You have to hand it to Brad Smith, general counsel for Microsoft. Last night he delivered the “footnote” address at the Open Source Business Conference 2008. Not only was the general counsel for Microsoft going to have a tough crowd, but he agreed to talk for 30 minutes, then get questioned by a panel [Mark Shuttleworth (Ubuntu), James Bottomley (CTO, SteelEye and Linux kernel maintainer), Andrew Updegrove (standards lawyer extraordinaire), and Stephen O'Grady (Redmonk co-founder)] for 30 minutes and then get questioned by the audience for 30 minutes. As you can imagine some of the questions from the audience were less than constructive, but overall I think things went well.
Some of the highlights (as I remember them).
* Brad stated definitively that in his opinion the general Open Source community does respect IP. This is the first time I have heard someone from Microsoft say this in such a pointed way.
* He admitted that Microsoft had some messaging problems around Linux and Open Source in the past (a cancer, for instance). In his opinion Microsoft has legitimately changed its opinion on the topic, fueled by customer demand.
* Microsoft is generally interested in wider interoperability with the Open Source community, but admits there are issues around both patents and other items. Also remarked that while Microsoft did not initially lead this effort, market leaders typically do not.
* When asked more specifically about the patent issue by James (and then an audience member), his answer was that “there’s no easy answer to this problem.” He did add that he and Microsoft were more than willing to continue a dialog, but that compromise would be needed on both sides. It was pointed out that on some of the issues the Open Source methodology will not allow compromise, which kind of left things up in the air.
I think it’s clear that some parts of Microsoft really are opening up to the idea of change. I still remain skeptical that real change is possible while Ballmer remains in charge, but I do think the beginning of the foundation can start to be formed. Whether this will go somewhere substantial or whether it’s just lip service remains to be seen, but time will make that quite clear.
–jeremy
An interesting panel in an area that is really heating up. The panel consisted of participants from 451 Group (moderator Matthew Aslett), EnterpriseDB (Andy Astor), Ingres (Roger Burkhardt), Oracle (Ken Jacobs) and MySQL (Zack Urlocker). This was the last panel I attended last night, so I’m going from memory this morning. This is clearly an area where Open Source companies are competing very effectively against their proprietary counterparts. It’s also an area where the Open Source participants are still figuring out both their long term business models and their niche within the Open Source database ecosystem. There is more inter-Open Source vendor competition here then in almost any other segment IMHO. It’s also clear to me that many of the proprietary vendors still don’t fully grok Open Source. They over estimate the importance of gratis and underestimate the importance of libre. I think that’s going to be a mistake long term.
–jeremy
Got a decent seat for this one, so am going to attempt a pseudo live blog. Panel: Stephen Walli (moderator), Jean Barmash (Alfresco), Neelan Choksi (SpringSource), Sam Ramji (Microsoft) and Jim Zemlin (Linux Foundation).
* Microsoft has more community around it than some in the Open Source community realize or give it credit for. –jean
* Need to learn from the Microsoft ISV “designed for Windows” program. LSB is a start. MSDN is also a good model. –jim
* Need more consistency in user experience. –sam
* Need better developer marketing in concert with traditional marketing. –neelan
* Products that solve real world problems create community really quickly.
* A community is as defined by the people it does not or cannot include as much as who is included. Proprietary models tend to have more defined rules as to who can and can not participate – should Open Source? –r0ml
* 96% of the $51B of Microsoft revenue last year came indirectly. –sam (this should underscore how important it is for us to get OEM’s and ISV’s involved)
* We need someone to pull a Ballmer-like monkeyboy dance. –andy
* What is Open Source doing to make IT easier for the non-IT savvy people? –matt
Note: not nearly as rowdy as I’d have anticipated.
–jeremy
…were the two panels I chose to attend this afternoon. The Future of Open Source included reps from Ingres, MySQL AB, SugarCRM, Ubuntu and Acquia. It was standing room only and as such it was a bit difficult for me to take notes (the iPhone is really poor for this, another place I miss my Treo). A bunch of interesting topics were covered in this and it really got me thinking about where Open Source is going. While commercial Open Source was the main focus, it got me thinking about some non-commercial aspects as well. This panel included some audience participation via text message based live polls.
When you get reps from Intel, Sun, Novell and Vmware talking about the future of Operating Systems, you know it’s going to get interesting. The panel did not disappoint. It was interesting to hear the different perspectives these companies had, although representatives from companies like Google/Amazon would have added another perspective that was probably under-represented (although certainly discussed). One thing that I think is clear is that there are a number of possible futures for the Operating System space, and a lot is going to come down to implementation, timing and probably a bit of luck. Virtualization is going to be somewhere, but whether that is in the CPU/BIOS/firmware, in the operating system itself or as now as a distinct layer remains to be seen.
