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Acquisitions expert: What's behind Oracle's open source buys?

Acquisitions expert: What's behind Oracle's open source buys?

By  Jan Stafford

16 Feb 2006 | SearchEnterpriseLinux.com

What lies behind Oracle's open source vendor buying spree? That question was hotly debated at San Francisco's Open Source Business Conference (OSBC) after news broke about Oracle's successful and attempted purchases of two open source database vendors -- Sleepycat Software and MySQL AB, respectively -- during that two-day event.

"Oracle stole the buzz at this show," said Douglas Levin, CEO of Waltham, Mass.-based Black Duck Software in an interview at OSBC. "People are trying to understand Oracle's motivations for buying open source software (OSS) companies like Sleepycat and InnoDB and, possibly in the near future, JBoss."

Levin has been working behind the scenes with prospective open source vendor buyers and sellers, because Black Duck specializes in compliance management and due diligence for software asset sales. In this interview, he offers an insiders' view of the levels of meaning behind Oracle's OSS deals.

Why is everyone talking about Oracle putting the moves on OSS database vendors?

Douglas Levin: There are several reasons for that, but mostly people want to know two things: Is Oracle going to promote or destroy its open source competitors by buying them? Is this the start of a larger open source buying spree?

Is there some fear, uncertainty and doubt about Oracle's OSS acquisitions?

Levin: Yes.

Consider that last year, when Oracle bought PeopleSoft and Siebel, it was very clear that they acquired them for cash flow. So, people are asking why Oracle is acquiring OSS companies that don't offer that incentive.

In 2005, when Oracle purchased InnoDB, a small Finnish company, the open source community questioned Oracle's motivations. People took that as a direct attempt to threaten MySQL, Oracle's main open source competitor. That was a $3 million dollar purchase, an amount that Oracle throws off in about a minute.

I don't think there's anything sinister at work here. I believe that Oracle is trying to put together an open source strategy and open source architecture that makes sense to their closed-source product customers and the open-source customers of today and the future.

Do you think there are more Oracle open source purchases coming?

Levin: I think that Oracle will make other acquisitions through the year, to get into new markets, acquire new customers and acquire technologies that enable them to leverage new technologies in their installed customer base.

Won't Oracle have to work out some tricky licensing issues to work around OSS public licenses?

Levin: Well, Sleepycat, for one, uses a dual license. One part is a Berkeley BSD license that has some fairly liberal distribution arrangements, but it also requires that derivative work is put back into the open source community. So, Sleepycat does present a challenging licensing situation for Oracle, because Oracle's licensing strategy to date has been closed source and proprietary enforcement. What I mean by that is parts of the Oracle license say that you can't use open source in conjunction with the Oracle license. So, they will have to address their older licenses.

IBM bought the OSS Gluecode product, and now Oracle has bought two commercial OSS companies. Is this the start of an OSS buying spree by proprietary vendors?

Levin: I don't see a spree, but 2006 will bring several mergers of closed-source and open-source companies. There will be, however, quite a few mergers and acquisitions in the commercial open source product space. The general fabric of mergers and acquisitions will be companies trying to include OSS in their strategic position as a technology and sales and marketing position.

How did you come to this conclusion?

Levin: I know this because Black Duck's software is used for due diligence purposes. So, we work with companies who are on the verge of merger and acquisition activity or in advance of financing.

During the second half of last year, there was a great deal of financing activity. Some put the amount of money invested in open source companies at around $600 million. That means that a lot of companies that r have had additional or initial funding to build open source. What is going to happen is that some of these companies will either be acquired or merge with other companies.

Anytime you have such a crazy fit of financing, it leads to another set of mergers and acquisitions.

How will this OSS acquisitions trend affect companies that use enterprise OSS today?

Levin: OSS is not just applications; it is also, literally, code. So, the big, really big, difference between proprietary and open source software is the ability to access the source code. So, the big question is not what's going to happen to the open source companies, but what's going to happen to the source code.

If code is proprietary or closed, then the enterprise IT organization doesn't have an escrow, doesn't have a means to access to the source code and innovate or take advantage of the community's innovations. The most important consideration and requirement, then, for enterprise users is to be sure that the code remains in the open source domain.

In theory, wouldn't the acquisition of a small OSS company by a large company bring stronger support options for enterprise users?

Levin: Yes. Sure, Sleepycat was growing rapidly and would have been able to provide more services over time. By getting acquired by Oracle, however, Sleepycat should be able to give users even better customer service. I think Sleepycat got to the point in its growth, where Oracle was the services and support answer for the company's need to expand and excel in a worldwide marketplace. Oracle can provide Sleepycat with the resources to provide worldwide service.

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