Brent C. Williams, an independent Equity Research Analyst, gave a quick-paced ride through some Open Source Business Models and key activities from 2006 at EclipseCon 2007.
Some takeaways about a couple of big activities in 2006:
- Oracle decides to "clone" Red Hat Enterprise Linux in October 2006, and to offer it for half the price of Red Hat. Stats: First 90 days, about 9,000 downloads of the product. Compare that to 1,000,000 people who downloaded Fedora Core 6 from Red Hat in its first 90 days.
- Red Hat ignored the move by Oracle - no price reduction, no individual deal discounting. Red Hat has a premium brand. Software is not price-competitive at the market level.
- Oracle announced that they will join the Eclipse board and donate a number of technologies. This is a good, smart move for them, however not big enough to overcome the blowback from the cloning experiment gone bad.
- Novell - Microsoft licensing deal.
- Novell recently reported $91M of invoicing for Linux subscriptions, up 650% over the previous year. However, $73M of that was from existing customers. Sounds like small change to me.
- Novell thinks their problem is trying to catch up to Red Hat. Novell needs to build a brand identity for SuSe that is something other than "We're not Red Hat".
Brent's Prediction: If Microsoft sues anybody for patent infringement in 2007, that there will be an Open Source community response such that each of Microsoft's existing software patents would receive prior-art petitions filed against them with the patent office (and 70% of such petitions are accepted by the Patent office).
What do investors care about for 2007?
- Simple. More revenue. Either "Economies of Scale" revenue (sell copies to more customers in existing markets) or through "Agility" revenue (open source companies are more agile and can branch out into adjacent markets easier).
- Example: Actuate and their BIRT efforts have helped to boost their stock price.
- Software Market is not a Commodity Market.
- Open Source Software market is even more of a branded market than proprietary software (strong emotional preferences found in the Open Source community).
- Interface Standards do not affect pricing. Implementation of the "standard" interfaces is what customers are buying.