an OGIS developer conference where Ross and I are presenting to an audience of non-english speakers. It should be highly entertaining trying to explain how you "service enable your infrastructure with open source technology." In the meantime all of our meetings have been very good. The Japanese market is extremely different from the US or EMEA. The majority of IT work here is done by SIs and the SI channel is arguably the most important for a US-based company to develop (it's also very difficult.) The upside is that the SIs we are meeting with are all taking a best of breed approach for the customers--a big change from the old days of one vendor having deep hooks into customers (though I suppose the SIs have the hooks now :>)
So far I have seen an inordinate amount of cellphones and mobile devices (many of which are surprisingly large) as well as a dizzying array of digital cameras. The picture above is a phone that has a TV receiver. I watched NHK news and a bit of CSI dubbed into Japanese at some cellphone shack in Akihabara.
There is a ton of advertising for Vista all over Tokyo. In fact Microsoft has these very odd banners that just say "Wow" all over Omotesando and Harajuku--multiple city blocks with this utterly useless 6x10 foot banner every 10 feet. Considering we couldn't figure out what they were for I am going to bet that the subtlety will be lost in translation. The best part is that all of the banners have the date of 1/30 for launch and every electronics store in Shibuya is already selling it--as you can see from the picture to the right. I may buy it just for the entertainment value of watching a PC blow-up.
Posted by Dave Rosenberg on January 24, 2007 06:34 AM
August 09, 2006 | Comments: (0)
Killing vs. Cultivating Good Ideas (Zack Urlocker)
Zack has two posts on how to kill good ideas and how to come up with good ideas. Cynic that I am, I like a few of Zack's ideas on killing good ideas most:
2. Manage by consensusThanks for sharing these, Zack. Good advice from a leader in a great company.
If you've got radical ideas it's pretty much guaranteed that you won't get consensus. Heck, if it doesn't get someone's dander up, it probably isn't radical enough. If you try to get everyone to agree, you'll probably compromise so much that the value of the idea is lost. Forget consensus. Be brave and be prepared that there will be detractors. There will be people who object to new ideas for lots of reasons. Maybe it threatens their power structure, or they are jealous that they didn't think of it. People can get very complacent with the status quo and change makes people nervous. But don't try to manage towards consensus or you'll find inertia holds you back.
3. We've done it before and it didn't work
While it's good to learn from the past, it's easy to become a prisoner of it. Whenever someone complains that something has been tried before, try to think if there's something different today. Maybe there can be a variation of an old idea, or perhaps a different execution plan. Or perhaps the market has changed. But instead of criticizing an idea as being old, figure out a way to strengthen the idea.
4. No one has been successful doing it before
This is the opposite of item 3 above. If no one has done it, it doesn't mean that it won't work. Maybe no one has been bold enough. Or maybe no one thought of it yet. If you want to get out on the bleeding edge, then you need to try things out before it's common knowledge. How many people do you think told the founders of SugarCRM that no one has been successful with open source applications? The truly successful companies, like Google, Yahoo, Microsoft, IBM, Apple, Intel have all broken new ground many times. It's when they stop breaking new ground that you need to be concerned.
Posted by Matt Asay on August 9, 2006 08:17 AM
July 26, 2006 | Comments: (0)
Lessons learned from Open Source: Making Sales While Making Friends
Matt Asay, bon vivant, kung-fu master and man-about-town is delivering a session on how companies can partner to create more sales and more opportunities for OSS adoption while avoiding the spectacular failures he's experienced in the past. I am going to attempt to live-blog this session.
So why do we need to figure out open source models?
Open source is changing everything about sales, support and implementation of software. This correlates to open source advantages associated with innovation and cost savings.
Lesson 1: We are not successful by association
Open source may be hot that doesn't mean you are--there will be many failures for each success
Open Source is not a tagline
Lesson 2: Friends are nice: Cash is critical
Downloads=friends; customers=cash
You need friends but cash means survival
Matt is making a point about JBoss that once they had brand recognition and validation their average sale and customer number went way up. This leads to:
Lesson 2 revisited: Pushing the Pull
Marketing is critical
Invest in tools to convert friends to customers
Question from the audience: what kind of marketing?
