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How Red Hat Decides Which Open Source Companies To Buy

Posted by Soulskill on from the putting-that-dartboard-to-use dept.

darthcamaro writes "You don't really buy an open source company — since the tech is all open. But then again, Red Hat 'buys' open source companies all the time, they just bought one this week. So when does it makes sense for Red Hat to buy a company versus just building it on their own? Apparently, it all comes down to community. 'When you buy an open source company, if the people aren't coming and passionate about staying then you spend a lot of money for what? Because you don't get a lot of intellectual property,' Red Hat CEO Jim Whitehurst said."

20 comments

  1. What a dumb statement by HarrySquatter · · Score: 5, Insightful

    You don't really buy an open source company — since the tech is all open.

    What a dumb statement. Buying an open source company is buying their copyrights, possibly any patents they hold and getting to acquire their people.

    1. Re:What a dumb statement by Anonymous Coward · · Score: 2, Insightful

      Absolutely. I won't speak of all that legal stuff, however the human capital of not just individuals well trained, but trained also in working well with their team is worth a LOT of money. It can take years to get that cohesion that comes from developing good work atmosphere and team familiarity. Getting a whole shop that has years of experience together is extremely valuable.

    2. Re:What a dumb statement by Anonymous Coward · · Score: 0, Flamebait

      Why is the parent modded Insightful and not Funny?

    3. Re:What a dumb statement by Anonymous Coward · · Score: 5, Insightful

      Not to mention their customers, prospective customers, and the non-paying community of happy users who find and fix bugs, suggest enhancements, and spread the word about what a great product it is.

    4. Re:What a dumb statement by Anonymous Coward · · Score: 1

      I don't know if you actually read the summary, but you said the exact same thing he said, immediately after saying it was a dumb statement.

      Redhat doesn't buy companies for the IP, they do it for the people.

    5. Re:What a dumb statement by rgbrenner · · Score: 4, Insightful

      Buying an open source company is buying their copyrights

      ^ This... plus.. you have to read between the lines of what red hat is saying.

      If a project has a large community, it is because they have a lot of users.

      Red Hat sells support.

      A large community == users to sell support to.

    6. Re:What a dumb statement by eric_herm · · Score: 2

      Copyrights/brands do not have that much value most of the time, and RH already has a good brand, so adding more may dilute the current one ( see how most of the product are rebranded as RH-something for the enterprise version ).

      Patents have value only if you use them, and there is a patent promise on Red Hat website about what they use patent for ( http://www.redhat.com/legal/patent_policy.html ). The company is also one of the founding member of Open Invention Network and likely donated patents to the shared pool. There is also few people paid to work on the topic, such as Jan Wildeboer fighting against IP extremism, as he say on his web site, or Red hat have several time tried to express against software patents. So again, that's likely not a major interest.

      And finally, acquiring people is nice, but in most country, people are free to leave a company at will, and I am prety sure there is lots of example of people leaving after being acquired ( I think Oracle/Sun is a prime example of that, given some problem that some managers at Oracle caused ). So again, that's nice but IMHO, still risky.

      So all of them may be worth to buy, but that's quite expensive for 1) something you do not use 2) something you fight against and 3) something you may not keep. if you start to be stupid

      Existing contracts are a investement, but again, that's limited in time. And there isn't much assets, computers often depreciate soon, offices are rented most of the time.

    7. Re:What a dumb statement by petermgreen · · Score: 2

      The copyrights only have significant value if two conditions hold

      1: The company has retained the power to relicense the main parts of the codebase (e.g. they have been very careful about getting "contributor agreements" from any external contributors) and it's affordable* to replace any parts of the codebase that are incompatible with propietry licenses.
      2: There is a group of people who will pay to use the code under terms other than those in the opensource license..

      * What exactly affordable means depends on the size of the group mentioned in condition 2

      --
      note: i'm known as plugwash most places but i screwd up registering that here somehow in the past and now can't register
    8. Re:What a dumb statement by Grishnakh · · Score: 1

      And finally, acquiring people is nice, but in most country, people are free to leave a company at will, and I am prety sure there is lots of example of people leaving after being acquired ( I think Oracle/Sun is a prime example of that, given some problem that some managers at Oracle caused ).

      There indeed are plenty of examples of that (and yes, Oracle/Sun is the poster child), however I don't think the dummies running companies and making these decisions actually take this into account very much. Oracle obviously didn't, in their extreme arrogance. In fact, I'm sure it's the exception rather than the rule anyway; most people stick with the job they have unless there's something about it they really don't like, or they get an offer that's too good to refuse elsewhere (and they usually have to go looking for it, meaning there's something they're not happy with at their current job). As long as the acquisition doesn't screw things up too bad, they probably don't result in many resignations, unless it's pretty obvious the acquisition is being done with the objective of gutting the company and getting rid of everyone. I think Oracle is an exception.

    9. Re:What a dumb statement by eric_herm · · Score: 1

      Oracle didn't buy Sun for the people, there was patents involved, there was also the various trademarks and stuff like that, and they wanted to have a complete stack. However, people told me that Oracle was not a so bad place to work, but i guess the management didn't care about redundancy.

