Software battles and the new Hegelianism

I'm still plowing through Richardson's biography of William James, and came across a comment on Hegel that really struck me. Hegel, in a gross oversimplification, believed that history is a series of conflicts, directed by the Geist (spirit) inentrixably toward freedom - thesis, antithesis, synthesis. All conflicts lead toward a positive end of global freedom. As Hegel wrote, "The history of the world [Zeitgeist] is none other than the progress of the consciousness of freedom."

Very nice. What's not to like?

Much, if you're William James. The problem with seeing all conflict as mere disagreements that lead us ever onward toward freedom is that, unfortunately, it's not true. Some conflicts are real conflicts, with significant consequences depending on which way they go. In James' view, Hegelianism is pernicious because it encourages us

"to see the world good rather than to make it good" (Qtd. in Richardson, 216).

One of my wishes for 2007 is that we'll stop trying to gloss over the chasm that exists between open source and proprietary software. They are worlds apart in their mentalities and outcomes, for both vendors and buyers. On the vendor side, I think we do ourselves a huge disservice (and, hence, our customers) by failing to look forward to a New World of software, being so determined to keep our feet firmly planted in the way companies profit from software in the Old World. There is much to learn, yes, from existing software businesses. But we should be chary of trying to retrofit open source's new wine in the industry's old bottles.

I interviewed a very promising prospect two days ago. He works for an Old World, Old Bottle company. He believes the company can turn the corner and really become an open source, New World, New Bottle company. He's kidding himself. It can't.

This is why I have so much hope for Red Hat, MySQL, JBoss (now Red Hat), and other companies that have gone 100% open source. They have burned the boats and built themselves from the ground up as 100% open source companies. Red Hat spent years in the wilderness trying to figure out how to make the model work, and now has. Roadbumps and obstacles will persist, but the company has a new frame of thinking to guide itself through these challenges.

The future is open. Not because some Geist wills it, but because customers will it, and because we can make it happen. Open source does not require a vow of poverty. Nor, however, does it, like proprietary software, require customers to enter into indentured servitude contracts with vendors to get their IT (and why? Simply because the Old World could think of no better way to get people to pay for things than by locking them up, both customer and software).

To be an effective part of that future, one must burn the boats to the past. We have to do open source, not just think happy thoughts about it. That's William James.

Open source franchising (Roberto Galoppini)

Roberto Galoppini sent me his paper on a potentially interesting business model for open source: franchising. I've written on the topic before, but hadn't thought about it for some time. (Thanks for being patient and persistent, Roberto!)

Roberto cites IDC and Forrester reports that indicate that the vast majority of enterprises want basic IT services (support, installation, maintenance). Even so, IDC found that 38% of enterprises hire outside consultants to do their migration services and 39% hire outside consultants to do implementation services. For these same services, 59% and 66%, respectively, do the work themselves, internally.

This means that either a) this sort of work is best/cheapest done internally or b) no one has created a viable model to do these basic services better/cheaper/faster.

Roberto's contention - and in my experience it's a very plausible one - is that a franchising model could serve to provide such basic services at better price and quality than could the enterprise's IT staff. The vendor could take this services work itself, of course, but would achieve greater scale by setting up franchises to manage the work.

This makes sense to me. At Alfresco, we already use system integrators to perform all of our implementation services. What we have yet to do, however, is put into place the sort of hardened certification system that Roberto envisions. Roberto highlights Sun as a perfect company to trial a franchising program. The ingredients are certainly there: great software (Solaris, Star Office, Java, etc.), great brand, great channel. What it's lacking is a strong certification program.

For this reason I think Novell, with its experience with its YES! certification program, might be in the pole position to deliver a robust franchising program. It, too, has a strong open source desktop offering (better than Sun's, in my opinion), Linux, etc. And since a big swath of enterprises (44%, according to data cited by Roberto) use Linux for web/email services, as well as file/print, where Novell has good experience, it might be a good product fit, too.

Your thoughts?

Open Sources Reflections on 2006 (Matt's Version)

As 2006 nears its close, Dave and I decided to try to do a "Year in Review" sort of post or two. You can find Dave's here.

This has been an exceptional year for open source (and for me, personally, though Arsenal didn't contribute much to that). I was with Alfresco all year, as well as the advisory boards for SugarCRM, JasperSoft, Specifix, MuleSource (sort of - still waiting for my paperwork, Dave :-), Intoto, and Bungee Labs, as well as the board of OSI and the Open Source Business Conference. These gave me a bird's eye view into different sectors of the industry, so as to separate hype from reality in open source.

Guess what? All signs are positive for open source, no matter where you look.

2006 was the year that Linux became so mainstream that you could buy it at Wal-Mart. (Well, not quite that mainstream, but mainstream enough that Wal-Mart was actively running its business on Linux, as well as other open source technologies.) It was also the year that the open source middleware (JBoss, in particular) and database (MySQL, in particular) markets really solidified, and that open source applications started flying off the shelves into the Global 2000, the SME market, and everything in between.

It was also the year that the Proprietary Bloc finally woke up to the imminent threat, and started to lash out.

Here's my month-by-month review of the biggest news of 2006 for open source:

January

• The SCO FUD is in full thaw, and enterprises start to talk about massive (and minor) programs to adopt open source.
  
  
• Open source venture funding started to rise significantly, with a collection of VCs doing the bulk of the funding.
  
  
• Microsoft kicked off its open source partner program with JBoss, with a range of others (MySQL, SugarCRM, Novell) to follow. (Kudos to Jason Matusow for doing some of the sowing here, and Bill Hilf for sowing and reaping.)
  
  
• The GPLv3 went live for comment. And boy did those comments come....
  
  
• I wrote about Red Hat's business model, but few listened.
  
  
• People like Dave hoped (in vain) for the Linux desktop.
  
  
• Microsoft starts to get a little smarter about open source, arguing that it competes with some products that happen to be open source, but not open source, itself.

February

• JBoss comes out swinging against "fake open source." Marc also swatted at Red Hat, but all of those comments disappeared from his blog.... :-)
  
  
• In a prescient move, we posted on how enterprises can protect themselves from their open source companies/projects being acquired. The fact that Oracle tried to buy MySQL was a textbook example.
  
  
• Open source venture investments top $1.3 billion.
  
  
• Rumors abound that Oracle would acquire JBoss, Sleepycat, and Zend. Only one of these (Sleepycat) ends up going through, but no word on JBoss...

March

• Ballmer starts the "Microsoft IP in Linux" FUD war. Unfortunately, he failed to notice all the open source IP in his own products.
  
  
• Vista delays reported...again.
  
  
• Mozilla pulls in $72 million without even trying.
  
  
• More and more open source projects succumb to the allure of venture money.
  
  
• Open source's allegedly superior security is called into question. (And rightly so - a project is only as secure as the quality of the people and process involved. Open source is helpful, but not a panacea.)

April

• Sun drags its feet on open sourcing Java, and treats scripting languages like toys.
  
  
• Sun's McNealy steps down, paving the way for the more open source progressive, Jonathan Schwartz. (Would that Microsoft could shed itself of its brilliant but backward Ballmer....)
  
  
• Oracle starts rumbling about Linux.
  
  
• Open source applications hit their stride with everyone from Alfresco to GroundWork to JasperSoft to Zmanda to SugarCRM chomping away at the Proprietary Bloc.
  
  
• Red Hat's JiHat begins in earnest with the acquisition of JBoss. The question looms: how will Matthew and Marc get along?

May

• OpenSolaris appears to be effective in stemming some of the rush to Linux. Some.
  
  
• Microsoft starts to feel a bit worried by Google's ambitions.
  
  
• The problem of how to leverage open source downloads into paying customers persists. Every open source company thinks and talks about it...daily. Larry Augustin writes an interesting post on the topic.
  
  
• I note that open source needs more competition. There shouldn't be one open source company per application space. That's lame.
  
  
• Jonathan Schwartz hints at open source Java in the near term.
  
  
• Open source revenue models grow up and become more sophisticated.

June

Red Hat continues to blow Novell's Linux business out of the water. This continues to baffle some, because many prefer SLES from a technical point of view. (The answer, btw, is "execution.")


• IT buyers go for open source in droves, but persist in thinking their vendors are trying to cheat them. (It will take time to undo all the damage the Proprietary Bloc has done to the software market.)
  
  
• I convince IDG to hold OSBC once per year, which is much better for everyone (including me).
  
  
• 25% of Dell's business goes Linux.
  
  
• Gartner acknowledges that open source applications are hot. Meaning, every company you'd want to buy from or work for is using them.
  
  
• I write that open source licenses help to mitigate against the worst of vendor intentions, but are not perfect in doing so.
  
  
• Google continues to get credit where no credit is due.
  
  
• Zimbra gets more media coverage than Paris Hilton...and for much better reasons.
  
  
• MySQL continues to knock the ball out of the solar system. It becomes the Web 2.0 database darling and shifts more and more of its business from OEM sales to enterprise sales. Oracle pretends to be unconcerned.
  
  
• I suggest that successful open source projects need not relocate to Silicon Valley and apparently freak out every denizen of the Valley. Perish the thought that it's not the center of the open source universe. (It's not, btw...not even close.)
  
  
• Martin Taylor, once Microsoft's chief anti-Linux officer, resigns from Microsoft. I really liked Martin, and was sorry to see him go.

July

• Microsoft opens up its file formats to appease governments and shut up its critics. Successful on Count 1, but not so much on Count 2. Sometimes you just can't win....
  
  
• Open source really takes off on Windows. SugarCRM, Alfresco, and other open source companies report over half of their downloads are on Windows.
  
  
• Unisys becomes the biggest open source system integrator.
  
  
• The US Department of Defense comes out strongly in favor of open source, declaring it a superior way to achieve national security than through proprietary software.
  
  
• JBoss points the way to how to create a successful open source business.
  
  
• MySQL and PostgreSQL show how open source can create new markets and not simply commodify old ones.
  
  
• Open source virtualization project, Xen, is declared not quite ready for enterprise deployment.

August

• A debate kicks up as to whether open source companies can ever do more than $1 billion in revenues. Short answer: Yes. It's also the long answer.
  
  
• US state government CIOs overwhelmingly vote for open source, complementing open source's unstoppable force abroad in governments.
  
  
• Digium takes venture funding from Matrix Partners. I say "takes" because every VC on the planet had tried (and failed) to get Mark to take their money.
  
  
• That Sun hippie starts to make serious bank for the company. Pretty good for a guy with a pony tail. :-)
  
  
• The 451 highlights what is now painfully obvious: open source stack providers need a new business model.
  
  
• Marc Fleury proves that you don't have to be a boring loser, just because you work for a big company.

September

• Proprietary innovation goes the way of the dodo.
  
  
• Ubuntu continues its rise as the community Linux distribution of choice, and makes eyes at the enterprise.
  
  
• GPLv3 starts to generate a lot of criticism, with none more potent than Linus'.
  
  
• Microsoft introduces the Open Specification Promise, which basically says it won't sue you. Maybe. In some cases. Depending on the day. (Sorry, Jason - couldn't resist!)
  
  
• It becomes more public and obvious than ever that open source manages/drives/undergirds/etc. the web.
  
  
• Open source databases take over the enterprise.
  
  
• And yet, Linux and Windows have yet to really start duking it out in the enterprise.

October

• MuleSource launches and immediately becomes the de facto, enterprise-class open source ESB.
  
  
• Red Hat invests more R&D dollars in Linux innovation, moving beyond its "packager of Linux" history.
  
  
• Peter Quinn, CIO of the Commonwealth of Massachusetts, quits. Who knew that IT could be so political?
  
  
• Microsoft touts open source and the advertising-driven business model as its biggest competitors.
  
  
• MySQL adds an Enterprise product and comes up with an innovative spin on a "network" product.
  
  
• Oracle goes for the Red Hat jugular by announcing discounted support for Red Hat Enterprise Linux. It conveniently leaves out all the devilish details. Red Hat's stock drops 25%.
  
  
• The open source attribution debate begins in earnest.
  
  
• Microsoft and Zend partner to speed PHP performance on Windows. Mission accomplished.

