As open source goes mainstream, big commercial software companies reap as much revenue as scrappy independents Has the open source software movement become a victim of its own success? A provocative new study by a longtime software analyst suggests that the giants of the commercial software world are cashing in on the popularity of open source and becoming the dominant force in what was once called the free soft As open source goes mainstream, big commercial software companies reap as much revenue as scrappy independents Has the open source software movement become a victim of its own success? A provocative new study by a longtime software analyst suggests that the giants of the commercial software world are cashing in on the popularity of open source and becoming the dominant force in what was once called the free software movement. Perhaps the most startling statistic in the report is this: IBM’s open source revenue in 2007 was equal to that of Red Hat, the largest and most influential open source company. Not only did IBM equal Red Hat’s open source revenue, but the next largest revenue earners were Sun and Oracle, according to the study. What does that mean for the long run? “The market will see a convergence of closed and open source software such that the terms will eventually become meaningless from a research perspective,” says Dennis Byron, senior analyst for Research 2.0, who has followed the IT industry for more than 30 years. And that, says Byron, is just fine with IT buyers. “They just want good software that doesn’t break often, but when it does, a substantial company is available to fix it.” The economics of attraction Indeed, the interest in open source software has been so strong that instead of going public, open source startups are being snapped up by commercial vendors like Oreo cookies at a kindergarten snack break. And that’s not because the IPO market was weak, says Kevin Harvey, a general partner of venture capital firm Benchmark Capital and chairman of MySQL’s board. “The large public software companies see even more value [in open source companies] than the public markets,” he said during an interview. Preceding Sun’s buyout of MySQL were purchases of Zimbra by Yahoo and of Xensource by Citrix. None of the takeovers was particularly cheap; in fact, there was some feeling on Wall Street that Sun and Citrix overpaid. The result, of course, means less of an “open” open source market, while the prospect of a big payday with none of the risks of an IPO could well push more open source entrepreneurs into the hands of “the enemy.” Open source by the numbers The sea change in open source from pure-play provider to traditional vendor is not a symptom of discontent with the software itself. Far from it, as the numbers show. Worldwide revenue from stand-alone open source software reached $1.8 billion in 2006, according to IDC, and will increase to $5.8 billion in 2011, representing an annual growth rate of 26 percent from 2006 to 2011. That’s roughly three times the growth rate of commercial software. (To be fair, the volume of commercial software dollars dwarfs open source dollars by at least an order of magnitude.) Research 2.0’s Byron figures that the open source market probably grew by 40 percent to $2.5 billion in 2007, a not unreasonable figure for the first year of the five-year growth spurt.According to its own financial reports, Red Hat’s open source revenue for the 12 months ending on November 30 was $425 million. That’s a big number, but it’s no bigger than IBM’s open source revenue — including WebSphere Community Edition, Linux support revenue, and the value of Apache within WebSphere — which was also $425 million. In the second full year of converting much of its software to open source, Sun posted $200 million in software revenue, while Oracle’s open source revenue reached $100 million, Byron said. That gives the major commercial vendors a market share of nearly 30 percent. That share will likely be higher this year, when Sun’s purchase of MySQL, which probably had revenue of about $75 million in 2007, is factored in. The freewheeling days are numbered All of this is evidence that the days of the freewheeling open source movement are numbered. Is this bad news for open source? Not at all. Open source software is more than good enough to stand on its own merits, no matter who owns it. And it’s about time that the hardworking visionaries of the open source movement were rewarded with good jobs and high returns on their money and sweat. I welcome your comments, tips, and suggestions. Reach me at bill_snyder@infoworld.com. Technology Industry