May 1, 2009, 2:23 pm
There‚Äôs been a lot of commotion around Oracle‚Äôs recent bid for Sun Microsystems. Oracle is in the process of purchasing Sun for $7.4 billion, which includes Sun‚Äôs $1.8 billion in debt. With this acquisition Oracle will purchase Java, Solaris, and a bunch of hardware and virtualization tools, which together will help Oracle realize a projected increase of $1.5 billion in revenue in the first year and over $2 billion in the second year.
But let‚Äôs put the business of proprietary software and increased revenues aside for a second and consider: what will happen to all of the open source software (OSS) components of Sun ‚Äî especially MySQL, which is a competitor of the Oracle database? After all, this is the question most people in the open source community are asking themselves right now. Sun is currently the firm with the largest contributions (lines of code, total dollars, and ongoing dollars) to core projects released under open source licenses. Just to name a few, they‚Äôre the backers of Java, MySQL, OpenOffice, Open Solaris, and NetBeans.
Considering the number of projects and amount of money that Sun contributes to open source, they have the power to influence the entire open source market ‚Äî power which may now lie in the hands of Oracle. It‚Äôs clear that Oracle is purchasing Sun primarily to increase revenues, but what is not clear is if Sun‚Äôs open source projects were profitable themselves. It‚Äôs hard to calculate the marketing value that open source projects brought to Sun, but either way Oracle will gain the customer base that Sun built. This leaves a potentially undesirable outcome for Sun‚Äôs open source projects and the open source community as a whole.
It‚Äôs possible that Oracle will scrap many of Sun‚Äôs OSS projects to reduce their costs and cut out any unnecessary departments in order to simplify the merger and increase profits. As of 2006 Sun had contributed approximately $390 million to OSS. These are costs Oracle may not want to take this on as they are trying to make the acquisition profitable as quickly as possible.
Why should you care?
Sun has been responsible for the single largest corporate investment in open source software to date. In addition, Sun‚Äôs actively-funded and well-supported OSS projects are at the core of the open source community.
A short list (seriously) of some of the open source projects to which Sun contributes includes:
- Grid Engine
- Jini Network Technology
- JXTA Technology
- Mobile & Embedded
- Open ESB
- Open Media Commons
- Open MPI
- Open HA Cluster
- Project Darkstar
- Project Fortress
- Project LookingGlass
- Project Woodstock
Sun has been an advocate and champion of open innovation driving networked computing. Their recent direction seems to clarify who they are . . .
And let‚Äôs not forget . . .
- The network is the computer
- The dot in dot com
Oracle built its business around proprietary software licensing. It is a company not known for its sponsorship of the open source community. Oracle is more focused on very tactical investments in open source.
Oracle and MySQL
MySQL itself poses many problems for Oracle.
- It costs lots money to maintain a project with limited license revenues.
- MySQL is an actual competitor with the Oracle database.
So what is Oracle going to do with MySQL, ‚Äúthe world‚Äôs most popular open source database‚Äù and one of the top five databases in use? With a significant portion of the market, Oracle can‚Äôt just throw MySQL to the side once they get the chance. If they don‚Äôt control where the extra market share will go, competitors like Microsoft SQL Server ‚Äî Oracle‚Äôs largest proprietary competitor ‚Äî will benefit from the dismantling of MySQL.
Oracle might want to transition the MySQL user base over to the Oracle database. One way this could play out is Oracle offering MySQL as a ‚Äúlight‚Äù database, which would still be open source, and give customers the option to upgrade to the paid premium Oracle database. The transfer of database would be only one way so that customers filter into the paid Oracle database.
Oracle and OSS
Another way to analyze this situation (as opposed to profitability) is to look at the background and core values of each company. It is clear that Sun has a much larger stake in OSS than Oracle, as they are the largest commercial contributor to OSS, but Oracle has also had their hands in open source development. Oracle‚Äôs open source stance, as stated on their website is that:
Oracle is committed to developing, supporting, and promoting Open Source. Oracle has been, and continues to be, committed to offering choice, flexibility, and a lower cost of computing for end users. By investing significant resources in developing, testing, optimizing and supporting open source technologies such as Linux, PHP, Apache, Eclipse, Berkeley DB, and InnoDB, Oracle is clearly embracing and offering open source solutions as a viable choice for development and deployment. Today, many customers are using Oracle and supported open source technologies in mission-critical environments and are reaping the benefits of lower costs, easier manageability, higher availability, and reliability along with performance and scalability advantages.