November

• Following on the heels of the Oracle announcement, Microsoft teams up with Novell to offer patent protection (from themselves(???)) and enhanced Windows/Linux interoperability. Few note that this opens up the possibility of Microsoft using its patents to tax open source.
  
  
• Google pledges to open up customer data to those same customers (i.e., data portability).
  
  
• Samba rejects the Microsoft/Novell deal, and asks Novell to reconsider. (Answer: "No way.")
  
  
• Java is GPL'd.
  
  
• Microsoft announces that Linux violates its IP. All that work Bill Hilf had done...down the drain. Note to Ballmer: Sometimes you get in the way of your company's progress.
  
  
• Medsphere melts down because management tried to be the open source company its investors were funding it to be.

December

• Most vendors can't see beyond Linux, apparently, but open source middleware, databases, and applications continue to thrive, all the same.
  
  
• Red Hat tops CIO Insight's "value" list again. It also moves to the New York Stock Exchange, where it finishes a prosperous year with excellent Q3 results.
  
  
• Microsoft's SharePoint product becomes its fastest growing product ever, with little response from the industry.
  
  
• SugarCRM and JasperSoft announce that they are kicking proprietary's tail.
  
  
• Novell and Microsoft announce that they have customers in common. Yeah. There really is no news there, except that they also discounted their pricing to roughly zero. Is it a customer if they're not paying money?

All in all, a very interesting (and prosperous) year for open source.

On a more personal note, here are some Matt Asay highlights of 2006:

• I got to see several Arsenal matches (one of the perks of working for a UK-based company). More importantly, I have now thoroughly brainwashed my children into supporting Arsenal, too. Even my 18-month old. One of her first five words was "Arsenal." Really.
  
  
• I was fortunate to hire the best sales/business development team on this planet. Really. I am constantly surprised by how talented these people are. Luis, Martin, Jason, Michael, Yong (and two more on the way!): thanks for being the best. Yes, this will invite even more recruiters to call asking about you, but whatever. Credit where credit is due.
  
  
• I, along with the other OSBC team, was able to fully move control of OSBC into IDG's hands. This gives me much more free time to spend on...Alfresco, FIFA 2007, and family. (Or would, if I weren't now consulting for IDG on the program.)

Through Open Sources and AC/OS, 100,000 of you spend time with me each month. I appreciate that. Hopefully, it's interesting and useful. See you in 2007.

Drupal founder on Sharepoint

Dries Buytaert, the founder and maintainer of the excellent web CMS, Drupal, talks today about Sharepoint 2007. He calls it (and its "ilk" of software) "Collaboration Management Software," instead of "Content Management Software." I like that distinction. It takes the emphasis off the content - which is just static and a bit dull - and moves it to the locus of importance: people, and the work they do with other people.

Given the explosive rise of this market (Sharepoint, alone, went from $0 to $500,000,000 in just its first three years), it is shocking how little the industry is doing to solve the same customer problems (and thereby compete with Microsoft) that Sharepoint envisions. Dries mentions Alfresco as the leading open source alternative to Sharepoint. Fine. But where is Oracle in this? IBM? Etc.?

Some context. My last role at Novell before I left was analyzing the Sharepoint threat. Microsoft was (and I suppose still is, whatever the psuedo-Glasnost we're supposed to be imbibing) using Sharepoint to push Linux out of the data center. It is a fantastic way to lock up an enterprise's content in a closed-source, no-standards repository such that Microsoft owns that company's IT future, because content is the heart of any enterprise.

It is not enough to be an operating system, ERP, CRM, etc. vendor anymore. You need to have a content story. Yesterday it was important, but not critical. Today, it is mandatory.

The difficulty will be in ensuring that competitive offerings have tight integration with both Microsoft technologies and varioius software pieces that embrace and extend Sharepoint's vision. I personally think Sharepint is a great product, but a little light in some areas that customers think are important. I also think there will be interesting opportunities to both tie into Sharepoint (partner) and compete at the same time, as Documentum is doing.

Dries writes:

I wonder what impact the introduction of SharePoint 2007 will have. What was once an important Drupal differentiator (i.e. bundling a wide variety of functionality into a single platform) will finally become commodity in 2007. Instead, seamless integration with other applications might become essential to compete? Interesting times!

Indeed.

Oracle's Uninteresting Linux

I really did want to give Oracle the benefit of the doubt on its "Unbreakable Linux" program. (Really!) (Well, OK, I really didn't, but.... :-) But the numbers aren't looking good. Only 9,000 times in the first 30 days, according to Oracle president Charles Phillips. As Matthew Aslett notes:

Novell enjoyed 325,000 downloads of its SUSE Linux Enterprise distribution in its first 28 days, according to my ComputerWire colleague, Timothy Prickett Morgan, while Fedora Core project leader, Max Spevack, told Internet News in November that Fedora Core 6 was looking at an average of 12,500 installations per day in its first few weeks (which is actually a much more meaningful number than downloads). [Asay: A rough calculation puts this at 350,000 installations over four weeks/28 days, so consistent with Novell's numbers. Both are fantastic results.]

It doesn’t look good for Oracle. Red Hat’s decent third quarter financial figures suggested that Unbreakable Linux has had little to no short-term impact on the Linux market leader, and if these statistics are correct - and you consider the likelihood that the first 30 days were likely to be the peak of interest in Oracle’s newly announced alternative - the long-term impact is also likely to be negligible.

I've got a good idea. Oracle, you make a lot of software that people want to buy. You're the market leader in databases, and doing well on the applications side, as well. You don't need to maim yourself with Unusable Linux. You don't need to be an also-ran in any market. But you are, today, in Linux, whereas you used to be considered an important member of the Linux ecosystem. Get back to your roots. Leave the fight you can't win.

Allison: Novell out, Google in (but into what?)

Mary Jo Foley talked with Jeremy Allison after his resignation announcement, and found out that he starts with Google in the new year. I suspect that when the Samba team started complaining about the Microsoft-Novell deal, Google (probably Chris DiBona) quickly pounced.

Now what would Google want with Samba?

"Samba is an Open Source/Free Software suite that provides seamless file and print services to SMB/CIFS clients," according to the Samba web page. What does this mean? It means that Google can offer file and print services over the web, while having them look like a local file system. It means that Google Office just became that much more interesting.

Google already has a development license for a Java-based CIFS implementation. But maybe Google is heading in a different direction, and Allison will be tasked with making sure Samba can be a good fit for Google Office?

Stay tuned....

Red Hat Q3 earnings: Bookings up, customers in, competition out

Red Hat knocked the ball out of the park again this quarter, especially in light of the competitive pressures from Microsoft/Novell and Oracle. I joined in the earnings call today, and was very impressed.

Revenue, cash flow, billings, bookings were all up. On bookings, Red Hat has the largest pipeline it has ever had, Charlie Peters (CFO) reported. Total revenue for the quarter was $105.8 million, an increase of 45% from the year-ago quarter and 6% from the prior quarter. Subscription revenue was $88.9 million, up 48% year-over-year and 5% sequentially. Overall gross margin was 84%, consistent with last quarter. Peters reported that Red Hat is on track to hit its 2006 annual numbers.

Even profits were effectively up. Yes, earnings dropped to $14.6 million, or 7 cents per share, down from $24.6 million, or 12 cents a share in the same period last year. But if you exclude stock options expenses and income tax provisions, profit totaled $29.6 million, or 14 cents per share.

Where did the money come from?

• 50% from the channel, and 50% from direct sales (vs. 54% and 46%, respectively, last quarter)
  
• Bookings: 60% from Americas; 24% from EMEA; 16% from APAC

Other interesting comments/tidbits:

• 12,000 net new customers (30,000 net new customers, year to date)
  
• Renewing customers are frequently expanding their Red Hat implementations
  
• 98 of the top 100 Red Hat customers have renewed this year, including 24 of 25 (up for renewal) in Q3. It may be that some customers are fickle, but not Red Hat's core customers.
  
• On pricing (in response to a quote from a Morgan Stanley analyst's question): Szulik noted that its operating system and middleware business is about delivering value, not discounts (though the company does discount). Its customers are elevating the importance of the kinds of software Red Hat delivers, and not looking to go on the cheap. (Asay comment: Saving a few pennies on the Oracle dollar, then, is not a priority.)
  
• On JBoss' contribution: The bulk of the integration is behind the company now. [I then got distracted, but I believe that Peters said they'd hit in the $20-25M range in Q4 JBoss revenue contributions.]
  
• On the percentage of JBoss' contribution coming from the core application server: Cornett didn't give details, but said people would be surprised by how diversified the JBoss' revenues are (Portal, Application Server, Hibernate, etc.)
  
• Pricing for Q3 (and typical discount levels) did not change. This is surprising (and gratifying) given the fierce pricing pressure from Oracle. It means that Red Hat really is able to sell value, not price, which is good for all open source companies.

"We are a pure open source play building upon a 15-year history of collaboration with the open source community....[In open source] the customer is an active participant in the innovation process." Matthew Szulik, December 21, 2006.

Jeremy Allison resigns from Novell in protest over Microsoft deal

Groklaw is reporting that Jeremy Allison (Mr. Samba) has resigned from Novell in protest over the Microsoft-Novell patent deal.

"Whilst the Microsoft patent agreement is in place there is *nothing* we can do to fix community relations. And I really mean nothing," Allison wrote. "Until the patent provision is revoked, we are pariahs....Unfortunately the time I am willing to wait for this agreement to be changed ...has passed, and so I must say goodbye."

You can read the full text of his resignation on Groklaw.

Take this with a grain of salt, however. Jeremy can be a bit of a firebrand. That he's upset, I understand. Why, I also understand. But I think he might have done more good for the company by staying and serving as an internal watchdog than he will outside the company. Novell didn't do this deal out of any malicious intent toward the community or anyone else. It was not a wise move, in my opinion, but I don't know that Jeremy's move helps anything.

Five things you don't know about me

Susie Wu tagged me with the "Five Things" meme, after posting her own. I especially liked learning that she used to design jewelry, since a sister-in-law of mine is currently working on something like that. I'll send her your way for tips, Susie. :-)

Given what a blabbermouthing prat I can be, it's amazing that people don't know everything about me already. But, actually, I'm a pretty private person, and somewhat anti-social. Anyway, here are my five:

1. My wife and I ran against each other for the position of "class president" in our ninth grade seminary class. We tied. The not-so-forward-thinking (male) teacher declared: "Tie goes to the priesthood." It took five years for Jen (my wife) to forgive me for accepting that reasoning. At least, I think she's forgiven me.
   
   
2. I'm responsible for the boy scouts in my neighborhood. Basically, this means that many evenings we get together to play FIFA Soccer on one of their XBoxes. (I just bought an XBox so that I can dominate - I am nearly unbeatable in FIFA already. I'm happy to bring my XBox to any open source conference to challenge all takers. :-) I guess that's actually two things: I work with the scouts, and I'm addicted to FIFA. I can waste hours on that game....
   
   
3. I served a two-year mission for my church to Belgium and France. The people loved me: in this picture, you can see the people of Forbach, France, hinting that I probably should go home (some teenagers stole my bike tire ;-).
   
   
   
   And just to prove that I was thinking about open source long before I started my career, this picture shows me halfway through my mission with a bunch of bootleg CDs I had been collecting (there are great CD shops in Brussels). I finally felt guilty and destroyed them, which is what you see in the picture. Human, all too human....
   
   
   
   Btw, I gained 30 pounds in my first two months in France. So much good food....
   
   
4. Prior to joining Alfresco, I actively considered joining Microsoft. (Gasp!) I spent some time with Horacio Gutierrez, Microsoft's (former) general counsel for EMEA, who ultimately dissuaded me from pursuing it. (Horacio, by the way, is a fantastic person. I would have loved working with him, whatever the company.)
   
   
5. I bake pies to relax. I started back in 1997, and generally bake a pie every Sunday. (Feel free to drop by.) My favorites are pecan (shown here) and maple cream. My kids hate pie, so I usually take the pies over to our neighbors to prevent myself from getting too fat.

That's all for now. I guess I could share some family secrets, but my kids already think I'm dorky enough. (Actually, they still love me - they're not old enough to find me embarrassing. But it will come.)

