Database 2.0

For a long time (decades I believe) it seemed like the General purpose Database was the silver bullet. Object Oriented Databases tried to take the shine away from RDBMS , but only to strengthen the notion that RDBM’S do best at what they are supposed to do – Store , Query and Update Data.

The application development world adjusted to the notion that the Object Relational mismatch is a reality and instead of fighting it let us work with the RDBMS systems and make world a better place. Tools like Hibernate had great success because they accepted the strengths of RDBMS as compared to competing technologies at that time like EJB's . The Enterprise was also caught up in the ERP wave where everything in the Enterprise needed to have a predefined structure, vocabulary established etc.

2007 brought some interesting changes in the DB world. Web 2.0 brought the concepts of self organization , realization that all information does not reside in-house , that everything cannot be structured , that Information Management is not just EDW / BI - there is a whole world out there with unstructured information and Semantic Web . Consequently SQL and RDBMS is not the silver bullet.

2007 also brought some interesting DB’s to the forefront including SimpleDB , BigTable , HP Neoview , CouchDB each of these serving very different purposes finetuned for particular needs.

So the definition of Database 2.o in my opinion is that it is the realization that all information in the Enterprise cannot be out into RDBMS , cannot be structured and that there can and will be multiple datasources to information within and Enterprise.

So what is my point ?

I think the Database market is splitting into two layers
1. The general purpose database market - now turning out to be a commodity market
2. The specialized DB market

So finally I would like to close on the trigger that got me to think the above - The mysql acquisition by sun – Why does sun need a database product NOW ? it has severe wall street issues and convincing the market of buyout of a company that gives away free products is going to amazingly difficult.

Here is the answer I came up with .
With the technology and engineering capability needed to build a general purpose database generally available – Building a high performance RDBMS system that competes with the likes of Oracle and DB2 does not seem like a very big challenge. So if competing on price and brand are your differentiator's in the general purpose DB market then what better way to compete by giving the product free.

Now monetization on mysql and revenue potential is a separate discussion. My discussion above is keeping the number of deployments in mind.

more reasons for the Sun / mqsql acquisition

Collective Business Intelligence and Enterprise 2.0

Web 2.0 as defined by Tim O Reilly is "the design of systems that harness network effects to get better the more people use them" . In his blog piece he describes very eloquently how Google's Page Rank mechanism is good case of harnessing user generated content.

Now take this to the Enterprise context. Up till now most of the discussion of Enterprise 2.0 I have seen revolves around two things
1. Harnessing Collective Intelligence of workforce to collaborate and share via tools like Wiki's , blogs . Product sets include Lotus Connections , Suite Two
2. Conversion of traditional office tools to Office 2.0 style platforms. Google Docs , HP Adaptive Enterprise Solution are excellent examples that basically focus on the ability to conduct normal business in a collaborative environment without being co-located.

A third part perspective of Enterprise 2.0 that should probably be included in the mix is the Business Intelligence gathered as a result of the network effect taking place with the continuous accumulation of Employee and Customer generated data and having an even broader data set as a result of SaaS applications serving more than one Customer.

So consider Salesforce.com - with several organizations using salesforce.com , they pretty much know the business benchmarks of processes in an industry (example :If they have 15 customers in the consulting space who use salesforce from sale to staffing cycle , salesforce will have the data to understand what it takes to improve the cycle by comparing various customers).

Frankly , If I was an SaaS player , I would pay to get users to use my software so that I can get their data and further master the business processes based on Data Analysis. As Tim pointed out , that in Web2.0 world Data is King and for Enterprises in 2.0 world , knowing what data is your core asset (and hence not shareable) and what data is something that you can share is going to be key.

So now you know - why did SAP buy Business Objects ? To enable Collective Business Intelligence on their Business By Design platform stupid.

open source and consulting

Having read posts from Andy and Stephen O Grady. Here is my grey matter added to the collective intelligence around the topic.

Making money in open source is still IMHO not a proven business model (Refer Andy- Redhat revenues <> $5 plus ranges and most of the venture cap money going to open source , But the monetization method is not yet clearly established yet.

My take on open source monetization is the following. (Besides my thoughts here , here and here)

Convergence between Services and Product firms is inevitable(specifically in the open source space). Andy's POV of around consulting dollars in the open source space comes from a traditional view of a consulting firm where products and services are two separate businesses. There might not be that clear a boundary in the future.

