InformationWeek's Charles Babcock takes a fascinating look into the pros and cons of open-source mergers and acquisitions, and comes up with some interesting perspectives in the process. In sum, if you want to acquire an open-source software company, you'd better be very clear about what you're buying, and how you're going to pull value from it.
Squeeze too hard, and you risk alienating the community of customers, developers, and interested onlookers that made the open-source project successful. Squeeze too lightly, and you end up being popular and poor.
There is no one-size-fits-all approach to acquiring open-source projects, as the article points out. Indeed, sometimes a private equity buyout of sorts ends up yielding the most value.
What do I mean by "private equity buyout?" Consider XenSource.
XenSource was bought for the princely sum of $500 million despite offering virtually nothing in the way of revenue and a clear business model. Under Citrix's proprietary hand, however, XenSource has gone from pocket change to what XenSource CTO Simon Crosby says will be $50 million in revenue this year. Crosby tells InformationWeek that "XenSource has close to 3,000 customers, compared with 1,800 at the time of the acquisition." Considering that it made less than $10 million or so in sales off those 1,800 "customers," XenSource may well be thanking the proprietary gods right now that Citrix gave it a new way to monetize adoption.
But this doesn't tell all of the story on open-source M&A. If it were a matter of "buy open source, make it proprietary," more would have done it by now. Some, like Red Hat, actually go in the opposite direction, as it did with Sistina, taking proprietary code and open-sourcing it. But the JBoss example is even more interesting, because it involves taking a pre-existing open-source project and trying to improve its financial yield by changing its business model.… Read more
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