The following article comes from the Open Source China, Xie Jia author
This article BlockMania "into the world of open source," the second article in the series.
Click Review First: What is behind the open-source economics?
2018 is open source software in the history of special significance of the year, this year a lot of big milestone event took place in the course of open-source software and commercial software integration, we are also pleased to see the great progress China made in the open-source software companies. I think some of the open source commercial paper will share.
5 trillion dollars enterprise-class open source software integration
Recalling 2018, we witnessed a historic breakthrough open source software in commercial level achieved:
1, IBM with $ 3.4 billion acquisition of open-source software companies listed Red Hat, which is also a record sum in the history of commercial software acquisition record. Red Hat Linux open source operating system from the cut, is an important force in the field of private cloud computing, in the field of cloud computing IBM is struggling to catch up this price to acquire core business demands.
2, Microsoft for $ 7.5 billion acquisition of open source collaboration platform GitHub. Financial income Nadella did not want a GitHub, he is valued above GitHub developer network, in the field of software, developers have to have vitality, he defined by Microsoft as a developer-first company, so Microsoft is this SaaS company to pay nearly 30 times ARR (annual circulation revenue) premium, usually secondary market pricing of the head SaaS company is between 10x ~ 15x.
3, Salesforce for $ 6.5 billion acquisition of open-source software companies listed Mulesoft. Mulesoft position is for data exchange between the enterprise application software, the acquisition of Salesforce intention is to cover the outside of the CRM application scenarios open up the enterprise data to help Salesforce's cloud computing business more smoothly landing, but also help customers better to achieve digital transformation. This is the largest ever acquisition of Salesforce.
4, Adobe for $ 1.68 billion acquisition of open-source software company Magento. Magento is an open source B2B / B2C electricity supplier management platform, Adobe's intent to acquire a very direct: Magento Commerce Cloud will be a strong complement to Adobe Experience Cloud's. Of course, there Magento accumulated customer resources.
Adobe's strength is content creation and management, along content extends to marketing techniques, the acquisition will help Adobe expand quickly extended to the electricity supplier business.
5, VMware acquired the open source container technology companies Heptio. VMware did not disclose the purchase price, but Heptio 2017 in the case of financing point of view, when administered after valuation of nearly $ 120 million, so this should be at least once billions of dollars in acquisitions.
Heptio to provide services around open source container technology Kubernetes, the two founders are Kubernetes this has become a core member of the early practical standard container technology.
Heptio business model is not beautiful, it looks more like VMware once Acqui-hire. Container technology has become a key underlying technology of cloud computing, and Kubernetes has become the de facto standard container technology field, this acquisition also means that cloud computing infrastructure, VMware is cloudy across cloud management business focus to embrace open source technologies, or, they have to embrace.
You know, it was only six in total global market capitalization in billions of dollars-class software company, Microsoft, Oracle, SAP, Adobe, IBM and Salesforce, VMware count the nearly $ 70 billion market value of the quasi-one hundred billion, a total of seven ( I believe VMware to enter one hundred billion club is only a matter of time).
Open source software is the ability to show commercial revenue
On the basis of open source software, the two companies IPO, the IPO has two companies were merged.
Pivotal: located in the PaaS platform to help large enterprise customers building private cloud computing platform, to more effectively develop enterprise applications on top of its PaaS platform. Pivotal in the market before a fiscal year's revenue was $ 500 million, the current market value of $ 4.5 billion (as of 2019.02.04).
Elastic: located in the data retrieval technology to help companies analyze their structured and unstructured data (such as log data) to tap more business value. Elastic in the market before September 2018 12-month revenue was $ 160 million, to push forward year revenue is nearly $ 90 million, the current market value is $ 5.0 billion (as of 2018.12.31).
Cloudera + Hortonworks: two are done based on open source Hadoop big data technology commercial products and services, Cloudera model partial product, Hortonworks partial service model, respectively IPO in 2017 and 2014.
This is a 6: 4,52 million US dollars all-stock merger, with annual revenues of merging two together are nearly $ 720 billion in 2500 customers. Merge means that over the past two flies are not very good, need to work together to improve efficiency and competitiveness. From 2003 Google File System paper since the beginning, this is the Hadoop open source technology in decline this portrayal of 15-year-old bar.