Oh, and I hereby tag Zack Urlocker, Dave Rosenberg, Jason Matusow, and Larry Augustin.

OSBC: Still some room at the inn

I just received great news today. Eben Moglen has agreed to keynote the conference. He joins Matthew Szulik (CEO, Red Hat), Marc West (CIO, H&R Block), Marten Mickos (CEO, MySQL), and one other IT executive (that I can't name just yet) as our distinguished keynotes for the conference. If you haven't heard Eben speak, you're in for a treat. He is masterful, and will seriously challenge a lot of conventional thinking about what "open source" means, and how freedom contributes to capital.

This complements a speaking faculty that also includes senior IT executives from Activision, AIG, Bank of America, Davis Polk Wardwell LLP, US Department of Defense, E*Trade, H&R Block, and others, as well as senior executives from leading industry players like MySQL, Alfresco, SugarCRM, Oracle, Microsoft, DLA Piper Rudnick Gray & Cary, Intel, Olliance Group, Red Hat, Matrix Partners, Mayfield Fund, and a range of others.

This is, hands down, the best line-up and best content we've ever had for OSBC. Importantly, it will have a strong IT component, which is something we've failed to deliver in the past.

On that note, and the purpose of this posting, is to solicit input for the 2-3 remaining sessions. I'm looking for sessions that are focused on the real-world of open source implementations, from the CIO/IT executive's perspective. Vendors can come up with the session ideas, but they have to include a panel of IT buyers. I'm not interested in any additional vendor panels.

I'm also looking for three brave entrepreneurs to volunteer to be on the CIO hot seat. This is a session where we give three entrepreneuers 20 minutes each to pitch a panel of IT executives from big-name enterprises, to see if the ideas stick, or stink. It's a lot of fun, but requires a thick skin (and a strong business/product plan.)

If you have any ideas, please send them along to me at masay _ AT_ osbc.com.

Novell and Microsoft find they have customers in common

The news today out of Walmond (Waltham/Redmond) is that some marquee customers are buying into the Microsoft-Novell deal. Specifically, AIG, Credit Suisse, and Deutsche Bank are all on the record as being happy "new" customers:

Under three separate customer agreements, Microsoft will deliver to each company SUSE® Linux Enterprise subscription certificates, allowing these customers to take advantage of the Microsoft and Novell agreement. Credit Suisse, Deutsche Bank and AIG Technologies, which is a member company of American International Group Inc., highlighted the benefits of interoperability, the patent cooperation agreement and the road map for bidirectional virtualization solutions as the deciding factors in their choice.

Now, despite the obvious problem that each of these companies was already using both company's products - so, they're not net new customers of either Microsoft or Novell, making the announcement as such somewhat deceptive (but hey! That's marketing) - I still think it's good that customers are buying into the interoperability story. This part of the Microsoft/Novell deal is useful and important. I buy it.

Why these organizations care about the patent question I don't know. (Pop quiz: How many companies has Microsoft sued over patent infringement in its history? Exactly two, one of which was Belkin, and I can't remember the other one.) Given Microsoft's position relative to US and European regulators, do you really believe they would want to sue anyone? It would be infinitely worse for them to sue someone than for them to watch Linux start to gobble some of their market share. They are hemmed in by past mistakes.

Anyway, what I continue to find completely baffling about this is why these companies are getting their SLES licenses from Microsoft. I know that they have an agreement and so they need to feed it, but why would Novell ever want to have its biggest competitor selling its software? And, in particular, why should existing customers now get their SLES licenses through Microsoft? From a purely practical standpoint, it looks a bit daft.

(By the way, why isn't Novell reselling Microsoft's software? That would actually make sense, since most of Novell's software already runs on Windows. Funny how interoperability works just fine if you're driving dollars to Redmond, but not when you're heading the other way. :-)

Anyway, does Novell really believe that Microsoft has its best interests at heart? I quite like Microsoft and have a healthy respect for them as a product competitor, but for that very reason I would have absolutely zero trust in having them pitch my products. (In other words, because I trust them to be a strong competitor, why would I trust them to be a strong sales channel for my stuff?)

JasperSoft turns 5,000

Earlier this week I noted that SugarCRM had just hit its 1,000th customer. Today, JasperSoft announced its 5,000th. Jasper's stats are impressive:

With more than two million product downloads, 20,000 deployments, and 23 global partners, JasperSoft leads the market for open source business intelligence, bringing enterprise-quality open source business intelligence tools to organizations of all sizes and budgets. A lightweight Java architecture allows JasperSoft BI solutions to be easily integrated into existing applications. Today, JasperSoft has more than 5,000 customers in 81 countries, from small businesses to Global 2000 enterprises, including Harland Financial, L3 Communications, Siemens, TIMCO, Tomax, University of Nebraska, Visage Mobile, and Walgreens.com.

And then, of course, there are a range of JasperSoft customers that the company simply doesn't have permission to name.

What a great time to be an open source company. As SugarCRM and JasperSoft both demonstrate, open source is an effective way to bring sophisticated technology to the masses, at a price point and in a form that makes them easy to consume.

In particular, JasperSoft is seeing a lot of traction in SMEs with mid-sized businesses and government. More important, they are getting more and more conversions from the free download open source version to paid support for the core reporting engine, JaserReports. This is a highly positive trend for the company, and for open source, generally. (Sales of JasperReports, by the way, are doubling quarter over quarter.) The success of JasperReports in deployment environments in turn has fueled an increasing interest in the full JasperSoft Business Intelligence Suite.

This is the way open source is supposed to work. Glad to see the plan prove out in reality. :-)

Full Disclosure: I am on JasperSoft's advisory board and my company partners with them.
Fuller Disclosure: I am on JasperSoft's advisory board because I love the product, and so would write about it regardless.
Fullest Disclosure: I wouldn't write about something because of money. Unless it were a lot of money. Or tickets to an Arsenal game. My home address is.... :-)

Search engine demographics (a la Nick Carr)

Nick Carr has this post that is deeply interesting, and very funny. He compares the top 10 search terms for 2006 for Google, Yahoo!, and AOL (missing is Microsoft's search). Wildly different...

...forcing him to conclude:

Looking back over the results, I think I can suggest the following market segmentation: Google users are dweebs. Yahoo users are horndogs. And AOL users are geezers.

Where CIOs are spending their budgets, and how to reach them

Forrester, Gartner, and IDC are hard at work in predicting the future. Fortune telling is always a tricky business, but helps when you're actually talking to the people that will be creating that future (namely, the buyers).

Forrester kicks it off by projecting where IT dollars will go (a $1.5 trillion market in 2007):



What are the priorities driving this spending? Gartner (December 2006) highlights these top CIO priorities:

• Create an IT Generation Succession Plan
  
• Start Tracking and Improving the Environmental Performance of IT
  
• Identify, Enable and "Incentivize" the True Innovators
  
• Reestablish Visibility of Total Enterprise Spending on Technology
  
• Help HR Become Strategic
  
• Improve Front-Line Business Experience
  
• Stop Returning the Savings —Report IT Yield Instead
  
• Stop Treating IT Governance as Procedure
  
• Stop Obsessing About the Minutiae of Technology
  
• Get "Hands On" With Some of These Technologies

IDC follows this up with an analysis of where tech marketers are spending their money to reach CIOs:



Open source companies spend differently to reach this audience, but they definitely still need to spend marketing dollars. Open source does not obviate the need for sales and marketing. It just changes how (and when) you spend those dollars.

And now for something completely different...

Think people can't live without your project? I (actually, Forrester) have news for you: they can, and they do. In fact, they spend most of their lives happily living without your technology. Forrester asked consumers what technology they couldn't live without....



Maybe we need an open source TV....

Alfresco's system integration partners of the year

I get asked all the time for references to good system integrators. Alfresco works with a range of SI, OEM, and ISV partners - some announced, some not - and I've been surprised by the wide disparity between the quality of system integrators. Some exceptional...and some not.

We just announced our partners of the year for the Americas and EMEA, with Rivet Logic claiming our US award. (Aarden Ringcroft took the EMEA honor. I only manage our Americas activities, so I'm not as familiar with their work as I am with Rivet Logic's.) For anyone looking for an excellent SI partner, these two fit the bill.

In Rivet Logic's case, they easily won because of the early and continuous support they have offered to us. Initially referred to us by JBoss, we've found them responsive, trustworthy with our customers, and interested in ensuring our success (so as to secure theirs). We have never once had to wonder whose interests they were serving: the customer's, ours, and theirs, without putting themselves before us (as is a constant temptation for SIs - drop the price of the software so that they can get more in services).

We have other great partners, and believe a strong SI partner is worth its weight in gold. Open source offers SIs so much ability to help or hinder a commercial open source project's success - they can be the lifeblood or the bloodletting of an open source company. This year, I'm happy to see Rivet Logic and Aarden Ringcroft take the prize. Perhaps next year it will be other partners. We'll see.

I'd be interested to hear the top SIs for other open source companies, too.

SugarCRM tops 1,000 customers

I knew SugarCRM was going well, but didn't know precisely how to publicly quantify that "well." Sugar has done that job for me, announcing today that it has passed the 1,000 customers mark. (Not announced, but equally significant, is the increasingly "enterprise-y" nature of these customers. Customers like Starbucks.)

Interestingly, a decent percentage of these customers are coming from...Salesforce.com. One of these is Sterling PCU, as noted in the press release:

Sterling PCU, provider of specialized equipment for the appliance and automotive industry switched from salesforce.com to SugarCRM after getting fed up with hidden costs. Sterling expects to save $18,000 annually, paying $239 per user with Sugar instead of $780 per user with salesforce.com.

"Things were fine with salesforce.com until we tried to do a second database back-up," said Christopher Edwards, General Manager of Sales at Sterling PCU. "That is when salesforce.com started to charge us an arm and leg for backing up our own data. It's just not acceptable. It is our data, they do not own it, we do. We moved from salesforce.com to SugarCRM because Sugar gives us twice the functionality at half the price. SugarCRM also gives us the flexibility we need to grow as a business."

Since switching to Sugar, Sterling has achieved a 90% user adoption level. The company is currently using Sugar On-Demand but will most likely move customer assets to Sugar On-Premise in the future, a flexibility salesforce.com cannot provide.

Tim O'Reilly has written many times about how data is "the new Intel inside." Put more crassly, data is the new lock-in. This is one of those fine-print sort of things that Salesforce.com and other web-based companies don't want their customers to think much about, but it's one of the biggest reasons to go open source:

An enterprise's data, or content, belongs to it. The vendor should not own it. Open source largely precludes the possibility of a vendor locking in the customer's data/content. There is no conscionable reason for vendors to hold their customers hostage.

As customers realize this, they will increasingly opt for the freedom of open source. In the CRM world, that means SugarCRM. Congratulations to John, Jacob, Clint, and team on crossing the 1,000 customer threshold. You've earned it.


Full disclosure: I am on SugarCRM's advisory board.
Fuller disclosure: I would write this anyway, because I think SugarCRM is a great product and a great company (which is why I agreed to be on the advisory board in the first place.)
Fullest disclosure: I am also a SugarCRM customer. I think Alfresco is Customer #743 or so. I didn't even get a T-shirt for that. :-)

Pesky reality and open source

I'm reading an exceptional biography of William James, and came across this passage from a philosopher he was reading (i.e., Sydney Smith, Elementary Sketches of Moral Philosophy)

A great philosopher may sit in his study and deny the existence of matter: but if he takes a walk in the street he must take care to leave his theory behind him....

Pyrro said that there was no such thing as pain; and he saw no proof that there were such things as carts, and wagons; and he refused to get out of their way: but Pyrro had, fortunately for him, three or four stout slaves, who followed their master, without following his doctrine; and whenever they saw one of these ideal machines approaching, took him up by the arms and legs, and without attempting to controvert his arguments, put him down in a place of safety.

We may believe anything for a moment, but we shall soon be lashed out of our impertinences by hard and stubborn realities. (4, 7)

Indeed. I love to talk with open source developers who try their hand at the business side of open source. Invariably, many of their cherished notions of "freedom" and "fairness" are changed by the necessity of earning a dime.

