SAP's Shai Agassi has been taking heat from the press and blogosphere over his comments on open source made during his interview (you can listen to the podcast here--the open source section starts at 35:34) with New York Times reporter John Markoff at a Churchill Club event on Tuesday. He responded in his own blog today to the flurry of criticisms.
I was at the event and witnessed the exchange. Agassi was asked whether SAP is immune from open source, and he gave a traditional proprietary enterprise software maker response. SAP allows customers access to the source code and to modify, but it creates downstream problems--modifications don't necessarily work with new versions of the code. So, Agassi is putting more of SAP's code in a "closed box" and allowing developers access to customize the software via well defined, documented service interfaces, open models and open source code.
"SAP gives [customers] the ability to see source code. It's important for debugging, but it's crucial not to touch it to build new innovations." Some developers would disagree, but for most enterprises the Linux kernal or Apache isn't something they want to mess with on a regular basis. They want to build applications on top of it in the most efficient way possible, operating at higher levels of abstraction, like open standards-based Web interfaces.
In his blog, Agassi further explains:
We are now taking this approach to our next generation of solutions, in which we not only expose the code of applications, we go the distance in exposing models of our composite applications in ways that allow non-programmers (business analysts) to modify the delivered apps to suit their business needs. This "Open Models" approach is not theory, it is executed and delivered with our latest generation of packaged composite apps, and we have more than 100 applications modeled and delivered to customers with in our recent delivery of SAP Analytics.
Open models is not the same as open source. SAP's code doesn't live under an open source license model that offers its bounty up to the community at large. So, he's really not talking about open source code in the sense of the GPL or other license schemes and community development approaches.
In his blog post, Agassi describes SAP's open source connection as follows:
We adopt platform elements as they become common and in high-enough demand, hence our early adoption of Linux ( we were the first to ship our enterprise apps on Linux ), our partnership with mySQL (to try to bring them up to enterprise readiness), and our investment in Zend (the P in LAMP).
SAP gets the notion of community development--a swarm of commons--and wants to enable its community of developers through its enterprise services architecture, rather than have of single point of innovation. But that's not an open source community, but a community is a community and can catalyze an ecosystem that creates value throughout the system. It's less a passion than a professional need to participate in the SAP community. Agassi said that SAP has created a market where its partners have earned more than ten times SAP's revenue as a result of the company's innovations.
Then Agassi launched into the statement that is getting the most play: "IP socialism is worst thing that can happen to any IP-based society...If there is no way to defend IP, then there is no reason to invest in IP. If there is no reason to invest in IP, then we don't get focused efforts going in any direction at all."
He then got off on somewhat convoluted track, talking about Linux, saying that the most innovative desktop today is Aqua (Apple's interface), and Vista is copying Aqua, not Linux. I'm not quite sure what he meant. He acknowledged that for commoditized or neutral areas, investment protection isn't required, but SAP, he said, is "at the frontier of innovation and has to have IP protection to justify mega-investments." SAP spends $1 billion on R&D. Apple is held up a great example of using IP protection to innovate and profit.
It appears that Agassi doesn't think that Sun's strategy to open source all of its code or the rise of MySQL, the Red Hat stack and other open source players is the right approach for SAP. Software is not generally free in the SAP world. Nor is it in the Oracle, Microsoft, IBM worlds of enterprise software--for obvious reasons. Nor is salesforce.com. While lower parts of the stack have gone over to open source, enterprise applications haven't been disintermediated by the open source license and community development model...yet.
In his blog, Agassi elaborates on the IP protection topic:
I work for an IP company, and we believe in the importance of inventors owning the IP they create. At SAP, we believe that without the ability to protect IP, most companies will no longer invest so much of their current revenues in future product innovation. Even with that point of view, SAP still assists the Open Source community, by providing and donating IP that is not core to our business, and where sharing IP will result in faster innovation in areas that will assist our customers better in the long run. One such example is our work with the good folks at mySQL, where we have shared significant code base, IP, and knowledge in helping them build a scalable transactional database over the last few years. Every company has taken a different approach with regards to this issue, and even pure play Open Source companies differ on their approach to this IP ownership issue.
The one thing we do not believe in is the attempt to kidnap the whole Open Source topic by the "socialize IP ownership" movement. We have seen in the past that extreme socialism does not lead to extreme goodness in any area of our lives, and IP ownership is no different. As a matter of fact, any form of extremism is not helpful, and, as such, I think there is room to respect the approach that the IP owner should decide the fate of the IP, not a social pressure group. SAP invests more than 1 billion euros a year in product innovation, and we look forward to many years of continuous investment into improvements of our software. These market leading investments result in continuous additions of functionality and features, including some breakthrough innovations, all of which come from the smart re-investment of our profits into R&D on behalf of our customers.
Agassi writes in his blog that SAP is "leveling the playing field between external innovators and our own application developers, letting all innovate on an equal footing without blocking innovation from coming into our customer base. No customs, no tariffs, no secret back doors. With that approach we are hoping to ignite a creative commons development effort around a common enterprise process backbone, in a market that until now did not have any commonality base to trigger such a community of innovation."
I don't think he is referring to Creative Commons license schemas when he refers to a creative commons development environment. Like rivals Oracle, Microsoft and hosted upstarts like salesforce.com, SAP is competing for developers to make its proprietary enterprise services platform dominant in enterprises and beyond.
As Sun's Jonathan Schwartz likes to say, volume and value matter. As long as SAP or its competitors controls a particular playing field, it won't be level, unlike the open source universe in which control is based on value created (and business savvy) rather than platform ownership. But, the proprietary vendors will be incented to share more of the wealth with the development community, competing for their attention and loyalty, and must become more transparent along mulitple dimensions. Both customers and developer have choices, and the tactics of previous software generations won't work in a software world where open and standard, if not open source, are the new foundations.