And Pivotal and Elastic different, Pivotal is the core open source Cloud Foundry owner, Elastic its core open source technology ElasticSearch owner, but whether or Hortonworks on Hadoop Cloudera have no control over, which also had two distinct open source business ecology and degree of market concentration.
These are some lively phenomena we observe, I like you curious about the reason behind it.
Open source as a new collaborative model of production which commercial competitive advantage?
On any market, customers most in need must be "good" products, whether open source or closed source, free or paid, what your product can become the most customer choice? The issue of commercial competition in the final analysis the competitiveness of products, that is, on a stock or incremental market, the products are competitive enough, including accurate enough to solve the problem, the introduction of the market fast enough, strong enough technology Advantage.
Whether open source or closed source, is the simple principle of market competition constant, open-source and closed-source is not completely replaced, but in some areas have unique advantages of open source, so the winner.
Open source software is the greatest competitive advantage "have the opportunity to quickly gain market share." So open source is a kind of go-to-market strategy, which is "productive and efficient distribution of goods," we call economics the key elements.
Open source helps to rapidly iterate product:
thanks to the open source model natural to attract the best people, who represent the most valuable, the most promising open source projects to attract top engineers, the best talent often makes open source technology It represents the industry's most advanced level.
Why, including banks, an increasing number of Fortune 500 companies began to use open-source infrastructure software products? For this part of the customer is not bad money is concerned, the main reason may be their only other no better choice.
Open source as an open collaborative network also brings a benefit, in an open collaborative network participants will cherish their reputation, low-quality code is tantamount to a fool in front of everybody, but closed-source code quality control it is largely dependent on the internal review mechanisms, so that open source is a higher order of human productive collaboration.
Also, equally important, users / customers the opportunity to participate in the production process of collaborative feedback requirements, millet MIUI in the early rapid rise is an example.
User participation is the core reason "basic software" This category is more likely to be open occupied, we can put the "basic software" simply understood as the developer-software category of major user groups in this category open source community of developers itself users, engineering expertise = domain expertise.
But in those areas of engineering expertise is not equal domain expertise, the advantages of open source collaborative approach that is not obvious, often have a much larger body mass commercial closed source software company counterparts exist, for example, there are areas of open source CRM SugarCRM, but Salesforce this field is worthy of the king, Office areas have open source LibreOffice, but can not shake Microsoft Office.
Open source helps efficient acquisition (CPA):
customers an integrated open source products are usually lower cost, which includes customer approval management costs within the enterprise, implementation costs, prices and other costs, avoid open also to some extent for customers of vendor lock fear, especially in the initial decision to use a product, excellent open-source products have the opportunity to become the first choice of enterprises.
Once some customers to verify product availability for customers in terms of other means to avoid the risks they step on the pit, there is a higher confidence to adopt, which is superimposed on a fast growth potential cumulative-acquisition process.
Open source helps to consolidate the business ecosystem:
open source projects once they reach a high enough market share would mean a chance to become a kind of de facto technology standard. Both upstream and downstream partners, enterprise customers or engineers, everyone in making technology selection and technical reserves are based on a common common technical standards, which are for all participants, the most efficient way.
Nor is closed source can not become common technical standards, but it takes longer to do after the market monopoly have the opportunity to achieve, such as the Oracle database after decades of development has become a common technology, this engineer The company also has a living skills this technology for the main business.
However, the market share by quickly obtain free does not mean necessarily commercial success, commercial success in the strict sense can only be proven through sustainable profitability.
So, what do open source key elements of success commercially?
Successful companies without exception, are derived from the customer value creation, open source projects you want to do business successfully not open around. The open source community needs to think like customer value creation strategy and business model as a commercial company.
For enterprise customers, even the best technology products and services need to sell into strength is the strength of the complete enterprise business. Therefore, from this perspective, the commercial success of open source software and closed source software business success factors and there is no essential difference, the key is to see:
Customer Value: the value of space can be created for corporate clients how much. For example, a model library TensorFlow do open source project based on TensorFlow itself as a complete machine learning framework open source project compared to the commercial value of the two is certainly different.
Barriers to competition: whether a sufficiently high barriers to competition to improve their bargaining power. For example, Web front-end technology is one of the most active open source category, but the front-end technology on the one hand technical threshold is not high enough, at the same time, the customer in fact, there are many other options, so we rarely see this category ran out of business success open source projects.