It's nice to have ideals. It's better to temper them with reality. Fortunately, oft times the fiercest of ideals weds nicely with reality. I find this true of Eben Moglen and the Free Software Foundation. It would be hard to find better capitalists anywhere....

Paying well to boost margins

Also in the December 2006 edition of the Harvard Business Review is an interesting piece entitled "The High Cost of Low Wages." In the article, Professor Wayne Cascio details the employee cost structures of Costco and Wal-Mart's Sam's Club: Costco = relatively high pay and good benefits versus Sam's Club's relatively low pay and limited benefits. Costco employees average $17/hour and 82% of them have health insurance coverage. Sam's Club? $9.86/hour (42% less) and less than 50% with health insurance.

So, in the low margin retail business, you'd expect Sam's Club to dominate metrics like operating profit per hourly employee, right?

Wrong.

As Cascio notes, Costco's practices, while more expensive, have offsetting cost containment effects: employee turnover of 17% overall and 6% after one year's employment, compared to Wal-Mart's 44% (which is roughly the US national average). It costs money to replace employees that leave: for Costco, that cost is $244 million/year, but for Sam's Club, the cost is $612 million/year (or $5,274 per Sam's Club employee versus $3,628 per Costco employee.

Add this to the lower costs from "employee shrinkage" (i.e., employees stealing from the store) that Costco enjoys, and Cascio's study shows that Costco's approach generates slightly higher revenues but with 38% fewer employees, and double Sam's Club's operating profit per hourly employee.

In other words, it pays to pay well and treat employees well.

The next time you shell out 20% (of the new employee's base salary) to a recruiter for your next hire, think of the cost of replacing her. Far better to pay her well, treat her well, and set expectations accordingly. A "race to the bottom" in terms of compensation may benefit the bottom line in the short term, but the unrest and churn it will likely create will not be worth the pennies saved.

My personal hiring philosophy is that I want to be both fair and generous with salary and compensation. I want to continually exceed my direct reports' expectations on compensation, while also requiring them to exceed mine. I'm generally not disappointed.

Imperial boredom

I'm on a flight right now, reading through the latest Harvard Business Review. There's a great snippet from Marc Abrahams highlighting Jeffrey Auerbach's analysis of British imperialism. I imagine this passage will ring true in several of software's incumbent BigCos:

Throughout the nineteenth century and into the twentieth, British imperial administrators at all levels were bored by their experience traveling and working in the service of king or queen and country. Yet in the public mind, the British empire was thrilling - full of novelty, danger, and adventure, as explorers, missionaries, and settlers sailed the globe in search of new lands, potential converts, and untold riches. The reality simply could not live up to the expectations created by newspapers, novels, travel books, and propaganda. As a consequence...nineteenth-century colonial officials were deflated by the dreariness of their imperial lives, desperate to ignore or escape the empire they had built. (21)

For people feeling stifled by the need to pen in their customers so as to prevent their escape to greener pastures, you should try a startup (and, specifically, an open source startup). We're creating a new order, one that defies the old laws of software economics in favor of a new empire:

That which the customer, not the imperial vendor, creates.

Orthodoxy and orthopraxy in open source

I was reading an account of the Mormon pioneers this morning, and specifically the Martin and Willie Handcart companies. The stories are often repeated here in Utah, but most others haven't heard of them.

In a nutshell, they were pioneers making their way to Utah, and started too late to avoid the winter storms. The result was terrible. As Martha Robinson Blackham related in her journal about the crossing of the Platte River:

The waist-deep water "put them into shock. . . . Upon reaching the other side a tremendous storm of snow, hail, and fierce winds hit the company. . . . That night 13 pioneers died from exposure. . . . Deaths came frequently [in the next few days] and the dead were found . . . holding hands, or sitting by the fire, or while eating crusts of bread or when singing hymns.

In Salt Lake City, Brigham Young heard about their plight and quickly called for volunteers to make the several hundred-mile trek to find the handcart companies, declaring:

I will tell you all that your faith, religion, and profession of religion, will never save one soul of you in heaven, unless you carry out just such principles as I am now teaching you. Go and bring in those people now on the plains, and attend strictly to those things which we call temporal, or temporal duties, otherwise your faith will be in vain; the preaching you have heard will be in vain to you,...unless you attend to the things we tell you.

Such is my feeling, as well, in most things, including open source. It's not what you say or believe, but what you do.

Orthopraxy, not orthodoxy. Correct practice, not correct doctrine/thinking.

Without straining the analogy too far (and certainly the stakes are far lower), there's currently a debate raging about attribution licenses and open source. Zack Urlocker has nicely summarized it. I've also written on the topic before.

Some in the open source community, as found on the license-discuss list, believe that open source burdens distribution, and so violates the Open Source Definition. I understand this point, but mostly reject it. I don't believe that attribution burdens distribution any more than the GPL does, and arguably does less so.

(In fact, I'm not a big fan of attribution precisely because it doesn't require enough. I'd prefer a stronger "freedom burden" such as the GPL requires. In other words, the MPL + attribution is far too easy on downstream users of the code. That's why I've long been a GPL advocate.)

Regardless of all this, and back to my original line of reasoning, one thing that bothers me in this debate is all the talk and theorizing I hear from some in the open source community who complain about attribution. Most of them contribute little or no significant code to any particular project, yet they have crowned themselves the arbiters of what open source means. On the other hand, you have corporations and projects that are churning out prodigious amounts of code - code that can be freely used by anyone - and asking for almost nothing in return. Yet these are being branded "pseudo-open source."

By whose definition?

Yes, there is a concern that "open source" can come to be meaningless if we don't hold the term to a set of standards. But my personal feeling is that the "wisdom of crowds" works just fine in separating the wheat from the chaff. And I'm betting that this wisdom would side with attribution right now, because attribution is responsible for a huge amount of exceptional code being channeled into the open source code pool.

These companies and code writers are doing, not just saying. Praxy, not merely doxy.

Which would you rather have?

Mobile Linux: Hot or not?

ComputerWorld has this article today on the future of mobile Linux. Embedded Linux has been on the cusp of being The Next Big Thing for many moons, but has never lived up to its hype/potential. Perhaps the time is now?

One reason for that optimism, according to mobile Linux proponents, is that this is an area in which Microsoft doesn't dominate, despite its best efforts. The reputed lower cost of Linux and its success in the corporate server market also encourage its supporters.

Perhaps most important, however, is that Motorola Inc., the second-largest mobile-phone vendor in the world, has thrown its support behind the operating system, saying recently that it expects more than half of its phone models to be based on Linux by the end of 2008.

That said, as the article notes, Linux is mostly used in low-end "feature phones" today, not smartphones. My former employer, Lineo, delivered the software for the Sharp Zaurus, but it never really took off.

I think the time is ripe for mobile Linux. But then, it's been ripe for many years. At Lineo in 2000, we thought we were going to conquer the world. We didn't. But nor did anyone else. Symbian is big in Europe but nonexistent in the US (with few exceptions). Windows is taking a larger share of the smartphone market (one reason I'm not staying with the Treo), but it's still crawling. Palm OS? Doesn't seem to be going anywhere.

So why not Linux?

Open source investments up 131% in 2006

Matthew Aslett is reporting a 131% increase in open source funding in 2006 to $404.5 million. Matthew also reports 34 total open source deals with an average investment of $11.9 million.

I suspect the number might actually be higher, because Matthew's total number for venture funding to date (since 2000, anyway), is $963 million. I personally, with Robin Vasan's help, have tallied roughly $1.3 billion in open source venture funding since 2000. (Our data - it's now a little dated - is here.)

Incidentally, Matthew's data is also different from what I reported here back in November 2006. But I never felt super comfortable with that data....

Liferay open source portal turns 4.2

Liferay is one of the quietest, yet most interesting open source companies around, both because of its technology and because of its corporate mission. They do enterprise-class open source portal technology, and make a super-slick product that a range of Fortune 500 companies deploy in production.

Liferay is adding to its open source arsenal with its 4.2 product release:

The latest version offers added back-end enhancements to workflow and content management via integration with ServiceMix JBI, jBPM workflow engine, and Alfresco, as well as new features such as chat and other user-interface enhancements that further improve end-user experience and collaboration.

New upgrades in Version 4.2 include integration with the ServiceMix JBI (Java Business Integration) engine, which acts as a single point of connection for disparate enterprise applications. ServiceMix simplifies the integration, upgrade and substitution of siloed applications such as CRM, ERP, and ECM, reducing development time and lowering maintenance costs.

I knew about some aspects of 4.2 (the Alfresco integration, for example), but didn't know Liferay had added Chat, jBPM, and ServiceMix. On that last point, I'd rather see Mule integrated, but everyone has to start somewhere. :-)

Good work, Brian and team.

An interview with Microsoft's Jeff Raikes: On the customer, Sharepoint, and the road ahead

The Guardian has a fantastic interview with Jeff Raikes, a senior Microsoft executive. Raikes echoes something I heard from Nick McGrath during our dinner a week ago in London - Microsoft focuses on the customer, not undermining competitors. Take that with a massive Great Salt Lake load of salt, of course, but I do think that when competing with Microsoft (or anyone), it's best to focus on the customer, not the competitor. By focusing on the competitor, you let them define the value proposition (i.e., the battleground).

A few gems from the interview:

On SharePoint...

ow there's Office SharePoint Server, which takes the server side to a new level. Bill and I would draw the analogy to when we put together the Office productivity suite in the late 80s: we think Office SharePoint Server will in a few years be recognised as a similarly important strategic initiative. We're bringing together the collaboration, the document libraries, integrated workflow, electronic forms, business intelligence, content management, the portal capability, and having the opportunity to build on it. Bringing that platform together is important....

...SharePoint is perhaps the fastest growth business in the history of our company: we went from zero to $500 million in three years....

[The Guardian] ...SharePoint is a corporate sale, but it isn't part of it the wider market conversation about blogs and wikis, Apache, MySQL and so on.

JR: Today, not as much as we would like ... and I think that's an opportunity.... We've started with small businesses, but I think that as you recognise -- and the broad market doesn't, yet -- there's certainly the opportunity to open that up to anybody who does information work and anybody who uses Office tools and wants to extend that. So I think that's a great opportunity.

In short, content management/collaboration is one of the biggest opportunities in the enterprise (and on this planet) today. If you're in storage, business intelligence, CRM, or virtually any other enterprise market and aren't actively plotting a content management strategy, you're about to get run over.

On hosted Office clones and competition...

Today, I don't get a lot of interest in running Word over the internet. Bandwidth is precious, and most people have Office. Nobody's crystal ball is perfect, but I think in a few years those who say software is dead will go the way of those people who said PCs were dead and network computing was the thing.

The reason is, people get very focused in on trying to undermine Microsoft and they don't get very focused in on the customer. You have all this horsepower at your fingertips, whether it's your PC or your laptop or your mobile device, and you have all that horsepower in the cloud. Why not use the combination of the horsepower in order to optimise the experience. Do I really want to run the Word bits over my network connection, or do I want to use it to store contents, to have access to them anywhere, to share and collaborate and so on. It's the combination....

On hosted applications/infrastructure like Exchange...

to what extent will businesses want to access these things online? Some of my colleagues think that, in 10 years, no companies will have their own Exchange servers. I'm not quite that aggressive!

I do believe, though, that many companies will look to hosted Exchange, hosted SharePoint.... I think we'll see more and more of those infrastructure elements. And frankly, Jack, I'll make sure that the people who are developing our servers are thinking of hosted services, which means they have to think through the technical issues. We are going to make sure we have service thinking integrated throughout our software.

I remember hearing Greg Gianforte talking about how they architected RightNow from the start for hosting. Seems like smart business. It's tough (and expensive) to architect for an unknown future, but hosting seems to be a good bet.

Microsoft, for its part, continues to be a smart competitor that shouldn't be underestimated. And $500 million in three years? Looks like I picked the right fight to be in.

My new laptop purchasing policy

Thought people might appreciate my new hardware purchasing policy for Alfresco Americas. We've had a PC completely blow up on us (and they stink, anyway :-), so I've implemented a new laptop purchase policy:

$1500 toward a PC or an unlimited amount toward a Mac.

