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Open source: assimilate and thrive
Matt Asay writes today about the prospects for open source vendors going public or, more likely, being acquired, and wonders whether open source vendors should “hold out for an IPO” or “capitulate” and be acquired.
The latter seems far more likely, especially in the current economic climate. We have written before about the open source vendors most likely to go public in the next couple of years.
Looking at the list of contenders again it is easy to imagine that they could all be snapped up before they make it public thanks to the fact that 1) open source vendors are very attractive investments 2) it is difficult for open source vendors to build the momentum to do so.
I spoke recently with Bernard Dallé at Index Ventures, which has previously invested in the likes of MySQL and Trolltech.
Bernard made the point that while the open source distribution/subscription model is a great way of reaching potential new customers and generating predictable revenue, revenue is on average three times lower than a traditional licensing approach. The result is that it takes more time to build the momentum required to go public.
I previously wrote that for open source vendors patience is a virtue, noting that it took MySQL 12 years to grow to the a position where it was preparing to go public - and even it couldn’t avoid the lure of Sun’s lucre. The open source vendors that have followed MySQL’s example barely get the chance to build a meaningful revenue stream.
There is also the issue that the pure play open source vendors like Red Hat do not have the financial clout to compete with the likes of IBM and Sun and Oracle when it comes to potential acquisitions. You can read a little more about our view on that here.
In his take Matt writes that “I’m coming around to the idea that everything will be a blend of open source and proprietary software or services, at least for the foreseeable future.”
I can’t go in to too much detail but I’m doing some research on this right now and the fact is that the future is now. There is very little money being made out of open source software that doesn’t involve proprietary software and services.
Which is not to say that open source won’t survive and thrive, but if you’re waiting to see pure play open source vendors replace the current crop of industry giants you’re going to be waiting a long time.
CodeProject: XmlConfigMerge - Merge config file settings. Free source code and programming help
Microsoft, Yahoo Back On — or Not
It is a sad commentary on the state of affairs in Silicon Valley when Carl Icahn, a known corporate raider from the go-go 80s, is used as a lightening rod to bring two of technology’s major players, Yahoo and Microsoft, to the table to strike some sort of a deal. And there seems to be some sort of a transaction in the works. And that’s not necessarily a good idea.
Microsoft is considering and has raised with Yahoo! an alternative that would involve a transaction with Yahoo! but not an acquisition of all of Yahoo! Microsoft is not proposing to make a new bid to acquire all of Yahoo! at this time, but reserves the right to reconsider that alternative depending on future developments and discussions that may take place with Yahoo! or discussions with shareholders of Yahoo! or Microsoft or with other third parties. There of course can be no assurance that any transaction will result from these discussions.
As you might remember, Microsoft made a $31 a share bid for Yahoo, got spurned, and then raised the bid to $34 a share, only to see it rejected it again. At that point Microsoft walked. Many Yahoo shareholders weren’t cracking smiles when that happened, prompting Icahn to step in with his idea of a board. Ichan’s move to put a new board in isn’t all that bad: Yahoo needs to clean house, as I had said a long time before holier-than-thou Carl showed up.
The New York Times reports that there were talks that “center on a partnership or joint venture for search-related advertising” as the two companies find a way to beat Google. Kara Swisher says that Microsoft “wants most of all to grab Yahoo’s search ad business to become a credible No. 2 in the important sector.”
This is Microsoft, once proud company that would have gone to any length to win, and it is going to settle for second spot. What does it really say about Microsoft? Never mind, it is a rhetorical question.
The combination of Yahoo and Microsoft in the search business is not going to be a winning combination. Essentially Microsoft is in the market to buy eyeballs – ones that have been declining in numbers. Both Yahoo and Microsoft continue to lose market share to Google in the search market.
Just take a look at the April 2008 data for US searches from Hitwise. According to comScore data Google now outranks both Yahoo and Microsoft. So building a search-advertising business makes no sense. (Read Kevin Johnson, Microsoft’s President of Platforms & Services Division memo about Microsoft’s online effort.)
For Yahoo it might not be a bad idea, since the company doesn’t solely rely on search/search-based advertising to make money. Instead, a substantial chunk of its revenues come from (what I like to call) produced pages, email and other content related efforts. If Microsoft wants to pay up for that, that I guess is palatable defeat for Yang & Co.
Vancouver's Finset Open Source Business Cowboys Merge and Expand Internationally
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