What happens to open source vendors when they get mature

It took a long time after Red Hat's IPO in 1999 to see other significant open source exits. But things have been accelerating lately, with large funding rounds, acquisitions, and an IPO. Open source vendors are maturing, and making a deeper and deeper impact

Earlier this week, open source business intelligence vendor Pentaho announced that they were getting acquired by Hitachi Data Systems. At a valuation to be rumored to be in the vicinity of half a billion dollars, this sounds like a successful exit for Pentaho's investors and employees, and one the open source ecosystem can be quite proud of.

This acquisition follows closely the successful IPO by Hadoop vendor Hortonworks which, initially met by skepticism from the ecosystem, actually proved their ability to reach and then exceed the "magic" billion dollar valuation. I commented when Hortonworks filed for this IPO that being the first (and still the only) real big data stock to be publicly traded, would certainly strengthen their position -- and it did (now of course everyone is waiting for their first post-IPO earnings announcement).

The pace has actually picked up for open source vendors in the past year. Indeed, not much had happened since industry veteran Red Hat went public in 1999 and MySQL was snatched in 2007 by (open-source-friendly) Sun Microsystems before being rolled into (not-so-open-source-friendly) Oracle.

The last 12 months were indeed marked by the acquisition of Actuate by OpenText, and Jaspersoft by TIBCO. They also saw several open source vendors raise new rounds of funding (on the gargantuan scale, Cloudera's latest $900 million round and MongoDB's total $300 million raised come to mind). During this interval, several open source vendors, including MapR and Talend, have hinted at plans to go public in the not-so-distant future.

The good news is that both options -- industrial exit or IPO -- open new possibilities for open source vendors. Gone are the days where the only possible outcome would be to get picked up by a proprietary competitor, annoyed by the market shares lost to this alternative. Competitors don't spend hundreds of millions to remove an option from the market -- but they do so to acquire a mature technology, a large installed base, and a synergy with their existing product portfolio. Jaspersoft's acquisition by TIBCO is a great example -- there was little overlap between Jaspersoft's products and TIBCO Spotfire, and their successful cloud innovations and expertise have been beneficial to TIBCO's entire BI offerings. We will have to see how Pentaho gets rolled into Hitachi's "Social Innovation" group once the acquisition is completed but I am pretty sure this will be a tremendous value creator.

The other alternative -- going public -- shows to the IT and investment worlds that open source vendors are forces to recon with, and that they are capable of the same value creation, business efficiency and predictability as "traditional" IT players. Clearly, there are not enough public open source vendors on the stock market to completely prove that point yet, but beyond MapR and Talend others have matured to a point where they are certain to follow suit. After all, Salesforce.com was for a long time the only SaaS player on the stock market, before many others joined the fray. SaaS today, open source tomorrow, meet the new mature business models and IT players.

Disclosure: I used to work for Talend and own stock in the company.

Copyright © 2015 IDG Communications, Inc.

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