Nothing like financial incentives to guide purchasing decisions. :-)

(Actually, our US sales, business development, and marketing team is currently split evenly between ThinkPads and Macs, but I'm hoping to break the deadlock with our next hire. If you're going to get a PC, it's got to be a ThinkPad. But now that the Mac runs OS X, Windows, and Linux, why bother?)

A sign of bad things to come?

I was reading the Microsoft Sharepoint blog this morning in my RSS newsreader (NetNewsWire), and tried to click through to a customer case study page. I was surprised (and dismayed) to have this pop up:



"To help optimize how your Web pages are displayed, we are checking to see if a Microsoft Office 2007 program is installed." Is this a sign of things to come? When Nick McGrath and I had dinner in London last week, he talked about the intersection of the desktop and the 'Net (just as I've read about Microsoft blurring the lines between the Internet and its server products and between the desktop and the Internet).

But I guess I didn't expect it to look like this.

All I wanted was to visit a website and click-through to read customer case studies. Perhaps these would automatically load up in Word 2007 if I had it (but I don't, because Microsoft will be a bit slow in delivering Office for the Mac). And perhaps that would be really cool. But today it just feels annoying - like a basic "right" has been taken from me so as to extend Microsoft's dominance of the desktop to the web.

Yes, I can see that I just need to click on the link at the bottom of the page and it will redirect me to the page in question, perhaps "dumbed down" to be mere HTML. Think again:



This is crazy. I think it's a useful competitive tool to be able to add to a user's experience through new technology - that's a hook that is worth paying for. But Microsoft appears to be subtracting from a user's experience - making vanilla HTML more complex to force an upgrade. What gives?

Google patents search results design...and lets you search for the patent

Slashdot is reporting that Google has been issued a design patent for its search results page. Basically, it's intended to prevent others from copying its look and feel.

At the same time, Google has launched Google Patents, as Paul Kedrosky notes. This should make it easier to find all those spurious patents that others are registering...before they knock on your door to request a "historic" deal to not sue your customers over said patents.

A cow by any other name...

...would not give as sweet of milk. Apparently, how happy the cow is has a material impact on the quality of milk it delivers.

As proof that not all commodities (including milk) are created equal, I discovered Channel Island Milk while in the UK last week. I love milk and most dairy products, and will happily drink half-and-half or whipping cream if given the chance.

But this milk from "contented Jersey cows" was the best milk I have ever tasted.

I have tasted quite a bit. My good friend, Mike Dutton, bought and runs a dairy (Winder Farms), and I've visited the dairy and done a "milk tasting" (it's the Mormon equivalent of a Napa Valley wine tasting :-). I've become somewhat of a connoisseur of milk. Winder's milk is quite good.

Channel Island Milk is that much better.

It's just milk, right? Well, no. It tastes much better (richer - almost tastes like full cream, rather than milk), and I would happily pay a huge premium to have it on a regular basis. Unfortunately, I can't figure out how to transport it several thousand miles each day to get it fresh on my desktop.

Having said all of this, let's be clear about what I'm willing to pay for: milk delivery, superior milk origin (happy cows), milk pasteurization and preparation (much as I love the milk, I'm unlikely to appreciate it quite as much if I were to drink it straight from the udder), and milk packaging/branding (would I have discovered it if Marks and Spencer weren't pitching it as extraordinary milk? No). I'm not really paying for the milk, as it were, because the milk as milk is basically unavailable to me.

This is essentially Red Hat's and (and now Alfresco's) business model: gulp the milk from the udder for free, if you'd like, but a superior source of "millk" packaged, pasteurized, and delivery. Oh, and supported if you get botulism. The bits are free, the service is not.

Why am I writing this? Because I continue to be surprised by how few companies have followed Red Hat's business model. It is extraordinarily successful. It works. It allows companies to commoditize their competitors while driving software innovation and investing heavily in direct customer value (service). It should be the business model open source companies look to first to see if it fits.

Google giving its employees Gooptions

In a strange bit of news that I don't fully understand (not being a finance guy), Google has is opening up a market (called Gooptions) in its vested employee stock options. From the Google blog:

As with most employee stock option programs, Google's program to date has allowed employees to do two things with their options. Upon vesting they can (1) hold them or (2) exercise them and then hold or sell the stock. With the new TSO program, employees will have an additional alternative: they can transfer (sell) their options to a financial institution through a competitive bidding process.... What is novel is that we are extending this ability to trade options to employee stock options.

Typically, employees get value from stock options by exercising them after vesting, and then selling the stock they get from the exercise at a higher price, provided the company's stock price has appreciated since the time of grant. With the TSO program, employees will also be able to sell vested options to the highest-bidding financial institution, which may be willing to pay a premium above the difference between the exercise price and the market price for Google stock (even when the exercise price is higher than the market price). The premium paid is for the time value of the options. More on that and how institutions would do this, and why, is here.

The part I don't really understand is whether the administrative burden inherent in this move is worth the benefit to Google employees. But they apparently do. It will be interesting to see how it works out.

What I'd much rather see is an open market in options in private companies. That would be fun.

Google opens up its Web Toolkit

Google is on a roll. The company has released its Web Toolkit under the Apache 2.0 license, as noted on the Google Web Toolkit blog:

Today is quite a milestone for Google Web Toolkit: with the GWT 1.3 Release Candidate, our team is very happy to announce that all of GWT is open source under the Apache 2.0 license. There's a lot to say, but let's start with our mission:

"To radically improve the web experience for users by enabling developers to use existing Java tools to build no-compromise AJAX for any modern browser."

Since our primary mission is to help users (as opposed to hoarding proprietary development tools), opening up GWT has always been a no-brainer -- we just had to decide when. Now that GWT has some serious adoption and a lively user community, open-sourcing is the obvious next step to help GWT evolve more quickly.

And we're committed to doing this the Right Way. All of our development will be done in the open, and we're going to be working directly from the GWT project on Google Code.

Google's Web Toolkit is used to build AJAX-friendly applications. The more usable the web, the more people will use Google (though not necessarily - I think it's important that Google has explicitly taken a step that potentially enables its competitors, including the license they opted to use for this project). Despite my trashing of Google in the past, this is a Very Good Move.

Prediction: Companies that learn to aggressively open up will win. Those that don't, won't. Google is learning. Others...? Not so much.

Safety in numbers

Last week I finished reading a biography of Muhammad the prophet-founder of Islam. As I read, I was struck by how difficult the initial years of Islam were for Muhammad and the first few converts. It took real conviction to stick with it....

As the converts multiplied, however, it became much easier for new converts. The conviction required to convert decreased with each conversion. Simply put, there was safety and comfort in numbers.

Not to draw an improper analogy, but this same phenomenon - a network effect of sorts - applies to our purchasing behavior. The WSJ today is reporting that Microsoft's Zune player is struggling in part because its social features (wireless to let you share songs with friends who also have a Zune) are somewhat useless when there are few Zune owners. The Zune becomes an easier purchase the more of one's friends that own one.

This is one of the reasons I recently opted to ditch the Treo and go with the Blackberry. I strongly prefer the Palm OS interface and experience (though I've found a range of things to love about the Blackberry). But I don't want to be the last person on the planet using the Palm OS - not when it stifles the range of applications available to me. As the Treo shifts toward Windows (an application cloud in which I'm not interested, as I don't like the Windows UI), I left to go to a platform likely to be around in five years.

All of which brings me to open source. (Doesn't everything? :-) I believe one of the strengths of the open source business model is that it can generate a horde of users...long before you try to sell to those users. The network/bandwagon effect, in other words, is a pre-money phenomenon. Taking money out of the decision calculus dramatically lowers the bar to adoption.

It's not wholly an open source phenomenon, of course. Microsoft has spread Sharepoint throughout the enterprise by making Sharepoint Services free with every copy of Windows 2003. Users simply install it and, if they want to upgrade to a heftier version, they pay to upgrade to Sharepoint Server. Seed the market with "free," and reap the market with "paid."

But I think it works better for open source, because distribution is potentially much more viral, in the good sense of that word. Ultimately, we're all lemmings. We want to wear the brands our friends wear. We want to eat at the restaurants where everyone else does. And we want to use the top open source projects, rather than risk our IT jobs on unproven "maybes."

Fortunately, the cost of failure is one's job, not one's life. I think Muhammad would have preferred unemployment to what he had to endure in the early days of his work.

My own spin on the Microsoft/Novell survey

Shockingly (Shockingly!!!) a Microsoft-Novell-commissioned survey reports that the world would end tomorrow but for the pact. Never mind, as Matthew Aslett notes, that one-third of the respondents had never even heard of the deal. (I guess background knowledge of the deal was not a prerequisite for taking the survey - I thought that was Survey 101, but apparently only if you're trying to get an accurate read.)

And never mind that Microsoft and Novell wrote the survey, and so geared it toward the results they wanted. I'm not implying nefarious intent. I'm just stating a fact: surveys and statistics tend to skew in favor of whomever writes the questions/is interpreting the results. Hence the famous phrase...

Lies, damned lies, and statistics.

No, putting all this aside, the real problem with this survey is it indicates a willing blindness to the real issues at stake:

Does the deal benefit customers, and does it potentially harm open source?

To these questions I'll answer "No" and "Yes," respectively.

I won't go into depth on why the deal is bad for customers and for open source. I've done that ad nauseum already, as have others (like Pamela at Groklaw).

Rather, I'll add a few questions of my own, some of which have been inspired by comments others have emailed to me (for which I can't therefore take credit, but do accept any blame).

Instead of

Technology companies should create partnerships to ensure that their products work well together.

(Now there's a softball of a question!) How about:

Technology companies that lack 1,000+ patents should pay up to those that do for the right to do business with you, regardless of whether there is even a modicum of proof that the patent-less companies have infringed the patent-ful companies' patents.

Or how about this softball?

Technology companies, not end users or businesses, should take responsibility for the intellectual property in the products they ship and service.

To be replaced with:

Technology companies, not end users or businesses, should take responsibility to compete on the merits of their products and not try to spread FUD about the "safety" of others' products in order to protect $20 billion worth of Monopoly money. [literally!]

Or how about this pleasant question from the survey:

I want platform providers to improve the interoperability of their systems.

Turned into this:

I want platform providers to open up their source code so that there are no secret APIs or other artificial barriers to achieving interoperability.

Another question that could have been asked, but wasn't, is:

Do you believe that you should pay an excise tax on every piece of open source software you buy to Microsoft?

Or:

Do you believe that it's a good idea to have only the largest patent-holding companies forever enshrined as your default vendors, protected from competition, by their patent portfolios which provide you no measurable benefit?

It's all in how you frame the question....

Mary Jo Foley also has a few questions to ask (like "Do you have any idea why Novell is paying Microsoft $40 million as part of the recently announced collaboration agreement? Does your understanding (or lack thereof) regarding this payment affect the way you perceive the deal between the companies?"), and I'm sure you do, too. But yours (and mine) aren't part of the survey.

Just questions like "Do you believe in a supreme being, and is his/her/its name "Steve"? All designed to obscure the fact that this deal is one step down a slippery slope toward a universal Microsoft tax on open source innovation.

Don't get me wrong. I like Microsoft, and even like some of their products (quite a bit, in some cases). But let's not allow them (and Novell) to hide the patent issue behind a warm-and-fuzzy interoperability picture. Microsoft has been doing interop deals with open source vendors for some time now, and those were customer friendly. SugarCRM does a deal with Microsoft because 50% of its customers run SugarCRM on Windows. They want to ensure those customers have the best possible experience. I have zero problems with this.

The Novell-Microsoft deal is different, because it introduces the patent canard into the discussion. Do you think it's accidental that Ballmer stated that Linux violates Microsoft's patents shortly after consummating the deal with Novell? Me, neither. It's designed to (gradually) raise a levy on every piece of open source (and, eventually, proprietary - why not?) software sold, so that Microsoft can throttle back the open source threat, rather than embracing the open source opportunity.

While in London

I spent last week in London with the rest of the Alfresco management team. But while there, I spent time on even more important matters...

...namely, watching Arsenal play and meeting some of the players. Scout (my oldest daughter), my wife, and I were fortunate to meet Cesc Fabregas and have him sign some posters and pictures for us. Some people long to meet a famous developer or the CEO of a big company. Not me. I'm a groupie for 19-year old wonder children like Fabregas and Walcott.

