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OSBC director: Linux, open source profitable, stable and on the minds of CIOs

Open Source Business Conference director Matt Asay weighs in on the changing face of open source and how open source software startups are asking investors to "show them the money."

In the realm of open source, what was once all-Linux, all-the-time, has shifted gears to encompass everything from enterprise resource planning applications to Web browsers and CRM.

Tiny startup companies and former pet projects of developers well versed in kernels and General Public License (GPL) now find themselves on the receiving end of millions and millions of investment dollars, while products like Firefox, MySQL and are now thrown about in a serious manner with household names like Microsoft Office, Oracle and others. Where there was once a jumble of FUD about open source software (OSS) in the minds of chief information officers (CIOs), there are now dollar signs and sound business models.

With the landscape for OSS changing every day and with the Open Source Business Conference less than a month away, conference director and Director of Novell's Linux Business Office and Open Source Review Board Matt Asay took some time to discuss some of those transformations -- both good and bad -- with

The Top 3 "Must See's" at OSBC Boston:

Planning on attending the OSBC in Boston this November?

Conference director Matt Asay lists the top 3 opportunities that the OSBC has to offer this fall:

1. The inevitable evolution of enterprise applications to OSS -- covers the trend of OSS as fad or long-term alternative to proprietary models. Present frameworks indicate CIOs are likely to see their own applications go toward OSS.
2. Pitching the CIO -- Three startup open source companies pitch actual CIOs and attempt to prove the substance of their products.
3. The future of enterprise e-mail -- CIOs have expressed distaste with Microsoft Exchange, but very few move off once they hop on. However, there are alternative ways of keeping the functionality of Exchange, including mobile e-mail and replacements from OSS vendors that have effectively cloned Exchange but run on Linux -- in some cases getting a 10x performance boost.

In the past year, what has been the most influential OSS news to hit the headlines?

Matt Asay: One that sticks out to me, and I'm not sure anyone would pick this automatically off hand, is that three companies -- Red Hat, MySQL and JBoss -- have absolutely proven you can make a profitable brand growing business from OSS. Red Hat has been on a $260 million run, MySQL is on a run to do $40 million, and I don't have the hard numbers on JBoss, but it is certainly similar to the MySQL rate.

There is all this questioning of what the right business model might be, and the CIO uptake, the TCO [total cost of ownership] studies, but in the background there is absolutely an objective fact that -- in LAMP stack anyway, with JBoss next to it -- that uptake is happening, regardless of whatever Microsoft has been saying about TCO.

Even though we are seeing these questions about OSS' significance it is certainly there. That $40 million at MySQL will be $80 [million] to $100 [million] next year, and both MySQL and JBoss will be looking at IPOs in the next one to two years. At that point the floodgates will be open, the same as when Red Hat had their IPO a while back and market values went insane.

They went up and down just as fast, but now five years later there is a much more mature approach taking place. These companies are profitable, growing their revenue and growing at a more reasonable rate. As result, I like to think that today we are seeing a time similar to the dot-com boom, but with a few solid companies -- like eBay and Amazon back then -- and today we are having same thing in OSS. The big bubble happened several years ago and there's this kind of mini bubble now -- but there is substance to this one.

Is there an overall theme or trend that will identify itself at the OSBC, or perhaps in the next 12 months?

Asay: The theme now has become CIO uptake of OSS beyond just the Linux operating system. The Linux thing has happened and there's nothing controversial there; there will [be] TCO studies from now until the day I die, which I'm not planning to do for quite some time. But the real issue is to show what the next wave will be.

The first wave was developers and CIOs understanding Linux, and the second wave was one that was more focused on infrastructure, middleware, database and application services, and Web services like Apache. The third wave is going to be the application layer.

Today, OSS application companies are being funded right and left, with $400 million raised altogether, but those funds are going toward application companies. It still remains to be seen if this is simply a fad or if there is something substantial there and I think there is. As an example, a company called Alfresco -- these guys are the founders of Documentum -- went out and started peddling the product, met with Fortune 50 companies, but no one was buying.

They wouldn't buy because of the pricing model. They were really looking for an OSS business model, in part because of the ability to see code, but more because of the way OSS has trended toward examples like the Red Hat Network and the MySQL network. It turns out this is a trend CIOs are happy to buy into. Most CIOs do not look at code; more or less they look to other aspects like the business model. The OSBC will showcase 30 startups, and a lot of those are applications companies, from CRM to ERP and everything in between. There is a strong CIO presence in just about every session and every session has some IT executive on hand to say things that may sound great in theory but [explain] how to use it in business.

What was one of the stories in open source that presented the greatest challenge or wakeup call to the industry?

Asay: I have seen lot of startup companies in the last 12 months that have shown really strong download numbers. This started a trend where OSS companies were trying to wave around download rates on SourceForge as a reason to believe they were a significant player. I think some companies kind of forgot that downloads don't mean revenues at the end of the day. A popular giveaway does not mean a popular product that people will be willing to buy.

However, most of these companies are still in the game and are still able to raise money, but in this respect the OSS industry has been humbled. They got a little giddy because they generated some serious download buzz, and suddenly believed they were a viable company, because download rates were through the roof in six months. Frankly, some VCs still believe people are willing to accept download rates over revenue, but I think that bubble -- if it has not already -- has burst.

The Mozilla Foundation's Firefox [Web browser] was a little different. It went up really fast then stopped, and the news now is that Mozilla has security vulnerabilities. We in OSS believed we were somewhat inoculated against vulnerabilities, but it turns out we were not. However, the undercurrent of this story is Firefox went through a huge boom and now companies that only supported Microsoft Internet Explorer in the past now support Firefox as well.

How important a role will OSS licensing play at this conference and in the year ahead?

Asay: In the short term, the legal issues will continue to be an important thing to discuss. Companies adopting OSS or selling those applications are not going to get away from lawyers. OSBC always provides a great forum for attorneys to come and learn OSS.

In March 2004 it was extremely difficult to find even one attorney that knew anything about OSS, whereas now every attorney thinks they are an expert in OSS. But I do generally think the quality of legal advice has also improved over the past two years, and I think OSBC has played an important role in fostering that trend. Legal issues will continue to play a role in the short term, but I think in the longer term, as buyers and sellers get more comfortable, all companies will have an attorney, but they will not be playing as central a role as they are today. Over time, I think, those issues hindering OSS today will go away as people grow more and more comfortable with a world that is both open and closed. But we are still few years away from that. In three to four years from now, the OSBC probably won't have a legal track.

On the OSBC Web site there were several mentions of lawyers being in attendance; will there be any attention given to the possibility of another SCO-type case on the horizon?

Asay: I don't see it happening again in the future, so aside from the nuts and bolts of licensing, the next biggest issue on the legal track is the GPL, both in terms of understanding it and where it's going. The third revision is coming out in the next year, so it has been kind of a hot topic with attorneys who want to get on track and find what holes it's going to close and open in exiting GPL. In the past, we had always had a track on the SCO lawsuit, and this year it has just not gone front and center in anyone's mind. I don't really see anything like that in near future like that, but knock on wood.

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