Case in point - Infosolve . This is an open source vendor which has a go to market strategy with Services as the Front end and products as the back end (the enabler for services). This is different from other open source players like Redhat where they are essentially a product company which also offer services. My guess is that all open source vendors will end up having a significant part of their monetization coming from services(Consulting , SaaS OR some other form - example mysql service). The role of the open source products will boil down to enabling you to provide a better service model for monetization OR (worded differently) open source software products will end up being enablers for some other revenue stream - hardware sales for companies like HPQ , JAVA and IBM OR services sales.

For SaaS doing open source is more of an internal cost saving function while for Consulting it will be revenue generating function. So IMHO companies like EDS , CG ,Accenture will have to develop open source products/tools etc that enable selling their solution in a vertical.

Here are three examples illustrating in different ways how a consulting firm will work in the open source space.

1) If I have to sell a Application Modernization Solution to a Bank as a consulting firm. I will be expected to bring to the table a set of products(potentially open source led by my firm) that will enable me to implement the Enterprise wide program. These products could be similar to openDQ or an indemnified stack of open source products like the one offered by Spikesource. These expectations are present today also from customers and they are fullfilled by partnerships and alliances , but in the future there will be a conflict of interest situation between the company creating the open source product and the traditional consulting company because both the companies have the same path to monetization - SERVICES. This is a situation similar to IBM Global services , where the alliances with IBM generally do not work out for services firms as IBM has a strong services arm.

2) The Value of SI's is going to come with their ability to pull a stack of open source products together to address Enterprise challange's. rumormill tells me that spikesource is hungry for revenue and not doing too well. I am not surprised. As a buyer , what is the value of spikesource to me- It is basically an insurance policy for my software. I am not sure if a stable product like
Springframework OR Hibernate requires insurance (it is really counter intuitive). Now lets consider if Spikesource was really a Systems Integrator and as one of its offering provided SOA implementations. As a buyer I see the value in going to with spikesource as it will not only execute the project but also indemnify the software it is using. The way mysql is using services like network monitering is also an interesting case of how services will play and important role.

Note: I have heard the Spikesource is moving towards this direction. It has also ventured into the Software Appliance Direction with Intel on its investors list

3) Lastly the role of consulting companies to advise / Strategize and help customers define the roadmap etc will always remain. This is the High value - low scale funtion Andy talks about. It will be the ability of the consulting firm to understand the vertical and have solutions that fit into what the customer is looking for that will provide the scale for the Consulting firm.

For Product companies , it is going to be important to figure out a monetization mechanism that does not rely on monetization at the time of distribution of bits and bytes. Maybe they will have to come up with appliances like you see for (Neoview and Datapower and tealeaf and SuiteTwo) OR end up being SaaS companies like - Microsoft -live , Google and Salesforce.com OR go about a consulting services route indicated in this post or an IT-BPO route discussed earlier

Microsofts Tolerating Piracy strategy and open source

Reading the story in Fortune was an eyeopener for me and it started a debate in my mind regarding what open source evagelists have been saying and Microsoft's strategy. (NASDAQ: MSFT)

The open source story has been that there are three kinds of consumers
- People who will never spend on Software (students , startups , etc)
- People who will always spend for Sofware ( As they want indemnification , Software contracts etc). generally Publicly traded companies.
- People inbetween.

Companied like Sun (NASDAQ: SUNW) have taken this to the core and have a go to market strategy that is inline with this concept.

The Fortune article and specifically the comment from Bill Gates

tolerating piracy turned out to be Microsoft's best long-term strategy. That's why Windows is used on an estimated 90% of China's 120 million PCs. "It's easier for our software to compete with Linux when there's piracy than when there's not," Gates says. "Are you kidding? You can get the real thing, and you get the same price." Indeed, in China's back alleys, Linux often costs more than Windows because it requires more disks. And Microsoft's own prices have dropped so low it now sells a $3 package of Windows and Office to students.

was an eyeopener because to me Microsofts strategy is more evolutionary in nature and also protects its interest recognizing the fact that customers will evolve and hence pay later on. Students will move into organizations and startup's will turn into public companies at some point of time. I do not mean to imply that SUN does not recognize the evolutionary nature of customer , but they are giving an option to the customer - not to pay if they think they can maintain SUNW software themselves. While Microsoft will use its Legal muscle later on in the evolution of the customer and force them to pay.