Matt cites SugarCRM as an example of successful PR - PR is perhaps the open source company's best form of marketing.
Lesson 2 re-revisited: Does this mean that open source (cost) advantage is overstated?
No, but it does mean that the benefits should taper off over time. If you're still arguing about how you're cheaper after five years, you've failed. The conversation should quickly switch to superior software and service, not price. At any rate, after 5-7 years the cost advantages start to go away (you start hiring direct sales, etc., which makes the P&L look more like a traditional software company. But by that time your incumbent competition is dead.)
Lesson 3: Scaling to fit your model
Year 1-100% pull
Year 2-Inside sales (100% proactive pull)
Year 3-Inside + direct
Year 4-Direct + inside
Year 5-Direct
Lesson 4: Think "user community" not developer community
Your company will do 85-100% of the core development work, but you should rely on your user community to greatly assist on localization, roadmap, bug spotting, etc. Users matter a great deal.
Lesson 5: Be where your customers are
Goes back to Matt's argument that OSS doesn't need to be in the Valley. Or, rather, that you should have a strong US presence (because that's where the current market is), but need not set up perma-camp in the Valley.
Lesson 6: Don't make your customer think about licenses
Clarity is everything in the sales process.
Lesson 7: basic ingredients for success
Market timing
Prepare for participation
Great initial code base
Degree of applicability
Modularity of code--Matt takes an aside to show us an unrelated soccer clip, which was a supposed explanation of modularizing anything. [Matt comments: Arsenal is relevant to everything. That clip made my entire argument.]
License to fit the need
Lesson 8: basic ingredients for success
Documentation is critical
Price cannot be your primary value driver
Enterprises have been taught to distrust sales
Lesson 9: Be permeable
Be open, not just in code but in relationships with everyone in the universe
Ultimately open source is not about price. It's about being the best software on the planet.
Posted by Dave Rosenberg on July 26, 2006 10:54 AM
June 30, 2006 | Comments: (0)
Bad product strategy gets you press (Google)
In the past both Matt and I have been critical of Google's mediocre offerings beyond its core search. BusinessWeek is running an interview with Google VP Marissa Mayer where she essentially says "we throw things at the wall and see if they stick" which seems in stark contrast to an engineering driven organization. It also speaks to Matt's post about the lack of innovation coming from Google.
Typically, companies succeed because they tackle a problem and do the best possible job solving it. Throwing a bunch of things into beta is an interesting "strategy" but not what great long-term products and companies are built on. There is a point when all this Web 2.0 development stuff leaves users with an abundance of mediocre products to use. This aspect is pointed out by BusinessWeek in a different piece So Much Fanfare, So Few Hits
Google's problem isn't a string of failures, then, but rather the middling performance of many products that survive. In fact, it seems far from achieving even its intended 20% to 40% success ratio. This may be contributing to the internal debate that rages at Google's Mountain View (Calif.) headquarters over how to deliver more search users to the new products.
I point the Google situation out because they have a luxury that most small companies don't have, a whopping market cap associated with their core advertising business. They can experiment with homegrown products that cost virtually nothing to build and if they don't generate huge revenue it doesn't matter in the near-term. But this strategy doesn't work for startups. Period.
I've recently been through meetings with several companies who are contemplating tossing new products over the fence in hopes of growth and community. On the OSS startup side it's very difficult to maintain focus. The whole company must be heading in the same direction and working toward a common goal. It's the only way to survive and succeed. And really the same goes for proprietary companies who are putting old code out as OSS--they run the risk of being distracted with no discernible benefits. Building community is extremely difficult. Just because you open source your software doesn't mean people care. It takes a long time and a great deal of dedication to be relevant in the OSS space.
Previously and Links:
Marissa Meyer on Valleywag
Google...innovative?!? Come on!
BusinessWeek/Open Sources Vulcan Mind-meld
Open the Door for Open Source Deals
Levanta--the comeback kid of Linux?
Novell: Better than it appears
The most hated man in open source?