Pathetic, I know, but what can I do? :-)

Allchin wants a Mac

I've been a pretty harsh critic of Jim Allchin, a senior executive at Microsoft, in the past, but Pam @ Groklaw has this tasty piece today from Allchin that mostly redeems him:

Almost three years ago, on January 7, 2004, Jim Allchin, the senior executive at Microsoft, sent an E-mail to Microsoft's top two executives, Bill Gates and Steve Ballmer, and the subject was losing our way.

Mr. Allchin says,

I'm not sure how the company lost sight of what matters to our customers, both business and home, the most, but in my view we lost our way. I think our teams lost sight of what bug-free means, what resilience means, what full scenarios mean, what security means, what performance means, how important current applications are, and really understanding what the most important problems our customers face are. I see lots of random features and some great vision, but that does not translate into great products.

He goes on to say,

I would buy a Mac today if I was not working at Microsoft.”

Of course you would, Jim, but now you can! Not only because you're retiring, but also because you can run Windows on the new Intel-based Macs. Lucky you! You didn't even have to quit Microsoft to have the pleasure of using a Mac. If only you'd known.... :-)

Red Hat moves to the NYSE tomorrow (Here's why)

I spoke with Dion Cornett, VP of Investor Relations, Red Hat, this morning. As you may have heard, Red Hat is moving from the NASDAQ to the New York Stock Exchange (NYSE), starting tomorrow (December 12). It's a big move with big implications for open source, and I wanted to get more information on the reasons behind the move.

Why move?

• Brand. NYSE is the world's premier, most prestigious exchange. It's home to marquee companies like General Electric, Time Warner, AT&T, etc. (The requirements for issuing stock on the NYSE are more stringent than for the NASDAQ. It's where the big companies reside. This tends to filter out rubbish companies.)
  
  Red Hat has long been a dominant brand in open source and technology - affiliating with the NYSE, so the thinking goes, associates like with like.
  
  For its part, the NYSE has committed to invest multiples of Red Hat's listing fees in promoting Red Hat.
  
  This begs the question: why?
  
  Simple. NYSE is trying to position itself as the next generation exchange for technology leaders. This is the reason they're putting so much emphasis on getting Red Hat (just as they worked hard to get Salesforce.com). NASDAQ is old school; NYSE wants to be new school. (NASDAQ, for its part, is aggressively lobbying to keep its position as the top exchange for technology companies.)
  
  This marks a clear reversal in fortunes for the two exchanges, and today is more vision than reality on NYSE's part. But getting the two defining technology companies of our day - Red Hat and Salesforce.com - on the NYSE is a major step in that direction for the NYSE.
  
  
• Improve Red Hat's bottom line. Technology companies now need to expense their stock options. Red Hat uses the Black-Scholes model to value its options, which is significantly impacted by volatility, or "how much the stock moves around".
  
  As it turns out, volatility tends to decrease when companies move from the NASDAQ to the NYSE. This means that stock option expenses go down, which boosts profit. This will take a year to shake out, but the expectation is that the future portends lower volatility and hence higher profits.

Red Hat expects to report its Q3 results on December 21, instead of its standard 26 - 28th of the month after quarter end. If you'd like to buy more Red Hat shares, starting tomorrow you need to use "RHT" instead of "RHAT."

I think this is big, positive news for open source. Think about the implications: the NYSE is actively recruiting an open source company to list with it. Not because it wants a few more dollars in listing fees - it could get those anywhere. But because it wants the defining technology companies of this century to list with it, rather than elsewhere.

It means that open source has truly arrived. Extinction for the old school vendors can't be too far behind....

Europe and the Linux desktop: Big talk, little action?

Good story a few days ago in Wired about Linux's dominance of Europe...sort of. Bruce Gain writes:

European governments have long complained about their dependence on Microsoft's software, but their rhetoric has not turned into a mass migration away from Windows.

During the past few years, Europe's elected officials have made a lot of noise about ambitious projects to switch to open source software, including big migrations of government PCs in France, Germany, Spain and Norway.

These plans are often heralded as major inroads against Microsoft's Windows hegemony in the old country -- where Microsoft has been fined close to $1 billion in antitrust violations by the European Commission.

Yet the actual migrations have been negligible. More than 95 percent of all PCs used by European government workers still run on Windows, according to the market research firm IDC.

What's going on? Office compatibility, mostly. Linux desktops (unless using Crossover Office and/or WINE) simply lack compatiblity with Exchange, Office, or other Microsoft technologies. It's become much better, but is still imperfect.

This is why I continue to believe the desktop is not Linux's near-term opportunity. Servers and embedded devices are. But there are plenty of other opportunities for open source on the desktop - ECM, CRM, ERP, etc.

Regardless, so long as politicians are pushing, the dam will eventually burst.

SourceKibitzer for Java open source projects

I received an email today Mark Kofman, CEO of Going Software. He wanted to introduce me to SourceKibitzer. I haven't looked into it yet, but it sounds interesting:

Created three months ago, SourceKibitzer collects and measures
programming metrics from Java open source projects all over the web in order to get an idea about code quality and inside information of the projects. The essential difference of the SourceKibitzer compared to few alternatives is speed: professional authors promise to give you assessment and feedback after one day of the request. After that your project will be regularly monitored and analyzed without additional inquiries. They do it for free and they are ready to work on it 24 hours per day. Why?

Oxford dictionary defines "kibitzer" as a person who looks on and offers unwelcome advice, especially at a card game. That is what creators of the current service crave for, but in the field of programming source code, not at the card table. As SourceKibitzer works with Java Open Source projects only, it provides more detailed metrics that are specific to Java language and is the fastest in this field. Welcome to the http://www.sourcekibitzer.org if you want

• to view and compare you metrics with works of Open Source leaders;
  
• to improve the quality of your OS projects;
  
• to have a better idea of progress of your favorite OS tool.

To get your project kibitzed, please provide SourceKibitzer (kibitzme@sourcekibitzer.org) with the following information:

• Name and homepage of the project;
  
• Location of the versioning system, usually CVS or Subversion URL;
  
• Path to location of the project's Java sources.

What I don't understand is why the company doesn't simply sniff out Java projects on Sourceforge and do the analysis on a proactive basis. Also, I have no idea how it intends to make money.

Anyone want to try this out and let me know how well it works?

Some data from Alfresco

I'm flying back from Alfresco's quarterly management meeting, and looking through some of the data shared by the team. We're just one company in a rising tide of open source companies, so I'm not sure how much to infer from our numbers about open source, generally, but I thought I'd share, anyway. Perhaps the data will be useful for you, too, as you plan your own open source business.

A few points:

1. Lead Generation. Alfresco's website (Downloads/product trials) drives 72% of our leads, and documentation drives another 21%. Cold calls from sales people, direct mail, email, Google Adwords, and other sources you might imagine...almost nothing. To be fair, we don't really do direct mail or email campaigns yet, so it's not surprising that these bring in few leads.
   
   But we found (as SugarCRM and MySQL found before us) that PR, which leads to visits to our website and subsequent downloads, is the biggest driver for our business. Lesson? Invest in great PR and ensure your web presence is well-designed to receive the visitors.
   
   
2. Geography. US, France, Germany, Spain, UK, Italy, Belgium: these countries download our product (and associated documentation), and come back to buy from us more than other geographies. The US and France are strongest for us. I was surprised to find that France exceeded Germany, Spain, and the UK for us.
   
   
3. "Free" is good business. We only recently started measuring unpaid implementations of Alfresco, and have over 6,000 "Community" implementations. (Note: We use a Fedora/RHEL model, and call our free product "Alfresco Community" and our paid product "Alfresco Enterprise" - very original of us, I know. :-) Given that we've had over 430,000 downloads in our first year of business, I suspect the actual number is much higher.
   
   These Community sites prove to be our best source of qualified leads - that Community pool returns to buy Enterprise consistently and relatively easily. Our sales cycle - start to finish - is ~2.5 months, compared to our ECM peers that take 9+ months to consummate a sale. They are (or were, I should say - the $1M deals of yesteryear are largely gone for everyone, and good riddance) doing larger deals, to be sure, but if you divide the size of their deals by the time/resources required to close, I think we come out ahead.
   
   I was worried about a "free-riding" market at first, but it seems to be paying off very well. As Martin Mickos has said, it's much better to have prospects freely using your product than for them to be paying for someone else's product.
   
   
4. Competitors. For all the proprietary world's facade of nonchalance about open source, they sure do spend a lot of time on our site. And yours, too, I would imagine. (Dave recently wrote about a certain competitor that expends inordinate amounts of energy studying and spreading untruths about his company. I think it's probably more prevalent than we imagine. Why a billion-dollar company with hordes of marketeers would worry about little open source companies is beyond me...could they be feeling Fear, Uncertainty, and Doubt? ;-)
   
   Btw, we did a quick survey of media attention paid to our competitors, and it turns out that they each (excepting Microsoft and EMC-Documentum, both of whom - especially Microsoft - are doing interesting things with ECM) get more press for their acquisitions than they do for their products. (And we get more than their product-related coverage.) I think that shows who is actually doing the interesting work in the industry - there's just not much to say about most proprietary software companies, if ours is a representative sample.
   
   
5. Bugs. We get support emails/calls regularly from our customers. I just figured that they were all due to bugs. Our support manager (I would give you her name, but she's exceptional, and you might try to hire her) disabused me of this notion, however, when she pulled the data on why people contact us. Almost no customer or partner contact stems from bugs in the product, but rather configuration assistance and such. (Bugs account for a low single digit percentage of support calls.)
   
   I don't think we necessarily write any better code than anyone else, so I'm assuming this is typical of all software companies. It surprised me, ignorant as I am of the support side of software businesses. I just assumed customers would be calling about bugs, nine times out of 10. Nope.
   
   Btw, because our business is essentially support (as this is the primary ongoing value we provide to a customer, just like any software company), we've found it imperative to have support inextricably connected with engineering. The engineers who write the code take the calls. As we scale, we're hiring people whose primary job is support, not programming, but even here everyone must be contributors to the product. It means our customers spend less time with us on the phone/over email because we grok their problems more quickly.
   
   I suspect this is critical for all open source businesses to achieve scale. It puts a big premium on engineers or super-technical quasi-engineers. If you fall into either category, your job prospects look bright.

I continue to be impressed with how different open source is as a business model. It requires a complete shift in where one invests resources (We treat Helen, our support manager, as a goddess), and how one thinks about customer acquisition and retention. I compare notes often with Red Hat/JBoss, MySQL, SugarCRM, JasperSoft, and other open source companies, and our experience is akin to theirs.

Open source is all about making software more like 99% of the world's industries: customer-focused and driven instead of vendor-focused and driven.

Microsoft: Shrewd without being rude

I had a lovely dinner the other night with Nick McGrath, the head of Microsoft's UK platform strategy. (I can say words like "lovely" because I'm in London this week. I'll therefore also throw in the words "bloke," "top of the morning, guv'nuh!", and "Arsenal.") For all the bile I spill over Microsoft (and there is very good reason for it), I continue to be impressed by the company, as reflected in its people. I've yet to meet anyone in Microsoft's Linux frontline (aka, the counterinsurgency :-) that I don't respect and genuinely like: Nick, Jason Matusow, Bill Hilf, Martin Taylor (before he left Microsoft), Steve Mutkoski, Gutierrez, etc. Great, capable people.

What I like most about Microsoft is the intelligence it brings to bear on its competition. While many enterprise software companies persist in cramming their heads into the sand over open source (Most fail to recognize it as a threat and as an opportunity), Microsoft has long understood the stakes. It hasn't always executed well against rising open source threats, and sometimes its responses (like this !%!%!% but I admire a growing strain of thinking within its employee base.

There is a camp within Microsoft that is ardently for interoperability with open source. Not necessarily because of any secret love affair with open source, but because this group, led by Bill Hilf, recognizes that open source vendors (and projects) are part of the Microsoft ecosystem, just as much as SAP, Oracle, and IBM are (however much Microsoft may hate these companies at times, and I suspect the answer is "often"). So Microsoft strikes deals with SugarCRM, MySQL, Novell (this was the not-so-nefarious part of the deal), etc. Not to coopt open source, in my opinion, but rather as self-interested business practice.

