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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."

9 of 20 comments (clear)

  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: 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.

    3. 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.

    4. 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.

    5. 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
  2. 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
  3. 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.

  4. 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.