Posted by Dave Rosenberg on June 30, 2006 09:09 AM
June 05, 2006 | Comments: (0)
Are big companies feeling pain from open source?
This is a topic worth exploring: just how much pain are large software vendors feeling from open source competitors?
As Matt pointed out here it seems like most vendors are still trying to stay the course without adapting to the new world--or adopting the new models associated with OSS and Web 2.0 types of businesses.
Give us some feedback on what you are seeing in the market.
Posted by Dave Rosenberg on June 5, 2006 10:07 AM
May 10, 2006 | Comments: (0)
A downside to open source: leakage
A friend from a large enterprise (buy side of open source) sent me an email today. I had asked for his opinion on how to improve the Open Source Business Conference, a show I and a few friends founded a few years back. He said something in the course of his email that I found very interesting, if difficult to deliver:
[You need to show] [h]ow to decide which OpenSource product is really cool and does what it says on the tin and which is vapourware\aspirational.In short? He wants to see the reality of open source, and not the shimmering, sparkly side that we vendors constantly trumpet (myself definitely included).What Open Source products have my competitors used? Successfully. And unsuccessfully....
I like the panels - especially when they disagree. One of the things I find a bit discomfiting at conferences is when all the shiny, happy people on a panel agree...
... the core thing that I try and get through to my senior, senior management is the understanding that Open Source is NOT a panacea; is not totally free; and can sometimes be complete [junk]. I think that representing that as a truth would gain a lot of credibility among IT professionals.
So, what's the biggest downside to open source (for vendors)? Its inefficiency at converting usage into revenues.
For many of you (especially those on the development side), this is a hollow whine. After all, many of you primarily are concerned with seeing your product used and people benefiting from it. Fair enough.
For those responsible for turning your work into your salary, however, and by this I mean the greedy, narrow-minded pointy-haired boss salespeople (like me :-), "use" is not always as happy a thing as one would suppose. It is brutally difficult to see, as I did today, for example, a Fortune 500 company eagerly, happily using your software.
And not paying you a dime, franc, or ruble. Nada.
Get enough of these customers, and you neither have a business nor a means to fund the development of more code.
Ask Red Hat now if they are fine with Google using their distribution without paying for more than one copy (as the folklore goes - which folklore I believe was true as of a few years ago, though it might have changed since), and I'm sure they'd say, "Of course! It's a testament to the code we certify/test/etc. that such a great company would use ours as a starting point."
When I sat in a room in 2002 and heard that question asked of a senior Red Hat executive, however, he grimaced and didn't respond.
The difference? Red Hat today can afford "leakage," and, funny enough, gets less of it now that its brand commands respect which commands cash. Red Hat back then could scarcely afford salaries (unprofitable as it was), much less leakage.
Lest you take this wrong, let me state clearly: I believe in open source software. I believe great businesses have been built with it and will continue to be so (my own, included, I hope).
But it is not for the faint of heart. You have to be prepared to watch would-be customers, big and small, derive immense value from your software without paying you. Value that they'd gladly pay for in a proprietary world. Value that they would have to pay for.
Why do they freeload? Not because they're evil, but because they can. Their business is making money while spending as little as they can. Who can fault them for using free software whenever they can?
And, if you're honest with yourself, you'll recognize that you probably use a lot of free software, too. In Alfresco's case, we richly benefit from Lucene, the Spring Framework, and various other open source components. All software that we didn't have to write, and for which we don't pay anyone.
How do you prevent leakage and make open source more "sales-efficient" in the short-term? I've discovered a few means, and would love to hear yours, as well:
- "Proprietary" Incentive. You must have a hook that convinces would-be customers to buy, and not merely use. Free downloads invite use, but only some proprietary (pardon the word) hook effectively closes sales. For MySQL (which, I believe, derives a massive percentage of its revenues from OEM/embedded sales), this means that it offers a clean way out of the GPL. For SugarCRM, it's the additional functionality that is commercially licensed. For Red Hat (and Alfresco now, too), it's the testing, packaging, third-party application certification, etc. that only comes with the Enterprise product.