Google? I loved Nick's response. "Quincy," he said, "Search for Quincy. And please do so from Windows Live Search." What's Quincy? Quincy is the massive server farm Microsoft is building in...Quincy, WA. "Search is a right," Nick told me, "The more interesting thing is what comes next." Posturing? Maybe, but I agree with him.

Microsoft, or someone, can easily make search furniture - a commodity that is "just there," and that is part of a larger strategy. I don't think Google can live forever on search-related advertising. Maybe another few years, but 'finding things' can't be the most monetizable Internet activity for long - actually 'doing things' needs to be the center of attention (and dollars). Microsoft, for all its problems, is about doing things with software. Google is getting there, but has a long ways to go.

Microsoft has lots of strengths...and lots of weaknesses. It will be interesting to see how the two interplay over the coming decade. One thing, however, is clear: Microsoft is at its best on the battlefield, not the courtroom. It should be fighting its battles in customers', not lawyers', minds. That means an end to this patent silliness and a return to the hard-fighting Microsoft of old.

Weaning oneself from the proprietary nipple

Digital music sales seem to have peaked, as Nick Carr highlights on his blog, and as the WSJ recently reported. [Subscription required.] For this reason, EMI is beginning to experiment with non-DRM protected music files: MP3s.

For many in the music business, the sky is about to fall. Or so they think. "Why will anyone buy our wares if we don't force them to do so by preventing copying?!?"

What they don't realize is that the people who don't buy from them won't buy from them, DRM or no. The people that aren't thieves (and that's most of us) will, but convenience of purchase is key. I don't buy from iTunes because I can't get the files elsewhere. I buy from iTunes because it's a safe, super-convenient experience and only costs $.99.

The funny thing is that I'll often buy individual tracks for a given album, even when the total cost of the individual tracks aggregates to more than the $9.99 typical album price. I buy them at different times, or don't think about it, and mostly simply don't care. For music I like, I'm going to buy it, even if it means paying out an extra $.99 or even $4.96. Convenience sells.

interestingly, the same is true of software, and perhaps particular enterprise software. It's strange to watch the convoluted dances we do to keep software proprietary. Why do vendors do it? Not because it provides one iota of value for customers. It doesn't. The opposite is true.

No, vendors persist with inefficient, customer-unfriendly proprietary software because they don't trust their own value proposition. They simply don't believe they offer enough value to entice customers to want to pay.

I'm not being naive here. Given the option of getting something for nothing, most people will jump at the chance. If your business model is based on customers lovingly throwing donations at you out of the goodness of their hearts, you will go bankrupt. So, I'm not suggesting that companies open source everything and pray for charity.

Instead, I'm suggesting that vendors reframe the purchasing decision. As noted above, when I buy from iTunes, I'm not really purchasing music. I can get that anywhere for free. No, I'm actually purchasing convenience. That's a service that I can't get for myself. It's something I'm glad to pay for.

The best software business models going forward recognize this and capitalize on it...literally. Why is Red Hat consistently the top-rated software company (open or closed source)? Because it has figured this out, and charges for service, not 1s and 0s. As Michael Tiemann often expresses it:

The bits are free; the service is not.

Free as in liberty, and free as in price. It's the service around those bits (Red Hat Network, support, etc.) that Red Hat charges for, which is a far better value proposition for customers than Microsoft or any proprietary software company, who charge customers for generic software whose costs are spread over thousands or millions of customers. These vendors then ding the customer again and again for service/support, add-ons, etc.

It's a great model for vendors - get many people paying for exactly the same thing, even though it only costs the vendor $x.xx to actually develop it. But it skews value heavily in favor of the vendor in a way that virtually no other industries can replicate. Or should.

I wouldn't wax normative but for the fact that it is precisely the proprietary vendors' fixation with and dependence on monopoly rents from their license revenue that makes them most vulnerable. Vulnerable to customer criticism and vulnerable to open source vendors lobotomizing them.

But to make this open source counterargument work best, open source vendors need to go full throttle on open source. Hybrid models are an interim fix to appease vendors' insecurities - they don't actually deliver real customer value. Having said that, it's also the case that interim steps sometimes help customers to grok the transition - they often aren't set up to pay for support subscriptions.

I have had countless conversations with purchasing and legal departments who don't really understand how to buy open source software, because they have a binary view of the software world: it's either software or it's support/services. They don't recognize that it can actually be both, with service delivered through software in the way MySQL's or Red Hat's Networks do....

Regardless, if you're a vendor, get of the proprietary nipple. It's holding you back, whether you recognize it or not. I've lived through a company or two that tried to go halfway. Life is better when business is open.

World Economic Forum selects Alfresco as global technology leader

Yes, it's a self-congratulatory pat on the back (I work for Alfresco, but I can't resist on this one. As reported by InformationWeek, the World Economic Forum on Monday yesterday announced 47 venture capital and technology leaders involved in developing technology that has potential for long-term impact on business and society.

Alfresco Software, maker of an open-source enterprise content management system, also made the list. The company's software controls and accesses Web pages, images, and documents through an entire enterprise. Alfresco co-founder and CTO John Newton said the company's software provides the cost advantages of open source, which can help poorly funded or small organizations in developing countries.

"We hope to use the opportunities created by this award to gain greater visibility to how information can help solve some of the world's most pressing problems and how sharing and retaining knowledge can level the playing field for companies outside of the developed world," Newton said in a statement.

I have to admit that the only global hunger I've been solving lately is my own, though the promise of open source is that anyone can take and use the software to pursue their own ends, irrespective of what Alfresco may intend for the code. That's the genius and the beauty of open source, and it's something you simply cannot get with proprietary software, no matter how cheap you make it.

CIO Insight: Top 40 IT Vendors

CIO Insight each year solicits its readers to vote on the top IT vendors. As you know, Red Hat was rated #1 for the last two years. Pretty impressive.

This year, Red Hat is still one of CIOs' top three vendors, as reported here. The interesting thing to me is not that Red Hat dropped a few places (I'd be ecstatic to be in the top 10, much less consistently rated among the top three), but rather by who sits in the top two slots:

CDW and Trend Micro. Resellers, both of them.

In other words, Red Hat is still the top software company for value (and Cisco is the top hardware company). In fact, as seen below, Red Hat (of all vendors) was

• Rated #1 for increasing those company's revenues;
  
• Rated #2 for lowering costs; and
  
• Rated #3 for meeting ROI expectations.
  
• 90% of its customers would do business with it again.

This is tail-kicking performance and execution. People wondering why Red Hat continues to generate excellent bookings and profit growth need look no further than these numbers.

Novell profitable again, but Linux not helping much

Novell stalls, Red Hat grows

Its Faustian patent pacts aside, Novell has bigger problems to deal with. Namely, the ability to drive net new revenues in its Linux business. The company reported results today, and they continue to disappoint.

The good news? Novell is back in Profit Land.

The bad news? Linux isn't helping the company much.

$13 million in Linux-related revenues this quarter. That's it. (And I concur with Matthew that this doesn't seem like a 32% bump from $15 million last quarter.)

Novell must do better. Red Hat announced today that it's kicking tail in Spain (one of my company's top markets, too, btw - open source is alive and well in Spain). I wouldn't be surprised if Red Hat did as much Linux revenue in Spain as Novell did worldwide (though I have absolutely no data to support this guess). Novell must do much, much better.

If you're a Novell employee, one particular part of the earnings announcement is worrying. Jason Maynard of CSFB highlights:

While we were expecting Novell to detail a new plan to lower the cost structure in 2007, the company instead announced that it would be increasing expenses by $20-25M in the year, as part of a plan to lower expenses in 2008. The plan entails creating redundant positions in lower cost geographies, then reducing legacy positions once new hires get fully ramped. Management chose this approach because it appears it cannot eliminate anymore employees without sacrificing revenue.

Your job that you thought was safe? Not safe.

As for Novell and the apparent belief that it just can't cut heads without cutting revenue, let me give Novell some guidance on this as a former employee: yes, you can. You have all sorts of "fat" that can be trimmed from the company. On paper, you need project managers, product managers, support engineers, etc. to handle all the work you have. In practice, you have lots of Novell lifers that punch in but long ago checked out and don't deliver.

For Novell to be the aggressive, efficient machine that it must be to compete in open source, it must do more with less. Moving jobs to lower-cost geographies is a start, but it doesn't tackle the real problem: too many people doing too little. You have some exceptional people within Novell - put more on their shoulders and rid yourself of those that come into work each day like they're collecting pensions, not paychecks. You're not doing such people any long-term favors by continuing to dole out inflated paychecks to them. Really.

Novell forking OpenOffice? Not even close

OK, I know I've been guilty of bashing Novell lately (well deserved and self-inflicted), but I can't help but feel that it's starting to go a wee bit too far. I read today that Novell had added Microsoft Office Open XML support to its version of OpenOffice. Good news, and good work, I thought.

I was therefore surprised to read Pamela's comments over on Groklaw, with a headline proclaiming that "Novell 'Forking' OpenOffice.org." I suppose that's one way to say "improving," but it's not a very polite way to say it, and not at all accurate, in Novell's case. (Miguel de Icaza then provides more flavor as to Novell's long-term commitment to and history with OpenOffice, in case you want to hear it from the Novellian horse's mouth.)

I highly respect Pamela's perspective, but I think she's off on this. Novell has had its own version of OpenOffice for some time, just as Sun has its own (StarOffice), and others probably ship their own versions, as well. To me, it's similar to how Red Hat, Novell, Ubuntu, etc. ship different distributions of Linux. In like manner, Novell is simply shipping its own distribution of OpenOffice.

A fork? Nah. Only by the wildest stretch of the imagination. A boon to users? Absolutely. If you've never used Novell's OpenOffice, you really should - it's fantastic. I used to use it when I worked for Novell, and was always surprised by the added functionality and improved performance, much of which gets contributed back to OpenOffice.org.

So, let's call a spade a spade: Novell + Microsoft on patents = bad idea. Novell + improvements to OpenOffice = very good idea. Just because Novell screwed up on one thing doesn't mean everything they do is wrong. Much of what the company does is great. OpenOffice just happens to be one of them.

The next enterprise market

I was reading Mark Suster's funny and insightful blog entry on Koral's fundraising process. Koral is an interesting new-school content management company (and a competitor of mine). You can read his entry for thoughts on the fundraising process. I was most interested in feedback he got on his market, which I think applies well beyond ECM. His top two "lessons learned" define the next phase of software adoption:

1. people universally said to focus on the SMB market (SME in UK parlance) and MAYBE divisions of corporates. But not one VC thought I should go after big, enterprise clients. I had planned a balance of large companies and SMB/divisional sales but have changed my thinking. Reasons: cost of sales executives, long sales cycles, deep functional requirements.

2. the smartest guys I met in the process said I really needed to focus on customer adoption / usability. Most people agreed that if you had a document management need and were willing to load your documents into our system it was one of the most usable products they had seen. But how do you convince millions of people that need to be educated that they have a document management problems to upload their documents in the first place? We have invested heavily in this. People said, “invest more.” Making user adoption incredibly simple and shortening the time to a light going off in the user’s head that they see the value is critical in driving viral adoption. Think LinkedIn.

This is something I'm seeing at Alfresco, and that I'm hearing from colleagues at CRM, EAI, etc. companies. The big enterprise-wide license sale is a thing of the past, or begins with divisional wins.

The second lesson is that all those billions spent on enterprise IT (and, specifically, applications)? It's barely touching end users. Only Microsoft truly touches end users in any significant way through its Office product. ECM? Barely touches 5% of users within an enterprise. CRM is much the same. ERP? Ditto.

To get adoption up, new business models for reaching users need to be innovated, and new cost models need to be devised. Open source is a step in the right direction, as is SaaS. But the real goldmines are yet to be discovered.

