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A new M&A for open source?

If we could figure out ways to enable the software industry provide profitable exits for open-source projects to become foundations instead of companies, we'd be a richer industry for it.

OStatic's Sam Dean speculates that 2009 could be the year of open source mergers and acquisitions, what with the super-low valuations of Sun, Novell, and Red Hat. He may be right, though we might also see these (and others) snapping up the low-hanging fruit of even smaller open-source companies in an attempt to unify a growing open-source ecosystem under one corporate roof.

As I fell asleep last night, however, a different thought struck me: do Eclipse and Mozilla suggest an entirely new form of M&A for open source?

Yesterday I suggested that creating an OpenOffice foundation might be the best way to resolve its alleged management problems. Indeed, as I've argued before, foundations around open-source projects may well be one of the best ways to grow open-source projects' relevance and influence.

Could this be a more efficient way to provide industry benefit without trampling on developers' benefits? Consider the alternatives.

The increasingly normal (commercial) route goes as follows: Project X is started by a developer in her spare time. Project X grows due to great code and solid leadership. VCs notice this growth and invest in a company (Company X) around the project (e.g., Acquia for Drupal, Digium for Asterisk, etc.). Company X competes with IBM et al. but IBM et al. wish that Company X would go away. In some cases, IBM et al. acquire Company X, and capture its value for themselves, leaving the rest of the industry and, often, the project, a bit moribund.

What would happen, however, if the industry had a mechanism for allowing interested corporate parties to provide an exit for Project X's (or Company X's) core team? Instead of selling to one company, in other words, Project or Company X would sell to the industry, as it were, and would become Foundation X, with its value would becoming industry property.

There would be huge benefits to the industry with such an approach, and solid returns for the developers at the open-source project. The problem, of course, is coordinating the resources necessary to purchase an exit. Given corporate gamesmanship, this is likely to prove intractable.

It's too bad. My own company has had large corporate interests approach Alfresco to change how we operate to make us more of an industry standard, but at our expense, not theirs. I imagine, too, that projects like JBoss and MySQL would have made amazing foundations, but I doubt their founders (and their investors) would have been willing to forgo their $350 million and $1 billion paychecks, respectively.

It's not enough to demand that Sun turn OpenOffice into a foundation, or to howl at the gates for IBM to open source its Notes and Domino products. We can't rely on big companies to spend money to develop assets, and then release them out of charity.

Even so, there must be some way to make foundations into a profitable exit for development teams. As an industry, we'd be the richer for having more foundations, if only we could figure out how to help developers become richer in the process and to coordinate the corporate resources necessary to make it feasible.