There seems to be a bit more energy in the hallways this year and a lot of inter-vendor discussion is definitely happening. More after lunch…
–jeremy
The Open Source Business Conference opened this morning with keynotes from Jim Whitehurst, President and CEO or Red Hat, and Steven Pearson, VP Advanced technologies at CBS Interactive. Matt Asay started the morning off with a video based on his “fighting a rising tide riff”. The audience at OSBC this year is by percentage much less lawyer dense, with many more CEO’s, CIO’s and CTO’s. I’d guess this is just another indication of that fact that Open Source is becoming more and more mainstream.
If there were any remaining doubts about the selection of Jim as the new CEO of Red Hat, I think his opening keynote should help put them to rest. He gets it. He plans to focus Red Hat on enterprise infrastructure and also has plans to get more clients engaged with the Open Source communities that comprise the suite of products that Red Hat supports. He admits that’s something Red Hat has been “lousy at”. Admits that he’s still learning at lot, which is refreshing coming from a CEO. His IT budget at Delta was more then then $500M in yearly revenues at Red Hat. I think it’s clear that under Jim, Red Hat will almost certainly become the first $1B/year pure play Open Source company.
Steven underscored the massive amount of Open Source that CBS Interactive uses. “Every bit of what we do touches Open Source in some way”. Allows them to easily scale things like March Madness and fantasy sports up and down as season change. Covered some of the biggest challenges he sees with companies such as CBSi giving back to OSS (it’s not about competitors getting a hold of the code, but the work involved with cleaning it up/packaging it and the time involved finding the correct committers and getting it accepted).
–jeremy
I’ll be in San Francisco for the next few days to attend the Open Source Business Conference. I was considering attending the Microsoft “Open Source ISV Forum”, but it seems they declined my application to attend 
If you’ll be in the area and would like to meet up, drop me a line.
–jeremy
If you weren’t able to attend OSBC, Matt has already started posting some of the keynote slides.
Sometimes a picture is worth a thousand words. The following is what happened to the performance of the E*Trade platform as they switched to Linux. They did the roll out in 2 phases, which accounts for the bump in the dip. In addition to the performance benefit, they saved roughly $16 million dollars. Not too shabby. It should be noted that during the recent February market dip, E*Trade was one of the only online brokerage sites that did not have performance issues. Lee directly attributed that to the use of Open Source.
–jeremy
The OSBC is now officially over and here’s my second day wrap up. The opening keynote consisted of Rob Curley, Marten Mickos and Lee Thompson. I had never seen Rob speak before, but he is extremely entertaining and had some very good information. He maintained that what him and his team were able to accomplish in Kansas would not have been possible without Open Source. Marten gave an update on where MySQL is and the variety of models he thinks can be successful in OSS. Lee gave a very good overview of how Open Source is being utilized at E*Trade. During the recent February market dip, they were one of the only brokers to not suffer performance problems. He attributed that to the use of Open Source directly.
How Big is the Exit? What is an Open Source Business Worth in 2007 and Beyond?
* There was a consensus that the public markets for Open Source companies are highly dependent on Red Hat. This is from a perspective that if Red Hat were to falter, the Open Source image would be sufficiently tarnished that other OSS companies would not receive new funding and valuations in general would suffer. I wrote about this a couple years ago. I think as time passes, this becomes less and less the case.
* Investors and VCs really seem to like to “subscription” model in OSS companies. I think it’s a very good model, but am less convinced it’s the one true path (one insinuated that OSS companies that tried something different were pretty much idiots for instance).
* With OSS you need to think about your customers with razor sharp focus. Find their pain points, solve their problems and you will be handsomely rewarded.
Is the Novell-Microsoft deal good for open source?
As you can imagine, this session was standing room only. Not hard to guess what the participants opinions were. LWN editor Jon – Bad. Novell rep Justin and Microsoft rep Sam – Good. The one surprise may have been Allison (if you don’t read her blog), who said it would probably be irrelevant. Some notes:
* Ballmer’s comments were definitely detrimental to the acceptance of the deal.
* If the deal would have been with someone else besides Microsoft, say IBM, it would barely have been news.
* Microsoft was the number one channel for SLES in Q1 2007.
* Microsoft has only gone on the offensive in patent litigation 2 times in its history. They are the defendant in about 30 cases or so in any one given point in time.
* Is Microsoft now a Linux distributor?
* AIG and BoA reps both seemed uninterested in the deal, saying it did not impact their buying decision.
* Would Microsoft consider joining the OIN?
* Customers are almost universally telling Microsoft that they want heterogeneous environments. 100%-anything seems to be a thing of the past
Community Development: Business Development for the 21st Century
* Open Source in a large way was started by disenfranchised developers
* For OSS companies, community management is about facilitation.
* Google lawyers actually have an SLA requirement for responding internally in some cases. Developers are that important.
* Many OSS communities are going from developers only to developers and users.
* The time and cost in fostering a community is easy to underestimate.