In short, there is a MASSIVE enterprise software market out there, waiting to be discovered. The winners will be those who focus on simplicity and usability, delivered in a way that doesn't require IT intervention to try before one buys. This is why I think Microsoft is doing lots of things right with its Sharepoint product - whatever I may think of Sharepoint's technical merits and what it means for those enterprises foolish enough to deploy it, I think Microsoft is nearly dead-on with its distribution strategy (though open source would be a great addition).

Google grows up

Much has been made about Google and its "innovation by rolling out myriads of crappy products." Apparently, this was genius on its part. For regular readers of this blog, you know that I think somewhat differently.

Well, the company has finally started to grow up and focus, as Nick Carr notes in an excellent blog entry. Google's modus operandi, as BusinessWeek called out, looked a bit like this:

What Mayer thinks will be essential for continued innovation is for Google to keep its sense of fearlessness. "I like to launch [products] early and often. That has become my mantra," she says. She mentions Apple Computer and Madonna. "Nobody remembers the Sex Book or the Newton. Consumers remember your average over time. That philosophy frees you from fear."

So, that made lots of news, but it also churned out lots of crappy products. Yes, even Google is capable of creating crappy products. Lots of them, as it turns out.

So, as Nick Carr highlights, the company is starting to focus better:

Brin has been particularly blunt. In early October of this year, the Los Angeles Times reported that "Sergey Brin is leading a companywide initiative called 'Features, not products.' [Brin] said the campaign started this summer when Google executives realized that myriad product releases were confusing their users. 'It's worse than that,' said Brin, Google's president of technology. 'It's that I was getting lost in the sheer volume of the products that we were releasing.'" The article also quoted Schmidt, who said of Brin's effort, "That is a big change in the way we run the company."

I think below the surface Google has been doing this all along. For every five lame products it has rolled out one strong product (even if initially weak) that was strong precisely because it aligned with its existing strengths: search and advertising against search. Microsoft, the king of using one monopoly (err, product with dominant marketing position) to create another, has apparently rubbed off on Google.

This renewed focus should be a big positive for Google, and bad for Microsoft and Yahoo!, which have their own focus problems (Yahoo!'s being somewhat public lately).

Time spent on more important things

What a great day today. I spent the morning with my wife and eldest daughter at the Tate (one of the few museums I actually like) viewing one of my favorite paintings:



And in the afternoon we got to go to Emirates Stadium to watch Arsenal pummel Tottenham.



It's nice to occasionally remember that, important as source code is, it's not nearly as important as family (and Arsenal). Hope you're having a good weekend, too.

SaaS and open source: reducing lock-in

Nick Carr has a great post on SaaS (software as a service) and SAP's difficulties in groking it. As I read Nick's post, I was struck by how much the things he says about SaaS apply to open source:

Last month...[SAP competitor] Glovia introduced a new version of its software, aimed at the many small and mid-sized manufacturers who find it hard to afford traditional, complex enterprise applications and all the related software, hardware, staff, and consultants required to install and run them. The new version, called GSInnovate, is provided as a single, all-in-one service, incorporating both the application and the infrastructure that runs it, which clients tap into over the Internet using a web browser. The software is simpler than the traditional version, having 22 modules rather than 70, but it's still customizable through various process templates. The client pays a simple monthly fee for the service and can discontinue it at any time. There's no license, no lock-in.

That's what SaaS is....

What's interesting is that SAP also has a close partnership with T-Systems' utility arm. Many SAP clients, particularly in Europe, use T-Systems' multitenant architecture to host their SAP applications. The difference is that SAP continues to keep the fee for the application separate from the fee for the infrastructure. It continues to force on its customers the cumbersome fragmentation inherent in the traditional model of business software - and the license that symbolizes and perpetuates that fragmentation.

That's not what SaaS is.

That resistance to lock-in Nick ascribes to SaaS is also what makes open source tick. Bosom buddies, SaaS and open source?

Treo vs. Blackberry: My verdict

I've been a Treo user since the day the 600 was first released. I waded through the product's instability and growing pains because it was the most workable solution on the market, and eventually because it was rock solid (though it did need the occasional reboot). I was very, very happy with the Treo, and have been waiting for the new 680 or 750 (preferred because of its UMTS high-speed network, though strongly disfavored because the initial version will be on Windows).

But then my Treo was stolen last week at Borders in Palo Alto, and I had to quickly get a replacement.

I went to the Cingular store in search of a 680 but, as Fabrizio notes, announcing a product's availability and its actual availability are two very different things with Palm. The sales representative at the Cingular store suggested that I might like the Blackberry 8700 and, even if I didn't, I could try it out for 30 days and simply return it when the 680s arrived.

I told her I had no interest in the Blackberry, but that I'd try it out on those terms. See, for as long as I've been a Treo lover, I've also been a Blackberry hater. I didn't like the Berry's sense of style (or lack thereof), its clunky software, etc.

One and a half weeks into my trial, I think I'm a believer.

There are things I dislike about the Blackberry:

• Browser UI is ugly.
  
• Requires too many clicks to get to the address book to make a call therefrom.
  
• No camera phone (could this thing be any less fun?).
  
• Not intuitive how to get to a dial-pad while in the middle of a call (e.g., for those times when you have to dial by name while interacting with a company directory).
  
• Setting up my email was somewhat counter-intuitive (or was until I saw email push in action).
  
• It's actually easier for me to type on my Treo than on the Berry, though I assume I will improve with time.
  
• Too many clicks required to call or email someone from the phone book.
  
• Dearth of applications. Palm has thousands. Blackberry has few. You can feel the difference.
  
• Not as easy as the Treo to type with one hand (while driving, which I do all the time, unfortunately).
  
• Only two "convenience keys." On the Treo, I can assign any key to any application for quick launch. On the Blackberry, I only have two keys that can be assigned, and it's nowhere near enough. It slows me down by quite a bit....

There are more things, but I think it's that last one that I consistently struggle most with. It requires too many clicks to go from my email to an address book (and since I want the left-side convenience key to manage my profiles (ring, vibrate, silent), as I switch between these all the time, I can't have it for my address book, which is the other speed key I need).

But on the whole, I'm really happy. Here are some of the things I prefer on the Blackberry:

• The scroll wheel is truly innovative and nice to use. Not always, but often. (This was a "feature" I was not looking forward to, but I've been pleasantly surprised.)
  
• The browser always picks up where I left off. This drove me crazy on the Treo.
  
• Sound quality on the phone is better than on my Treo 650.
  
• The sync feature is well-designed and super intuitive. The only problem I've had with it is that it switched all my emails from "Work" to "Home" and vice versa on my laptop....
  
• Very easy to mute/unmute and conference people into calls.
  
• The push email is fantastic...and addictive. On the Treo I had to push "Send/Receive" to have it fetch my email (or could have set it to do so at regular intervals, but didn't because it burned battery life). The Berry just keeps feeding me all day long...much to my chagrin.

As I was typing up the "pros" list, I kept coming up with more and more "cons." It seems to me, now that I've written both down, that really the thing I like most about the Blackberry is how well it handles email, as compared with my Treo, and how well it works as a phone. It's pretty weak for most other things, but as RIM goes consumer with the Pearl and other phones, I think this will get better.

I think I'm a Blackberry convert. As of now, I have no plans to pick up the Treo 680 or 750 (I really hate the Windows interface, and it has nothing to do with an antipathy toward monopolies - I just don't like the software). You lost my business, Palm, simply by not having your product available for me when I needed it (and when you said you had it). I'd be very happy to give the 680 a spin, but since I don't want to have to buy it to evaluate it, I think I'll be sticking with the Berry.

Medsphere: The sky is not falling

UPDATED: I spent some time digging further into the facts of the Medsphere debacle, and am updating the blog accordingly. A great place to start is with Steve Shreeve's informative account of Medsphere's commitment to open source.

For those following the Medsphere debacle, and for those foolishly suggesting that this could mark the end of open source enterprise applications (a concern, among others, that Steve Shreeve swats down), let me just state for the record that there is only one thing at question in the whole mess:

Egos. Egos and corporate governance.

I've known about the lawsuit and internal problems at Medsphere for several months, as I know the Shreeves, the board members (I used to work with Thomas Weisel Venture Partners as an EIR and also know Wasatch Ventures), and Larry Augustin (though I've never discussed this particular matter with Larry).

Wherever you may stand on the issue (and I tend to stand with Fred Trotter and Eric Raymond on this), one thing is clear: it is wrong for a company to release source code without its board's approval. But it's also very unclear how/why/when an open source company gets that approval. Does Red Hat ask its board if it can release its kernel innovations under the GPL (or any other open source license)? No. Why would it? It's a fundamental part of its strategy.

Medpshere is about open source. Its strategy is open source. Yes, it has a hybrid model, but the proprietary components of the company's business model were not open sourced. They're not part of the release in question. The management team open sourced...its commodity, open source software. (And, interestingly, the source code release was a public matter, communicated outside the company and with the CEO's (Ken Kizer's) full knowledge, as noted here So how does implementation of management's plan of record run afoul of the board?

Again, did the Shreeves get formal board approval to open source their open source software? I think the answer to this is probably 'No,' but it's not clear why or how they would have solicited board approval for living up to its strategy (and, as I understand it, it was a concrete, clear part of the company's business plan and board-reviewed plans). This was a four-part open source strategy - the company had already released two parts of this strategy (without formal board approval, because the board already approved the overall business plan, and doesn't need to re-approve each step on that plan), and the open sourcing of the software in question was just another step on that path. It's odd that the board got upset at this point....

I think it's more likely that the lawsuit has to do with management issues: the board at loggerheads with the Shreeves (it had been looking for a new CEO from nearly Day 1, despite the fact that the Shreeves and team were knocking the cover off the ball financially). Larry and the Shreeves didn't work out as management partners. I'm wondering if part of this issue just comes down to egos.

It's unfortunate that we've come to this point with rampant finger-pointing and community unrest. It's more unfortunate that a thriving open source business is being stifled by a silly $50 million lawsuit.

I'm going to be going through the complaints and counter-complaints to try to provide more legal meat here. This is something Pam @ Groklaw should be looking into. It's a serious issue. It's a bad precedent if a board can claw back code that has been released. Will companies start toe-dipping, and then pull back code if the experiments don't work out?

Open source corporate investments: Very clumpy

Marco Iansiti (Harvard Business School) and Gregory Richards (Keystone Strategy) are in the process of writing an intriguing piece of research into open source corporate investments. The two researchers comb through open source's most active projects and discover something that is remarkable and yet not-so-remarkable at the same time:

The money is heavily concentrated in very, very few projects. Lots of Linux, in other words, and almost nothing else.

This is remarkable and unremarkable simultaneously because it means that vendors apparently share the same complements. One would think that the varied vendor strategies would result in a diverse body of open source investments (because, as the researchers note, corporate investments in open source tend to reflect a desire to invest in complementary technologies - e.g., Oracle investing in Linux to provide a cheap operating system for its database to lower the overall acquisition price for its databases). But this isn't the case.

First off, the researchers categorize the 1,135 active open source projects. (Yes, that's right: there are over 100,000 open source projects on Sourceforge and elsewhere, but very few are active. The researchers used Sourceforge data and then pulled projects like Linux from their respective forges to glean the top 1,000+.)



Nice spread, right? Well, it is, up until you look at where corporate investments are going:



The difference is even more striking when viewed this way:



Clearly, time/money spent on open source by corporations has nothing to do with charity, and has everything to do with money: making it or saving it (or both). Not a surprise but, again, I am surprised at how little creativity apparently goes into thinking through complements and substitutes, and making open source bets accordingly.

That said, it is useful to have a wide range of investment flowing into a concentration of projects (Linux, Xen, etc.) such that de facto open source standards are created. This frees up investment - proprietary or open source - to innovate elsewhere in the IT stack.

Still, I'd like to see vendors thinking more broadly about their development strategies. Oracle is doing this with its investment in the JSR-170 standard (content repository), perhaps as a counterweight to Microsoft's SharePoint (proprietary repository). So, it is happening, however limited it may be. I'd just like to see more thought go into investing in Funambol/Sync4j (ensuring that email isn't locked up by RIM/Blackberry), DimDim (finding clever ways to expand product boundaries with web conferencing), etc. There's a lot of excellent open source code out there.

Too bad very little of it is getting heavy investment.