If you lack a hook, you may well get many users, but it will be extraordinarily difficult to beg and cajole users into becoming buyers. You don't want that fight. You want an appreciable difference between your "community" product and your "professional" product, whether that difference is in functionality, stability, or whatever.
- Source of Code. You must have control over the code. I don't mean copyright here, but rather developers. Source of code rather than source code. Customers buy from those that write the software.
- Partner Alignment. You must have your partners aligned with your vision. Systems integrators and others who make their money on professional services - in the proprietary and open worlds - always have an incentive to drive the cost of software to zero to make their services more appealing/less expensive. This is normal and natural. It's not, however, good for the creators of the software. Software startups don't need a huge swath of partners - they need a few hyper-committed partners with expertise and the shared vision of driving software sales (as well as their professional services engagements). The two need not be mutually exclusive. Despite #2 above, having partners support your free product erodes your ability to charge for it.
- References. Customers talk to each other. They want to know who is paying for what. Convince one financial institution to pay and odds are that others will follow. This is not new advice - it's very much what Geoffrey Moore has been teaching for years. But it's critical in a different way in open source: you don't just want marquee buyers using your product - you want them buying your product. There's a huge difference between the two.
There are more, of course. I don't claim to have all the answers. Open source as a business is a work in progress, one that I'm very happy in which to play a part. I'd love to hear your insight.
Posted by Matt Asay on May 10, 2006 08:07 PM
May 10, 2006 | Comments: (0)
A downside to open source: leakage
A friend from a large enterprise (buy side of open source) sent me an email today. I had asked for his opinion on how to improve the Open Source Business Conference, a show I and a few friends founded a few years back. He said something in the course of his email that I found very interesting, if difficult to deliver:
[You need to show] [h]ow to decide which OpenSource product is really cool and does what it says on the tin and which is vapourware\aspirational.In short? He wants to see the reality of open source, and not the shimmering, sparkly side that we vendors constantly trumpet (myself definitely included).What Open Source products have my competitors used? Successfully. And unsuccessfully....
I like the panels - especially when they disagree. One of the things I find a bit discomfiting at conferences is when all the shiny, happy people on a panel agree...
... the core thing that I try and get through to my senior, senior management is the understanding that Open Source is NOT a panacea; is not totally free; and can sometimes be complete [junk]. I think that representing that as a truth would gain a lot of credibility among IT professionals.
So, what's the biggest downside to open source (for vendors)? Its inefficiency at converting usage into revenues.
For many of you (especially those on the development side), this is a hollow whine. After all, many of you primarily are concerned with seeing your product used and people benefiting from it. Fair enough.
For those responsible for turning your work into your salary, however, and by this I mean the greedy, narrow-minded pointy-haired boss salespeople (like me :-), "use" is not always as happy a thing as one would suppose. It is brutally difficult to see, as I did today, for example, a Fortune 500 company eagerly, happily using your software.
And not paying you a dime, franc, or ruble. Nada.
Get enough of these customers, and you neither have a business nor a means to fund the development of more code.
Ask Red Hat now if they are fine with Google using their distribution without paying for more than one copy (as the folklore goes - which folklore I believe was true as of a few years ago, though it might have changed since), and I'm sure they'd say, "Of course! It's a testament to the code we certify/test/etc. that such a great company would use ours as a starting point."
When I sat in a room in 2002 and heard that question asked of a senior Red Hat executive, however, he grimaced and didn't respond.
The difference? Red Hat today can afford "leakage," and, funny enough, gets less of it now that its brand commands respect which commands cash. Red Hat back then could scarcely afford salaries (unprofitable as it was), much less leakage.
Lest you take this wrong, let me state clearly: I believe in open source software. I believe great businesses have been built with it and will continue to be so (my own, included, I hope).
But it is not for the faint of heart. You have to be prepared to watch would-be customers, big and small, derive immense value from your software without paying you. Value that they'd gladly pay for in a proprietary world. Value that they would have to pay for.
Why do they freeload? Not because they're evil, but because they can. Their business is making money while spending as little as they can. Who can fault them for using free software whenever they can?