      And regarding people leaving, I have also heard of the same pattern when Mandriva acquired Connectiva, ( or Linbox ), with high profiles coders leaving after a while. Sometimes, that's just management screw up ( or just resources rationalisation, like "we do not plan to keep developing this product" ), sometimes that's just people wanting to leave for a while ( especially if, like Sun, the company was not doing very well before being bought ), and the merger is just a electroshock. Seeing others leaving give you incentive to do the same. Or just people who want to try something different, ie nothing rong especially with job per se.

  2. Funny dictation error in TFA by OneAhead · · Score: 0, Flamebait

    "If you honestly believe that robust community builds better softer, than this makes more sense," Whitehurst said.

    Obviously some journalist isn't very familiar with their subject matter.

    1. Re:Funny dictation error in TFA by OneAhead · · Score: 1

      Umm, in what way was that a flamebait???

  3. Built for sale.. by Dareth · · Score: 2

    What I got from the article is that they are will to buy a company with:
    an established community based product
    centralized developers willing to work for Redhat

    For companies that have distributed developers/contributors, they tend to just hire major contributors to steer it in the direction Redhat wants it to go.

    --

    I only look human.
    My mother is a halfling and my dad is an ogre, so that makes me an Ogreling
    1. Re:Built for sale.. by eric_herm · · Score: 1

      To hire major contributors, or just to put people to work on feature. For example, take openstack. There is people working on this on the interoperability with various RH stack softwares ( http://fedoraproject.org/wiki/Features/OpenStack_using_Qpid ). By making sure standard are respected, there is less lock-in, and better software for everybody. Better for RH, since their clients can use their usual stack ( ie, the RH one ), better for the client cause they have more choice, better for the community, cause they can offer easier integration with others users, and because they have more contributers. I guess the only one losing are rabbitmq in this case ( rabbitmq being property of vmware ), and even, they can use interoperability like RH did to get people on their software by competing on features or anything.

      ( of course, that's a almost ideal example )

  4. Intangible Value != price by Anonymous Coward · · Score: 1

    As someone who worked in High Performance computing before turning to the dark side of IT/IP law, perhaps I can illustrate how intangible value is calculated

    a) Patents - traditionally were the dividing line in the noo-sphere invention space marking where a claim was being worked. Apart from a signaling mechanism (mating call to VCs), most industry accept that the real-worth is the tacit knowledge in headspace of the invebtors

    b) Copyrights - may be F/OSS but acquisition of legal ownership grants pararights of offering alternative licenses under different terms, management rights of deciding what to approve/release when, and ability to alter the direction/intensity of project

    c) Trademark - or more accurately celebrity rights such as Torvolds by Transmeta. Bragging rights are well accepted as institutions like Harvard collect Nobel laureates. However, you might also acquire traits such as time to market, low bug defect or rapid user feedback

    d) Indigenous knowledge - which is the result of domain expertise and can be unique or hard to duplicate. Mozilla in web standards formation/propagation, Apache in internet performance engineering, the complex peripheral skills that enable complex products to evolve. Building a similar socio-cultural organisation with the same incentives, rituals/story telling and passion/values is non-trivial (cf Craig List)

  5. People Red Hat employes is the reason we pick them by ron_ivi · · Score: 3, Interesting

    We're a pretty heavy postgres shop, and Red Hat employing one of the top developers of that project (Tom) was the way we chose which distro to use (and actually pay for). Not that we actually needed such support (he gives at least as support on the project mailing list) --- but for marking reasons we needed *a* tier-1 distro with "official" "support" --- so we chose to support them based on them supporting Tom.

  6. Re:People Red Hat employes is the reason we pick t by ghn · · Score: 1

    I think you would have more return on your money by sponsoring so called Tom yourself and using CentOS or Ubuntu or whatever other free distro.

    My reasoning is, why pay for support if you don't need it? If you want to support postgres developers, support them directly.

  7. Popularity before profit by Mandrel · · Score: 2

    Apparently, it all comes down to community.

    This is increasingly true for all start-ups. Even if a start-up has no IP, and its platform can be easily cloned, it can be valuable solely from the users it's accumulated. VCs now look for at least one of the 3Ps: people, profit, and popularity. Get the people then find a business model to exploit them.

  8. Re:People Red Hat employes is the reason we pick t by eric_herm · · Score: 1

    Centos is not free, it is paid by Red hat ( cause packages and software do not write by them self ), so that also make sense to pay RH if people want to keep Centos alive.

    And supporting alone a developper is slightly more expensive than paying a company that does it and that share the load among customers ( cause if the price of a RHEL subscription is counted a around 1000 to 2000$ per year, you still have to pay for his paycheck, for travel and sponsoring ( ie, getting to hackfest ), hardware, etc ), so I would say that you can take around the price of 60 subscriptions just to have someone sitting coding for postgresql for you ( and for this, you have a full time coder not working on your product, cause if you pay a postgresql developpers to make it work on somethig else than pg during work time, you are not sponsoring them that well, and he is no longer a top coder ).
    In practice, I think that's indeed a good way to do this, but in practice, only few companes are willing to directly sponsor developpers, and only a few, so for the rest, mutualisation of ressources by paying companies sponsoring ( be it RH, or entreprisedb, or any others postgresql supporting companies ) is the way to go.

  9. politics by Anonymous Coward · · Score: 0

    All this sound to me like the typical BS you can expect from a sales oriented company.
    They need communities to save money on development.