Now is a great opportunity for Oracle to show their support by taking on Sun‚Äôs larger commitments to open source software. Oracle has a choice to either cut out down Sun‚Äôs open source developments to increase profitability or harden their open source values.
Oracle and Commercial Open Source Software
Scott McNealy said in 2005, ‚ÄúOpen source is free like a puppy is free.‚Äù According to Scott, Sun has a growing and dominant business taking care of puppies ‚Äî all those enterprises with applications built on open source software and running on Sun hardware.
There is of course the third possibility that Oracle will increase their support of open source because it‚Äôs actually profitable. However, this remains an ongoing test for open source. Sun believes that open source support can be profitable, but does Oracle?
As Larry Augustin stated on his blog, it was rumored that Oracle was willing to pay $850 million for MySQL last year, before Sun ended up buying the company for $1 billion. It‚Äôs a bit ironic that Oracle could now get MySQL pretty much for free, but Oracle did once ‚Äî and potentially still does ‚Äî see value in MySQL and the open source model. OpenOffice also has the potential to battle Microsoft Office, with a little tweaking here and there. If Oracle can fit open source into their business model and make it a profitable venture, OpenOffice could be a contender in a market monopolized by the Microsoft suite, which would make it the real sleeper in this acquisition.
Looking back at other large mergers, we can see how this play by Oracle might end up.
One case we can look at actually involves one of the parties currently involved, Sun. Back in the 90‚Äôs when Sun merged with Netscape, the merger was called the Sun-Netscape Alliance. A striking feature of this merger that you may notice is that the ‚ÄúNetscape‚Äù part of the deal disappeared along with the 90‚Äôs. Sun effectively bought Netscape‚Äôs software and discarded the brand name, which had value in itself and was later sold to AOL. Applying that model to the current situation generates a few interesting questions:
- Will we see Oracle dismantling Sun for only the parts that are explicitly valuable?
- Will they dismantle the hardware and open source departments and focus in on Java and Solaris?
- Could Oracle focus on taking out Microsoft with OpenOffice and disregard all of Sun‚Äôs good work in security, open source, green computing, and more?
The open source community should hope that this is not the scenario that the merger will follow. One of Sun‚Äôs core values is open source software, and as this merger takes place Sun may defend their open source departments if they are called into question.
The Time Warner Tail Wagged the AOL Dog
On the flip side, a merger that turned out quite differently was AOL-Time Warner, in which AOL bought the much larger Time Warner for $164 billion. In this case the business model of AOL turned out to be flawed, and it was Time Warner‚Äôs core values that ended up on the better side of the merger. Over the following years AOL-Time Warner reported large losses in the tens of billions, and in the end it was the buyer‚Äôs name that was dropped, leaving Time Warner as the company left standing.
This scenario may come to fruition if two things are true. First, Oracle would have to believe that open source is not worth capital investment. Second, open source would need to prove that it is indeed the business model of the future for tech companies. A misjudgment of the market such as this could lead to a decline in Oracle‚Äôs power while Sun‚Äôs power rises. If Sun‚Äôs core values ultimately lead the new company, it could be a large boost to open source software and Sun could rise again.
We may be getting far ahead of ourselves, seeing as the acquisition is far from complete. They still have to finalize the deal and go through the review process from the U.S. Justice Department and Federal Trade Commission. This is, however, an important development to the open source community. The result will depend on the truthfulness behind Oracle‚Äôs statement of support for open source. Many companies believe it still poses a risk too high to take on, but this could be due to excessive FUD (fear, uncertainty, and doubt).
There are plenty of upsides to Oracle strengthening its stance on open source. Oracle could better contend with competitors like Microsoft and may usher in a new business model for the next generation of computing. Open source has great potential to add value to a company, and this may be Oracle‚Äôs chance to explore the business possibilities.
Ernie Park is a senior technology professional specializing in information about free and open source software, license and software usage and proliferation, and the creation and management of FOSS usage policy. He has delivered significant innovations specific to the use and identification of FOSS within enterprise environments, and he is also an advocate for the development and maintenance of policies for the use of FOSS. Currently employed as an independent consultant specializing in software risk management, Ernie is also an active writer and contributor to thought leadership within the FOSS community. His writing can be found on sites including FOSSBazaar, The Open Source blog, and the GPL3 blog.