Saturday, February 09, 2008

Will next billion dollar open source acquisition come in 12-18 months?

Found this quote from Michael Tiemann on Matt Asay's blog:
"I would not be surprised to see another $1B deal of some sort in the next 12-18 months. The reason is simple economics...."

Will this come true? Very unlikely, especially within that time frame. Statements like this make MySQL's billion dollar acquisition look like a walk in the park. The reality is that MySQL is a leader in creating an innovative model that brings them pretty decent revenue. It has taken a lot of work from the leadership at MySQL to get it where it is.

So why is it 'simple economics'?
open source beats proprietary software as a development platform and as a value-delivery platform, and given how many millions of dollars companies are seeing wasted on proprietary software, it's only a matter of time before the majority of software technology deals are denominated in open source.

Ok, to me 'open source beats proprietary software' and opportunity cost of using proprietary vs open source software are NOT enough reasons in their own for an open source company to become a billion dollar company. Proprietary software has a high value licensing model. Open source software lacks that particular model.

There will need to be a very solid monetization plan behind the open source software for it to become that much valuable.

In order to become a billion dollar open source company, first you need enterprise strength customers. Then, you need stable and solid business model. Then you need great leadership to get your momentum going. Finally, you need a company with much more than a few billion dollars to make a leap of faith and buy you out. Or, you will need a history changing IPO and getting there will be a very difficult journey.

So, I personally do not believe at all in the argument of 'simple economics' that is presented above.

What company, if you believe in the quote, you see being acquired for a billion dollar in the next 1.5 years? RedHat, may be, but lets stick to cases where the first acquisition/IPO hasn't happened yet.

No comments: