Is Open Source Really Just as Good?

One of the great things about being a VC is that I am always meeting new and exciting companies that are focused on changing the landscape of enterprise technology. So how do you actually meet these companies, you might wonder? There are literally thousands of startups, all vying to be the next big thing. Amongst VCs, everyone has a different approach, but we’ve often found our best investments when we do two things: define a trend where innovation creates a disruption in the status quo, and listen intently to what customers (or prospective customers) are saying and doing.

In the enterprise, there is probably no greater disruption than what is going on with open source. The momentum of Linux, Apache, JBoss and MySQL is accelerating, which I am sure you already know. I won’t bore you with the myriad issues around deploying open source related technologies in the enterprise, whether that be about licensing, security, manageability, etc. I’ll leave that to the folks that are paid to write about this stuff. [Editor’s note: the latest blog post by CIO magazine’s Christopher Koch is a good dialogue on open source.] But I will leave you with one thought, which is this: if you can buy something that is at a minimum just as good as the alternatives at half the price (or less), why wouldn’t you? After all, we’re talking about technology, not luxury cars here.

The nuance with open source is whether that ’something’ is really ’just as good’ as the alternatives. Bill Hilf, the head of Microsoft’s open source strategy (yes, they do have an open source guru), I think put it correctly when he pointed out at our last CIO Council offsite that purchasing technology (software in his case) is more than just buying some code; it’s really the ecosystem that you are buying.  ’Just as good’ as doesn’t only mean feature parity, it means that the technology you deploy has a healthy ecosystem that keeps it going, and that you have the requisite skill in your company to use it to its greatest advantage and least headache.

So, when we look at companies that are building their businesses based on an open source strategy, we ask the following: what’s the ecosystem that they’re trying to build?  Will there be lots of people who will know (or want to know) how to work with the technology, are there vendors who can provide great support, and is there a path of innovation that will help the ecosystem grow?  If you can answer all of these questions affirmatively, then you have a business, not just a bunch of freely licenseable code.

In the end, the great thing about this open source trend for you as the customer is twofold: first, existing vendors have to seriously rethink how much they are charging for their products, and two, long term, it means that companies will compete not only on features, but also on service and support.  That’s never a bad thing.

As always, I’d love to hear what you think.  Feel free to add a comment or shoot me an email at michael.jung@jpmorganpartners.com.  Talk to you soon…