And, if you're honest with yourself, you'll recognize that you probably use a lot of free software, too. In Alfresco's case, we richly benefit from Lucene, the Spring Framework, and various other open source components. All software that we didn't have to write, and for which we don't pay anyone.
How do you prevent leakage and make open source more "sales-efficient" in the short-term? I've discovered a few means, and would love to hear yours, as well:
- "Proprietary" Incentive. You must have a hook that convinces would-be customers to buy, and not merely use. Free downloads invite use, but only some proprietary (pardon the word) hook effectively closes sales. For MySQL (which, I believe, derives a massive percentage of its revenues from OEM/embedded sales), this means that it offers a clean way out of the GPL. For SugarCRM, it's the additional functionality that is commercially licensed. For Red Hat (and Alfresco now, too), it's the testing, packaging, third-party application certification, etc. that only comes with the Enterprise product.
If you lack a hook, you may well get many users, but it will be extraordinarily difficult to beg and cajole users into becoming buyers. You don't want that fight. You want an appreciable difference between your "community" product and your "professional" product, whether that difference is in functionality, stability, or whatever.
- Source of Code. You must have control over the code. I don't mean copyright here, but rather developers. Source of code rather than source code. Customers buy from those that write the software.
- Partner Alignment. You must have your partners aligned with your vision. Systems integrators and others who make their money on professional services - in the proprietary and open worlds - always have an incentive to drive the cost of software to zero to make their services more appealing/less expensive. This is normal and natural. It's not, however, good for the creators of the software. Software startups don't need a huge swath of partners - they need a few hyper-committed partners with expertise and the shared vision of driving software sales (as well as their professional services engagements). The two need not be mutually exclusive. Despite #2 above, having partners support your free product erodes your ability to charge for it.
- References. Customers talk to each other. They want to know who is paying for what. Convince one financial institution to pay and odds are that others will follow. This is not new advice - it's very much what Geoffrey Moore has been teaching for years. But it's critical in a different way in open source: you don't just want marquee buyers using your product - you want them buying your product. There's a huge difference between the two.
There are more, of course. I don't claim to have all the answers. Open source as a business is a work in progress, one that I'm very happy in which to play a part. I'd love to hear your insight.
Posted by Matt Asay on May 10, 2006 08:07 PM
May 01, 2006 | Comments: (0)
JasperSoft proving the commercial Open Source model works
Last week I wrote about JasperSoft announcing a more complete business intelligence architecture to fill out their open source reporting package. In my view, this was sort of their open source coming-of-age, when they developed from a niche open source firm into an ambitious firm that will compete aggressively with the big boys and just happens to be open source. As it turns out, today marks JasperSoft's one-year anniversary, and they've hit some big milestones, with several hundred paying customers and a 300% increase in downloads over the last year. Interesting to note that their growth stats from this past year have dwarfed what the project saw in the previous three years, before it had any commercial backing. As soon as JasperSoft was formed to monetize and support the project, it took off, despite the same core technology.
In my experience, the startups, open source or otherwise, that crash and burn are usually the ones that try to do too much too early, instead of producing solid growth and good partnerships. There's such a stigma against picking the low-hanging fruit - open source companies are afraid of getting pigeon-holed as small-time so they try to take on the whole world before they have the means.
JasperSoft's success underscores the better way to build an open source business: with the right commercial sponsorship, an ambitious growth strategy, and some humility about its place in the market, a small open source company really can mature into a major market player. We're seeing it all over the market--that the model works and that sustainable revenue can be generated if you do the right things.
Posted by Dave Rosenberg on May 1, 2006 07:17 PM
April 27, 2006 | Comments: (0)
Three Simple Things Sun Should Do to Win
ActiveGrid CEO (and former Sun exec) Peter Yared is back with some specific suggestions that he thinks will help new Sun CEO Jonathan Schwartz right the ship.
Three Simple Things Sun Should Do to Win
The industry trends around Linux, x86 processors, and scripting languages are clear. Unfortunately, Sun is swimming against the tide on all three of these trends, in fear that it could cannibalize its existing business. Following is a simple, three step strategy for Sun to swim WITH the tide, while still maintaining its revenue.
#1 - Migrate Solaris to Linux
Operating systems are a commodity. The Unix wars are over, and they have been won by Linux. IBM is migrating AIX to Linux. Digital Unix is dead. SGI Irix is dead. HP-UX is dead. Sun should announce a long term strategy of moving to Linux and start migrating Solaris features like DTRace to Linux, just like IBM contributed SMP and journaling code to Linux. Sun is unique in that it has a full Unix System V license from AT&T, so it can sell an indemnified Linux.
Proof point: IBM has a long term strategy of migrating AIX to Linux, and it has not cannibalized AIX/Power sales.
#2 - Migrate SPARC to Opteron
Processors are a commodity. Sun should provide binary translation so that customers can easily move their applications from Solaris SPARC to Solaris x86. A decent binary translator will run SPARC machine code on an Opteron almost as fast as anything on the SPARC roadmap. And native Opteron code will scream compared to SPARCs. Either Sun can provide this migration to their Galaxy Opteron servers, or Dell and HP will continue their "Visine" customer programs where they migrate customer Solaris boxes to commodity Linux x86 boxes. And with its Fujitsu SPARC partnership, Sun can continue to extract revenue from SPARC on the very high end.
Proof point: IBM has a very strong, coherent Linux/x86 strategy and it has not cannibalized AIX/Power sales.
Proof point: Sun has successfully made such a transition from Motorola 68K to SPARC. Apple has has successfully made such a transition from Motorola 68K to Power to Intel.
#3 - Endorse LAMP and integrate it with Java
Java is great on the back-end, but LAMP is great on the web tier (as Google, Amazon, Yahoo!, Flickr, MySpace, Friendster, etc. have shown). Sun should endorse PHP and go one step forward and make sure the "P" languages run great on the JVM by open sourcing Java. Sun doesn't make much money on Java anyways.
Proof point: IBM and Oracle have strongly both endorsed PHP into their architectures and it has not cannibalized their Java middleware sales.
So there you have it. Three simple things Sun can do which would give it a coherent strategy relative to industry trends. Sun could then focus its energy on finding new revenue streams rather than protecting declining revenue streams.
Previously:
Sun's Open Source Strategy still MIA-An open letter to Jonathan Schwartz
Sun vs. Scripting Languages
Front End Integration-Lightweight Architecture Part 3
Enterprise SOA Apps Take Off on Lightweight Architecture
Google, Amazon, and Yahoo! point enterprise developers towards "lightweight" architecture
Posted by Dave Rosenberg on April 27, 2006 11:32 AM
April 14, 2006 | Comments: (0)
New Patent Commons Whitepapers
Two new whitepapers from the Patent Commons Project were released today.
Understanding Patent Pledges: An Overview of Legal Considerations
A Developer's Guide to Using the Commons
The Patent Commons administers patents pledged to the open source community by open source developers, and companies such as IBM, Nokia, Novell, Red Hat, and Sun Microsystems.
Posted by Dave Rosenberg on April 14, 2006 12:49 PM
March 30, 2006 | Comments: (0)
To the SIs of the world: Getting more from your ISV partners
Over the past few months, I've been helping to grow my company's systems integrator ecosystem. Because we don't have a professional services arm - we do 100% of our implementations through partners - we spend a lot of time working with our partners. They are our lifeblood.
This is why I've talked before about how important it is to choose SIs carefully and why it's critical to us that our SI partners feed our well-being in parallel with our feeding theirs. To put it much too simply, it's important that our partners make us money, and that we make them money.
This last point - making our partners money - happens concurrently with our releasing code. In the open source world, an SI partner can take our code, implement it for their customer, and collect services (and support) revenues, without ever involving the creator of the code. Great for them, right? And, frankly, not terrible for us. It's nice to be widely used, even if it doesn't directly (or indirectly for that matter) bring us cash.
However, as it works out in practice, those partners that "feed us" are the ones that we, in turn, feed deals/leads. We have some partners with whom we work constantly, bringing them our largest, ripest deals. Why? Because they have both brought us big deals and they consistently promote the importance of our certified, supported version. Those that default to community version because it's an easier sell (because it's free) will tend to see less business from us.
