Proprietary buys of open-source firms to flourish?

Open-source software companies are likely to increasingly find themselves in the arms of proprietary software vendors, with the trend starting in earnest in 2009.

The 451 Group's Matt Aslett believes that a perfect storm is brewing for serious mergers and acquisitions around open source in 2009. Having a (literally) vested interest in the matter, I'd like to see his prophecy come true.

Aslett provides a long list of reasons to suppose that 2009 is the year of the open-source buyout, among them:

  • Proprietary vendors see open source as a means of entering adjacent markets.
  • Proprietary vendors see open source as a means of expanding reach and a potential source of upsell opportunities.

I've written on this second reason before, arguing that open source provides a hugely efficient way to discover new customers . Call it the Poor Man's Oracle Strategy: instead of acquiring new customer territory through multibillion-dollar acquisitions, you do it for free through open-source downloads, and then upsell those prospects.

It's clear that there is much value that open source can bring proprietary vendors as a business strategy. But I find Aslett's reasons for open-source vendors selling to proprietary vendors much more intriguing, among them:

  • Commercial-licensing strategies provide the opportunity for growth but are relatively expensive to develop.
  • As proprietary vendors will be looking to open source to extend their reach into new potential customers, many open-source vendors will be looking to proprietary technology as a means of converting community interest into revenue.

In other words, while I've tended to focus on all the benefit the proprietary world can glean from open source, there's clearly also a lot of value that open-source vendors will find in the arms of proprietary vendors. There's a symbiosis forming in the software industry right now, one that marries the benefits of open source (for customers) and proprietary software (for vendors).

This may not be the year we see this symbiosis consummated through acquisitions, but it's definitely a trend and will play itself out over the next few years.

My question: Will Red Hat and Sun Microsystems get to the open-source start-ups before the proprietary vendors do? On the face of the evidence so far, the answer is no. Zimbra went to Yahoo, XenSource went to Citrix, etc.

Relatively few open-source companies have found themselves merged into the big open-source vendors, a fulfillment of Tim O'Reilly's suggestion that "virtually every open-source company (including Red Hat) will eventually be acquired by a big proprietary software company."

2009 should prove interesting for the software world. The only thing I can predict with certainty is a distinct lack of stasis. That, as well as the likelihood that Microsoft will acquire its first open-source company in 2009, probably Zend or another complementary technology vendor. The times, they are a' changin'.

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About the author

    Matt Asay is chief operating officer at Canonical, the company behind the Ubuntu Linux operating system. Prior to Canonical, Matt was general manager of the Americas division and vice president of business development at Alfresco, an open-source applications company. Matt brings a decade of in-the-trenches open-source business and legal experience to The Open Road, with an emphasis on emerging open-source business strategies and opportunities. He is a member of the CNET Blog Network and is not an employee of CNET. You can follow Matt on Twitter @mjasay.

     

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