I had an epiphany today about a major reason open source is disrupting enterprise software. This is perhaps one of those things that you have heard so much, you've gone numb to it. All the big giants are still alive and kicking, however; so is this really happening? The answer is yes, however the mechanics are not what you think. It is not simply just a cost play. The acquisition – one of the main weapons that big software vendors had to fight disruptors – is losing effectiveness. And that changes everything. Allow me to explain:
In the past, big vendors bought the smaller potential disruptors and got the code and customers. Cash disrupted the disruptor; investors got paid, and customers got the new technology as part of the big vendor's larger suite. Everyone was happy.
In the open source model, the code is, well…..open source. The value is the people; and you can't keep most people from leaving, which they will. Cool, talented open source developers don't generally want to work for big, stoggie software vendors. Furthermore, customers bought into open source to avoid vendor lock in, so buying for the customers is not all that attractive either. This makes Hortonworks and Cloudera, for example, unattractive acquisition targets for the likes of IBM or Oracle. Hmmm…are you starting to see it?
Allow me to bring it all together: Open source is indeed erroding big software's vendor's profit; sure they are selling stuff, but open source disrupted sectors are not growing at the rate their stock price needs to keep investors happy. Investors will grow increasingly unhappy, cash will become scarce and big vendors will cut costs to prop up the bottom line and free up cash… for what – acquisitions? That doesn't work like it used to. It's is a downward spiral.
We'll see who pulls out. Microsoft is on the right track. IBM and Oracle are taking Microsoft's lead and reinventing themselves around the cloud. SAP and Teradata? I don't know what they will do. Retrench around their core products maybe? But that's not a growth strategy and growth is what it is all about.
I can't tell you exactly how this epiphany came to me, but I'll blog more about it tomorrow after some major announcements at Data Works
Fun times in the industry. More tommorrow.