Talking with other open source companies, it's no different elsewhere (and is the same outside the open source world): companies exist to make money, and will focus on partners that help them achieve this goal. Very simple.
So, if you're an SI, your first conversation with a prospective technology partner shouldn't be about geographical or market exclusivity. It shouldn't even be about what deals the ISV has in its pipeline and can feed to you. It should be about how you're going to promote that company's premier product, as well as concrete deals that you will bring to them. If the company you're talking to is like mine, you'll quickly find the return on your investment to be immensely profitable.
Posted by Matt Asay on March 30, 2006 08:15 AM
March 21, 2006 | Comments: (0)
Windows Vista won't make Xmas-Santa switching to Linux
Microsoft announced that Windows Vista is being pushed back to January 2007. If ever there were a time for Linux on the desktop to make it into the mainstream it's this holiday season.
"We're trying to crank up the security level higher than ever," Allchin said. "This came down to a few weeks. We're trying to do the responsible thing here."
Does that mean that Microsoft occasionally acts irresponsibly-releasing applications and Windows versions that are inherently insecure?
The group that will suffer the most from the Vista delay are the PC vendors who need to sell more gear during the holidays. While it's easy to say "I told you so" when it comes to reliance on Microsoft everyone recognizes the vast power MS has over manufacturers. Let me suggest that PC vendors once again consider alternate operating systems. Ubuntu and Linspire are obvious choices for both consumers and business users. We just need a good office suite and then it's time to starting shorting Microsoft stock.
Posted by Dave Rosenberg on March 21, 2006 04:10 PM
March 17, 2006 | Comments: (0)
Via The Economist-insight into how successful open source projects work-and the risks of non-management.
The "open-source" process of creating things is quickly becoming a threat-and an opportunity-to businesses of all kinds. Though the term at first described a model of software development (where the underlying programming code is open to inspection, modification and redistribution), the approach has moved far beyond its origins. From legal research to biotechnology, open-business practices have emerged as a mainstream way for collaboration to happen online. New business models are being built around commercialising open-source wares, by bundling them in other products or services. Though these might not contain any software "source code", the "open-source" label can now apply more broadly to all sorts of endeavour that amalgamate the contributions of private individuals to create something that, in effect, becomes freely available to all.
Posted by Dave Rosenberg on March 17, 2006 02:41 PM
March 12, 2006 | Comments: (0)
Winning: Jack Welch on Strategy
I read so much content both online and off that I barely absorb anything, but there are a few simple principles from Winning by Jack Welch that I think are important to keep top of mind in a business. One side note is that the word strategy is rarely used correctly. Most times people really mean operational efficiency-it just doesn't sound as good.
Welch says: "Strategy is simply resource allocation. When you strip away all the noise, that's what it comes down to. Strategy means making clear-cut choices about how to compete. You cannot be everything to everybody, no matter what the size of your business or how deep its pockets."
Three Steps to Strategy
1. Come up with a big aha for your business—a smart, realistic, relatively fast way to gain sustainable competitive advantage.
Answer a set of questions called the Five Slides—so-called because each set fits roughly onto one page. This assessment process should take a group of informed people somewhere between a couple of days and a month.
The Five Slides:
What the playing field Looks Like now. (scoping out the competition)
What the competition has been up to (where is the competition going? are there new entrants?)
What you've been up to (scoping out yourself)
What's around the corner (where are the threats?)
What's your winning move?
2. Put the right people in the right jobs to drive the big aha forward.
To drive your big aha forward, you need to match certain kinds of people with commodity businesses and a different type entirely with high-value-added businesses.
3. Relentlessly seek out the best practices to achieve your big aha, whether inside or out, adapt them, and continually improve them.
Strategy is unleashed when you have a learning organization where people thirst to do everything better every day. They draw on best practices from anywhere and push them to ever-higher levels of effectiveness.
Posted by Dave Rosenberg on March 12, 2006 10:09 PM
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