Oracle's fiduciary duty to stop the open-source movement

Defending against Oracle's attempt to wipe out large open-source communities will be difficult.
Written by Tom Foremski, Contributor

Oracle's attempt to buy MySQL, and its acquisition of open-source database company Sleepycat, and its reported interest in JBoss, demonstrate an extremely aggressive attack on the open-source movement.

The software giant could stop much of the open-software movement dead in its tracks  through acquisitions, and stifle the rest of it by making it difficult to recruit a developer community.

Who wants to do free development work for Oracle--if it turns out that Oracle could very well acquire the open-source company in the future?

Oracle could do all of this with the pocket change from one of Larry Ellison's sofas. It would not take very much money at all.

And Oracle's management has a fiduciary duty to maximize profits and value for its shareholders. Buying open-source companies provides an incredible return on investment and makes it possible for Oracle to boost revenues and profits.

An acquisition of MySQL, for example, would provide Oracle with an incredible return on its investment in just a matter of months because it would stop the loss of tens of millions of dollars in lost new business.

Enterprises aren't going to rip out their Oracle databases and applications but in new projects, they are increasingly comfortable installing open-source equivalent products. And that means millions of dollars in the loss of new business for Oracle, not to mention the steady maintenance income on those expensive licenses.

Dan Kusnetzky, the former IDC analyst and now head of marketing strategy at Open-Xchange--the open-source email server company, confirms that the vast majority of his company's deals are for new IT projects.

"Our product works exactly like Microsoft Exchange so it's very easy to implement, and the users don't notice any difference at all," Mr Kusnetzky says. "I would never advise anybody to walk away from technology that works, but in new projects, you can save a lot of money using open-source software plus you have a very large support community."

But open-source users are also motivated by frustration.  "There are many open-source software users who became irritated by their software vendors and wanted an alternative."Mr Kusnetzky says.

What happens now if those frustrated users, some possibly frustrated with Oracle, now have to deal with Oracle again, because of an acquisition? "That's certainly what happened to some of the J.D. Edwards customers," he notes.

[I wonder if those disloyal customers will be getting any special discounts from Oracle? I doubt it, there's probably a list somewhere...]

Oracle's acquisition spree will be difficult to stop because of the compelling economics of such deals. An acquisition of an open source company would cost just several tens of millions of dollars or about the same as losing a half-a-dozen-or-so new business deals. It's a no-brainer.

Even if Oracle has honorable intentions in its bid to accumulate open-source companies, I can't imagine that the open-source communities would be motivated to act as unpaid developers for Oracle. Where is the glory in that? They would shut down in a heartbeat.

I think that the only thing that can save the open-source movement is IBM. And IBM had better figure out its strategy fast.

I think this calls for a bat signal--or rather an Irving Wladawsky-Berger signal to be shone into the night sky over Silicon Valley.

Maybe it will be seen from the very stylish pyramids of IBM's ( I.M Pei designed) Armonk, NY  corporate compound and Mr Wladawsky-Berger, IBM's top strategist and champion of open-source and open industry standards, will come up with a strategy to stop Oracle.

And there is also SAP, which has a vested interest in open-source and has a stake in MySQL. SAP is hoping the open-source movement will be able to slow Oracle's expansion and make it less competitive. That's precisely why SAP Ventures invested in MySQL. And that is why Jeff Nolan, the former VC at SAP Ventures is heading a "kill Oracle" team within SAP, and open-source is one of the weapons of choice.

I am also proposing an alternate defense: Establish open-source companies with a structure similar to that of the Grameen Bank, in which the customers are also shareholders in the company. And maybe the open-source development community also become shareholders--after all, they put sweat and tears into developing the software.

The Grameen model could very well be a much more effective defense of the open source movement against aggressors than hoping for a white knight to appear from the East.

Editorial standards