Microsoft and Oracle’s Different View of Open Source

Implications: Open source is great when it’s bringing in revenue.  It’s “socialism” or “cancer” when it’s taking revenue away.   Those software CEO’s who today are lauding open source as such as great advance will be singing a very different tune if/when their products start hurting!

Analysis: Open source has not yet met the grandiose promises of its devotees, but it has far exceeded the gloomy predictions of the naysayers.  Open source software is now represented in most major market segments.  The operating system area has unquestionably seen the greatest success for open source, with Red Hat and Novell’s SuSE achieving significant market share.  Microsoft’s Windows has been successful in maintaining market share, but the various proprietary Unix offerings (Sun’s Solaris, HP’s HP-UX, and IBM’s AIX) have all been damaged to a greater or lesser extent.  HP and IBM have both embraced the Linux movement and profited from it, albeit at the cost of their proprietary Unix platforms.

Oracle’s software does have open source competition, for example MySQL for databases, JBoss for application servers and SugarCRM for CRM applications.  Unlike in the operating system market, however, these offerings have not yet posed a serious threat to Oracle’s revenue stream.  Oracle was one of the earliest major enterprise software vendors to make a major commitment to Linux, and that move has paid off for them with additional sales for their applications.  Thus overall the open source movement has been good for Oracle.

CIOs like to focus their spending on products and projects that visibly add to the bottom line in their company, since every dollar they spend in this area improves their standing within the company.  Typically this area is represented by applications.  CIOs must also must support the company’s IT infrastructure, which competes with applications for funding but usually does nothing to enhance the CIOs standing within the company.  Consequently, CIOs try to minimize infrastructure spending.  Linux provided a path for CIOs to move a portion of their infrastructure from RISC-based Unix systems to cheaper open source x86-based systems.  This is why Linux has been so successful, and likely will continue to be so.  Also, Linux was the first major open source software offering for the enterprise market, and thus has had a longer time to win acceptance. 

The same market dynamics do not – yet – apply to most other open source software.  Open source software is not generally considered a credible solution for enterprise databases and applications, so Oracle remains able to maintain their software margins.  As long as that is the case, Larry will continue to be a vocal supporter of open source.  If MySQL, SugarCRM or some as-yet-unknown application becomes a serious competitor for Oracle’s products, Larry will likely join the ranks of the open source detractors.

Although Linux remains proof open source can succeed, that story does not seem likely to be repeated any time soon in other market segments.  The move to Linux was driven by the cost savings inherent in the move from RISC to x86 server architecture, which Linux facilitated.  Unless the other open source market areas can find a similar driver, it seems unlikely they will be able to emulate the success Linux has shown any time soon.  They will probably continue healthy growth during the next few years, but not enough to become a serious threat to Oracle.