Overall a very good show, one in which I learned a good deal.
Note: For all these OSBC updates, items with * are not necessarily my opinions, just a summary of things that were said by various panelists.
–jeremy
Overall I have to say I’ve really enjoyed the first day of OSBC. I’m getting an entirely different perspective on many things, which is good. It’s easy to get a bit insular when you are only exposed to a single side of an argument. After my last post, I noticed many more “community” members too, which is great. It’s amazing how often a few general themes have been brought up, even in sessions with widely disparate topics. A few notes from attended sessions:
What’s Next: Emerging Opportunities + Strategies
* It’s interesting that many Open Source projects do very little or no marketing, but have extremely powerful and well known brands. That’s one of the power of ubiquity.
* The value that can be derived from non-paying users should not be underestimated.
* Transparency, at all levels, is critical in an Open Source community. So is respecting user privacy and data.
* One reason cost per customer acquisition is less expensive is due to customer self-selection through quality experiences via gratis downloads.
A New Breed of P&L: The Open Source Business Financial Model
Larry gave an interesting look at the current state of Open Source software in relation to what he calls the golden age of software (mid80’s through late 90’s). His assertion is that things, such as the percentage of revenue spent on sales and marketing, have gotten way out of whack in the software industry. Open Source may be bringing us back to that golden age. Red Hat was one of his primary examples. More data will be available in the coming years, as the current crop of Open Source companies have a chance to mature.
Copyleft Business Models: Why it’s Good Not to Be Your Competitor’s Free Lunch
Eben is such a phenomenal speaker that I really can’t do this talk justice with a simple summary. However, here are some highlights:
* When he worked at IBM, software was a free lunch… used to sell hardware. Customers often submitted patches with their bug reports. For a variety of reasons this has changed in the current day and age, much to the determent of general software quality.
* An example of this is the comparison of how far hardware has comes since 1979. When IBM had 29G is took massive space and was very expensive. Now it takes up 2.5″ and is $40. Software on the other hand has almost become worse. He describes the situation as deplorable.
* An analogy for what the lack of standards can do. During the civil war, the north had a standard gauge for railroad ties. The south did not. This meant items often had to be unloaded just to be reloaded in the south. This became crippling and is an example of how much work can be wasted when there are no open and available standards.
* In his opinion, community adds a huge amount of value to a project, for a variety of reasons.
* The next draft of the GPLv3 should be Apache license compatible.
* With regard to the recent speculation about Microsoft, the GPLv3 and the fact that the Novell coupons do not expire; he can not say as much as he’d like, due to an NDA (one he thought would have expired by now, but hasn’t due to a Novell SEC filing delay). What he did say was that you need look no further than his actions and the actions of Microsoft to see what the Microsoft opinion on the matter is. He asserts they are quite concerned.
More to come tomorrow. Now to partake in the very nice spread that has been offered to all attendees.
–jeremy
So far the OSBC has been interesting. It’s definitely much different than most shows I’ve attended. A much more business focus, with the number of people literally wearing suits at > 40%. For a while, I thought I was probably one of the only “community” type people here. So what were the odds when Jonathan Corbet, LWN executive editor, sat at the same table as me during lunch
A few takeaways from the sessions I attended:
Downloads to Dollars: Building a Revenue Stream from Free Product Traction
* People in proprietary companies are very surprised at how much less revenue per commissioned sales rep Open Source companies need. Since leads are pre-qualified in a much better manner (…at near zero cost) and people can actually get your software into production without you, when they do call it’s much easier to convert them to a paid customer. “Cold calls are a thing of the past”
* As Open Source crosses the chasm in a particular industry, being “Open Source” can be less of an advantage in that industry. At that point, being Open Source isn’t enough. You need to compete on features, scalability, ROI and all the other traditional competition points.
* Downloads is not the best statistic for commercial Open Source, but what the “right” statistic is realistically varies widely.
* Finding out how much information to gather and how to segment is absolutely critical, but also very dynamic.
Open Source in the Channel
* Your industry and role (VAR, ISV, vendor,partner, etc.) has a huge impact on your perspective on Open Source.
* Open Source puts much more importance on creating value for your clients. Building relationships becomes critical as up front revenue is not the same as in other models. The subscription model comes into play here.
* The only people that seem to care about patents are lawyers and the press. It’s not something business units seem to care about and none of the Open Source vendors on the panel had lost a major deal because of it. They did indicate that the main driver here was proprietary companies, whose business they were potentially taking, spreading FUD.
* Microsoft is really in a defensive mode. At one point in the panel, Sam Ramji (Microsoft Director of Platform Strategy) interjected from the crowd. While I thought he took the moderators comment out of context, I guess it’s possible that if you weren’t familiar with the facts you may have been confused (she was referring to SCO and not Microsoft), so clarification may well have been called for. The tone, wording and way it was done is what was interesting to me.
More to come later…
–jeremy
Subscribe