If Citrix didn't buy into open source, it got $0 worth of value
Some people are suggesting that the XenSource acquisition had nothing to do with open source. Here's why they're deluding themselves.
Saying open source is incidental to Citrix's acquisition of XenSource is like saying one would buy Red Hat and not care much about its role in the Linux kernel. Yet Matthew Aslett and Raven Zachary both suggest precisely this.
I guess they're following the flawed reasoning that Savio Rodrigues uses. Namely, that if Citrix cared about Xen and not just XenSource's proprietary technology, it could just fork Xen for free. This would be true if it weren't false. Xen without open source is an emperor without clothes.
It's also the reason that Novell failed to entice XenSource into an acquisition when it was knocking on Peter Levine's door nine months ago. It tried the "fork" argument, and gave a low valuation as a result. Guess who acquired XenSource?
I'm not suggesting that Citrix has an open-source fetish. But I'm also not silly enough to suggest that anyone would give a Xandros for XenSource but for the open-source Xen project and for its wide dissemination through Linux. If you agree to this point, then ask yourself how much of a role open source played in making Xen widely distributed and heavily used?
Bingo. Open source matters a great deal.
The real question Citrix should be asking itself is whether XenSource has much impact on the Xen source, as Red Hat has with Linux. The buzz I always heard was that major enterprises were happy to be using Xen...and saw no need for a relationship with XenSource to extract value from the project. I think XenSource's tepid revenues (close to $0.00 in 2006 and on track to hit $8 million or so in 2007) reflect this. The company reports having 650 enterprise customers at an average deal size of $2,000 (shockingly low), according to The 451 Group. There's only one way to go from there...
Which may make Citrix quick bite on the hype premature...or a very wise bet. There's no doubt that its inflated price was driven by the VMware IPO. $500 million is very cheap compared to VMware. Citrix believes it can turn XenSource into a $50 million growth engine by next year. I think it's kidding itself, but it still may be a great bet over the long haul.
Still, it comes down to source of code. And that, my fellow open-source bloggers, comes down to open source. If all XenSource has is some proprietary software that helps to manage an open-source project, it's got nothing and, by extension, so does Citrix.
But if Citrix bought the keys to the open-source project, Xen, then it may well have $500 million worth of momentum. It's all about open source. We would never have heard of Xen if it weren't. Don't let anyone kid you otherwise, even people who I like and respect as much as those referenced above.