IBM's Interest in EnterpriseDB

Like a few others, I found IBM's choice to make an investment in EnterpriseDB kinda interesting. Matthew Aslett (the 451 group) got the following quote from IBM in explanation:
"IBM has become a minority shareholder of EnterpriseDB. This affords us an opportunity to continue to participate in, and gain further insight into, the open source community. This complements other experiences such as with the Linux, Apache and Eclipse communities and previous investments we’ve made in Red Hat and Novell. IBM has been a long-time supporter of Open Source communities, and we continue to see interest among our clients for Linux and other Open Sources solutions. This investment supports our overall strategy to support Open Source solutions in the marketplace to further enable our customers to implement business-critical solutions"

If I'm in EnterpriseDB's shoes, I'm digging this quote since being thought of in the same breath as Linux, Apache, and Eclipse sounds like strategic company to me. After all, in my opinion, a large part of Red Hat's success can be attributed to the early investments and marketing done by IBM (as well as HP, Oracle,and others) on its behalf.

The quote above also tries to minimize the importance, of course, but why would IBM invest if it just wanted an arm's length relationship?

To me, this move is a typical IBM long-term strategy play. They are always looking 5-10 years down the road (which equates to 1-2 Big Blue Dog Years). And while EnterpriseDB is not going to immediately displace Oracle for the high-end database needs, they still have an interesting market opportunity.

Savio Rodrigues (IBM WebSphere dude) posted on this topic and asked the question:
"What do you think, does EnterpriseDB have a brighter future by targeting Oracle users that want "Oracle like features for MySQL prices" or by targeting MySQL users who have "hit the wall"?"

Since EnterpriseDB is built on Postgres (which has been around a long time and is quite stable) and since they provide an Oracle compatibility layer, my answer would be "Yes" and "Yes". I think they compete for general database business with both Oracle and MySQL.

Bottom-line: This investment by IBM gives them a potential future play that neither their DB2 nor their Cloudscape/Apache Derby investments address directly. Now we just need to wait 1-2 Big Blue Dog Years to see how it all plays out.

UPDATED: The EnterpriseDB One-Two Punch
Savio replied to my blog with "I agree in principal that EnterpriseDB will continue to go after Oracle & MySQL. But in practice, they need to pick one segment to be their primary focus, or else they risk less than optimal results in both."

While I agree with Savio that focus is usually a good thing, my experience at JBoss, for example, also taught me that sometimes you've gotta lead with a one-two punch. At JBoss, we had momentum from new application development projects AND momentum from BEA migrations. Both were valid and lucrative focus areas. We actually had solid WebSphere migration business too, but we treated those more opportunistically than strategically since battling IBM is always more complex.

Anyhow...my point is that if EnterpriseDB's Oracle compatibility is any good, then over the longer-term, they can drive solid business. Ex. think through the Oracle upgrade cycle (when faced with moving from an older version to a newer version....should I consider EnterpriseDB??). The combat with MySQL clearly will heat up over time...but I still think they need to milk the Oracle opportunity.

I'm just a Philly guy who loves a nice one-two punch. :-)

Scaling a Software Business (open source or otherwise)

OK, I've grabbed the bait Savio Rodrigues (of Big Blue fame) has cast for me. Savio's a good guy and we've traded opinions in the past, so here we go again.

Savio asserts "The OSS business model is great to grow from $0-$50M, but very difficult if you're trying to get to $100M.".

In my inimitable Philly style, my response is: Dude, that same statement can be made of most software companies, open source or not.

Let me use Princeton Softech (non open source) as an example. I was there before JBoss, and my focus was to help them grow to $50M and beyond. So I helped build and launch their database archiving solutions for Oracle E-Business, PeopleSoft, Siebel, and JD Edwards. In order to scale the business, we expanded our footprint beyond the generic archiving solution, to application-specific solutions. This scaled the business and increased valuation enough to entice your Big Blue to buy them recently...so be sure to treat my friends well! ;-)

So let me now use JBoss and Red Hat as examples.

To establish and build the business, you've got to start with great technology and A players. You then need to focus your business model on selling the right stuff. In the case of JBoss, we sold 75% subscriptions, 15% training, 10% consulting. Why? Because subscriptions have higher margins than training and consulting.

Once you've got momentum going on one product, you scale the business by:

• Expanding your footprint (new products, product lines, solutions, etc.)


• Expanding your reach (channel business, partners, geographies, etc.)

The focus when I joined JBoss in 2004 was to grow the footprint beyond the application server into a full middleware suite of products (Hibernate, JBoss jBPM, JBoss Rules, JBoss Portal, etc.). Add in our upcoming SOA Platform (based on JBoss ESB), and the fact we added MetaMatrix earlier this year, and you've got a nice footprint.

On top of that, Red Hat has a pretty cool strategy for the RHEL business, has a solid Channel focus that includes JBoss, and offers a global reach.

All of that adds up to a multi-product line company with decent reach. You take that into customer conversations and you're able to drive strategic decisions rather than single product discussions.

[Added on Dec 1]
To those who think “The support-only OSS business model does not scale.”. Uhhh…I disagree. It may take a while to build up a base, but once you do and you can keep renewals at a good level, it’s a very scalable model. It's actually quite similar to the maintence revenues traditional software companies treasure. The subscription model is the gift that gives day in/day out.

IBM is famous for its 10 year strategies, so I encourage you to visualize this over the long term and let me know if you're still having problems seeing the model scale.