Business model: if you can find enough highly efficient business model.
What business model of open source software?
Business models are particularly vulnerable to be known as a variety of eye-catching name, but in the field of enterprise-class 2B can be basically classified as "Product" and "service-oriented" types.
Product companies by profit selling a commercial version of the product or the core technology to customers, the open source community has formed a relatively mature dual-license or called open-core model, community version of the product free open source but the commercial version of the product charges by commercial version to look for value-added space.
Service companies to profit by providing services (sale time) to the client, to the early Red Hat's success as a representative, service is the business model of open source community earliest form, provide customized development to customers based on open source technology, technical support, consulting and training and other services.
Product generally can do 70% -80% gross margin, service is usually only do 20% -30% gross margin, the challenge lies in service-oriented model is difficult to scale, it is not easy to make a difference . Product company's profit will be more efficient than a service-oriented company, which is the objective of commercial law, we have also seen a growing number of open-source companies to go through the "Product" path to commercial success.
In the field of consumer 2C is mainly around the logic of "cash flow" to the open-source browser Firefox, for example, 2014, Yahoo! and Firefox parent Mozilla Corporation reached an agreement, Yahoo! Will pay nearly $ 400 million per year in exchange for the default location for Yahoo! search engine in Firefox.
Even in the consumer field, it is basically open source to generate revenue primarily by charging to the business end, rather than charge individual consumers.
The open source community behind commercial enterprises
For an open source project, gave birth in the open source ecosystem in one or a number of successful business enterprise is to ensure an open source project itself is the only way to force continuous innovation such as Linux bred listed company Red Hat.
Because any innovation requires sustained investment of resources in order to be output, like the same all startups in need of early wave after wave of financial support to the business machines up and running, success in business means that open-source project started It has a more active hematopoietic ability to profit on the business will be reinvested into research and development of open source projects to ensure that the leading technology products.
This process is usually a company owned by the open source community behind the project dominance (for example, listed companies in the open source MongoDB project MongoDB), or in an open source project is relatively dispersed ownership of ecology by several companies (such as companies and listed Hortonworks Cloudera's open source project Hadoop) to complete.
From this perspective, we have to admit that "business" is a business that still form the most efficient organizational form. Based on open source business more like some kind of "social enterprise", if a business can not find this leading open source "continuous innovation the only way," then she is likely to lose business in closed-source competition.
Open or Not?
If you are hesitant to venture in open source, my suggestion is that you need to think clearly about their goals, but also need to figure out your market space and business areas in which the pattern.
If your goal is to achieve commercial success through open source projects, with an independent profit-making capability, achieved even more than other similar commercial software company level, you need to determine what direction you are in whether there is a "customer value space" aspects natural short board, such as product complexity is not high enough, or the customer in fact there are many other options available.
Unfortunately, if you're in a relatively short slopes, then my advice is not open source, open source more harm than good because in this case, the biggest problem is that the technology dedicated to the competition, and you are more commercial version there are difficult to produce enough of the value differences. In addition, operating the open source community itself is also a need to invest a lot of things energy resources.
If your goal is simply to make a meaningful open source project, so, go ahead! Because at least you have a chance to succeed at the individual level, maybe there Which giants for strategic value, to pay a high enough premium launched a takeover bid, let they consider commercial issues, it would be another commercial success in one sense it (just long path, luck is very important, are relatively passive).
Finally, I quote Joseph foreign VC counterparts of research Jacks, Joseph founded by OSS Capital investment only open source, he maintains a table (COSSCI), a collection of open source enterprise with annual revenues of more than $ 100 million, and with his intelligence gathering the ability to continuously improve the details of the table, we can more fully to understand the development of open source business through these details.
The company behind the open source business intelligence is also open source, which in itself is an open-source spirit.
We see more and more open source projects to find their own path to business, cloud penetration and block chain technology and the rise of open-source technology is also inextricably linked, open economy will play an even more important in the future Roles.
COSSCI - Commercial Open Source Software Company Index，by Joseph Jacks, OSS Capital：
https://docs.google.com/spreadsheets/d/17nKMpi_Dh5slCqzLSFBoWMxNvWiwt2R-t4e_l7LPLhU
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