The Collapse of Competition

The “natural
Written by Dana Blankenhorn, Inactive
At the same time that free and open source software is growing, the old proprietary model is collapsing. (That's a model for a collapsing universe. Learn more here.)

Alfresco CTO John Newton is frank about it. “John Powell, the former COO of Business Objects and I, were looking at opportunities in Europe and the only thing that seemed to work was open source. The traditional enterprise sales model doesn't work for anyone, except for huge companies like Oracle and IBM.”

The Oracle example is illustrative. The company has spent billions “rolling up” competition in its database area in order to keep its margins high. The company maintains a page listing its acquisitions  of the last few years. This strategy works only if new, scaled competitors aren't born faster than they can be acquired, and you will note that a number of open source operations are on this list.

But Oracle has had to slow its acquisitions in the open source space, and lower its target prices, because it can't control the source code. Fear that Oracle was about to buy out the open source database space  has abated.

Instead, the number of true open source competitors is growing. Ingres and PostgreSQL  both claim to be “enterprise class” database systems. The number of open source CRM (SugarCRM), ERP (Compiere) , ECM (Alfresco), even system monitoring (Zenoss) vendors (as well as projects) keeps growing.

Newton says such open source competitors can scale their development much faster than any closed-source competitor. “We're not trying to hide things until they're ready. We're constantly putting out new functionality, and people are doing stuff with it.” By combining a number of projects together, something open source companies themselves are increasingly doing, all the work that Oracle and its acquisitions have done over a decade can be replicated in a fraction of the time.

Enterprise open source is moving up the stack into applications and up the stack in terms of customer size. The “natural” profit gain you assume in a consolidating industry just isn't being earned. Competition is collapsing in the closed source world, but it is just beginning in the open source world.

This competition, when it happens, also takes a new form. As the Eclipse Foundation notes it's about building alliances. Instead of playing FUD games, open source competitors win through hiring project committers, by supporting other projects, or by winning endorsements from other projects.  

Tomorrow, in the last of this series, I'll look at what all this means for the law.

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