January 23rd, 2008
Open source business model reaching tipping point
Over the last several years open source has grown in stature and maturity, becoming more worthy in the eyes of corporate buyers and investors. Everyone could point to Red Hat, which dominates the Linux operating system space, as the poster child for open source but few other “pure” open source companies rose up to that level. Sun has gradually been making its vast portfolio of software open source under various licenses, embracing the notion of FOSS (Free and Open Source Software). “Volume drives everything, and developers are picking free and open source software,” Sun CEO Jonathan Schwartz has said.
“Now just to relay my bias, if you had to ask me what’s the most important initial in free and open source software, to me, if you want to reach the broadest marketplace in the world there’s one price that works for everyone, and that’s free… and so the free part is what we’ve been focused on,” Schwartz said in 2005 during a keynote at JavaOne. Like Red Hat and a host of other open source-driven companies, Sun expects that enterprise customers will deploy the free software and pay for maintenance and support services.
Last week Sun acquired MySQL for $1 billion, following on other major open source acquisitions–XenSource (Citrix), JBoss (Red Hat) and Zimbra (Yahoo). This week several funding announcements point to a tipping point for the open source business model.
Automattic, publisher of the open source blogging platform WordPress (which we use for ZDNet blogs) raised $29.5 million in a Series B Round with funding, True Ventures, Polaris Ventures, Radar Ventures and the New York Times.
Greenplum, a developers of business intelligence software based on the open-source Bizgres software project, garnered $27 million series C investment from Meritech Capital, Sun and SAP Ventures.
Alfresco, which develops enterprise content management software, raised $9 million in series C funding from SAP Ventures, Accel Partners and Mayfield Fund. In other recent open source company financing, Zenoss, a developer of software for monitoring IT infrastructure, raised $11 million in series B funding; Openads, an open-source ad server, raised a $15.5 million in series B funding; and Acquia, which is developing solution around the Drupal open source web collaboration and publishing platform raised $7 million in a series A funding.
With the recent fundings and transactions, the financiers are no longer questioning whether open source, or software-as-a-service, are viable business models.
Dan Farber, editor-in-chief of CNET News.com, has more than 20 years of experience as an editor and journalist covering technology. See his full profile and disclosure of his industry affiliations.
