Question: What makes the Red Hat/JBoss combination a good fit?
Donahue: Red Hat has done a nice job in quickly building a business model around the Linux platform and has helped drive adoption and acceptance as a mainstream enterprise OS. The challenge for Red Hat has been the sustainability of its growth rates and the challenge of being a one-trick pony. Red Hat has shown nice top-line growth, but it set the bar pretty high since it was picking a lot of the low-hanging fruit in open source adoption. As Linux becomes an increasingly mainstream enterprise platform, growth will actually become harder to come by since battles will be fought in replacement and displacement. We still see a great market opportunity for Red Hat and Linux, but by building out through its acquisition of JBoss more pieces of the LAMP stack, the company can begin to show increased differentiation and the value of an integrated platform. The two companies' business models, culture, licensing, support, ecosystems and client bases are much more similar than dissimilar, so from an integration standpoint, the transaction should go fairly smoothly and should not be nearly as disruptive as would have been other potential combinations. Both companies would have done just fine had they not pursued this combination, but both were fighting against stronger, more established competitors. There is definitely more value together than separate.
Question: How will the new company change the landscape of the open source market?
Donahue: The acquisition is significant on so many different levels. For the enterprise waiting for OSS to mature and be supported as mainstream software, combining JBoss into Red Hat's sales and support infrastructure provides validation and increased vendor security, clear product roadmaps and fewer points of contact or necks to choke. For open source entrepreneurs and investors, the acquisition provides a clearer model for valuation and exit strategies. For open source developers, the combination provides increased opportunities for community support and product roadmaps, and for competitors, it provides additional incentive to innovate their products and competitive positioning, which in the end will benefit the IT consumers. In short, it shows that open source software is maturing. At the same time, the acquisition does not threaten the core of the open source model, which is the strength of the developer community.
Question: What should this acquisition mean to large proprietary software vendors like IBM, or even Microsoft?
Donahue: There are so many different levels and complexities in this answer, it's a real chess game.
At the highest level, it really doesn't change the game in OSS versus proprietary. Red Hat has been helping drive Linux success in the enterprise and JBoss has been ramping up and seeing strong community support. Clearly, Red Hat will be able to accelerate JBoss exposure and provide a stronger infrastructure in sales and support to validate the JBoss app server and JEMS. Current Red Hat customers will be more inclined to try JBoss and those already experimenting with JBoss will be more inclined to move the platform to production environments. Red Hat very much will accelerate JBoss adoption in the near term and longer-term will provide several opportunities for new products and developments with a more integrated LAMP stack. The proprietary software vendors have already been bumping up against Red Hat and JBoss, so there is nothing really new here in this aspect.
The more fun part of analyzing this question is to look at all the potential changes the partnership represents. This analysis really needs to be looked at on a company-by-company basis. IBM clearly likes Red Hat's support of Linux because it helps drive IBM hardware sales, but IBM software clearly does not like the competitive threat that JBoss represents to WebSphere. IBM won't walk away from Red Hat, but they will probably look for stronger partnerships with alternatives, namely Novell. Microsoft has been grappling with the realities of heterogeneous IT environments and is reluctantly beginning to embrace Linux. They recently formed a partnership with JBoss to help integrate J2EE and .NET environments, which is becoming increasingly important as SOA adoption begins to accelerate. Microsoft has already begun to accept open source co-existence (though very much begrudgingly) so the combination shouldn't create too many waves in Redmond. Oracle, on the other hand, hates the combination and they clearly are not happy about the turn of events around their interest in JBoss. Since Red Hat will strengthen JBoss adoption, the threat to Fusion and Oracle's stack will increase. We expect Oracle to make reactionary moves since Oracle really wants to become the default end-to-end platform in the enterprise. Oracle still needs to figure out where open source fits into its world.
This 3 Questions originally appeared in a weekly report from IT Business Edge.