Comparing Commercial Open Source and Traditional Software company’s business models

The world of open source now has a host of players in different forms. Here is my attempt to classify the two different business models taking a style used earlier by Tim O Riely to describe Web 2.0.

My aim is really to compare Commercial Players. I consider Software Organizations like Apache and Eclipse as NGO’s in the open source world as the aim for these organizations is not to make money, it is really to benefit the industry by having common standards in the industry and leveraging shared development.

Yes it can be argued that IBM makes money from Eclipse via Rational Tools and that member organization benefit from Apache by reducing production costs in producing a commoditized product like a webserver. I still consider these examples as Not for Profit because the monetization on the product is not a guarantee for the company doing the contributions. As an example IBM has been able to monetize on Java more so then the founder of Java -Sun and that Apache Webserver is benefiting an entire industry as compared to a direct player like IBM.

	Traditional Software Companies	Open Source Commercial Companies
Some Names	Microsoft , ILOG , Chordiant	Red Hat and JBoss , mySQL , Sun(Solaris) , Spikesource
Supply Chain	Integrated. One integrated provider that creates the product, tests it , supports it , consults on it	Loosely coupled. Generally different entities creating the software , distributing the software , testing the software. Generally each layer has to have a value add or else will be removed
Marketing	Traditional Top Down Marketing	Bottom up Marketing
Sales Function	Commission based sales agents OR Distributors	No Sales function. Order processing and operations only. refer death of cold calling
People	Designations are important - Product Manager , VP Software development etc	Brand Name Individuals - Linus Torvalds , Rod Johnson
operations	Similarities to Manufacturing (where you do Market Analysis , Product Design , Develop the product and roll out in the market). Products have a low barrier to entry if coming from establised vendors like Microsoft	Similarities to Movie Studio's where the aspect of running the business is a very different function from creating the Intellectual Property. Movies run on Brand name individuals like Tom Cruise and not on studio name
Monetization	at the time of distribution and potentially each Customer / vendor interaction	Monetization : several models (advertising , Conversion , professional Services , several more) but not necessarily for each interation
Product Lifecycle	Market Analysis , Business Case around revenue potential, Product Design , Develop , Test , Marketing , Sales , Maintenance then Next Release	Personal Situation Analysis , (develop , Release , Test) , (develop , release , test ) , Market and Revenue Potential , Bottom Up Marketing

Does open source make ecomonic sense ?

this is a topic talked about at several places including here (Jonathan) and here (Red Monk) all of which are perfect arguments ?

A point I felt that was not clearly articulated in my earlier readings was that I look at open source as just a different Market Capture Strategy.

You have a choice today. Do you want to spend millions in Marketing and Sales of your product or do you want to spend those millions into the product and follow the route of Bottom up marketing. ( and refer : death of cold calling)

Refer to what an a CEO of Major insurance carrier says regarding barriers to entry. I shall explain in a different blog entry of how the barriers can be eliminated in Web2.0 world.

Keeping the discussion to making money in open source. Once you leverage open source to overcome the barriers to entry you have several ways to make money including :

Business Models
- Donations : Apache , Debian
- Advertising : Sourceforge , O’Reilly Media, Sys Con
- Membership : Eclipse , Java.net
- Conversion :
--- Maintainence / Support / Subscription : JBoss , Solaris
--- Brand ownership - IBM (Eclipse)
--- MEdia Kit - Suse Linux
---- Add Ons (Dual License) - Niku Clarity , mysql

- Software as a service - Google with GMaps and a bunch of other services . Frankly if you are in SaaS world there is an even better case for you to go open source as the customer is interested in the service and not the software.

- Professional Services - interface21 (Spring framework)

Also note the Demand supply equation in the open source world works like this

Supply side:
- Technology Vendors : Achieve critical mass and gain market share aggressively
- Technology Vendors : Share cost of development and testing
- Individuals : Solve a particular problem and make the solution available to the world
- Individuals : Get involved in an areas of interest to learn , contribute and help career.

Demand Side :
- Lower Total Cost of ownership
- Transparency and freedom to enhance , modify the products to suit specific needs
- Better quality as a result of large user community base and hence more testing and improvements
- Demand side decision influencers generally involved in open source world


Understanding the type of payer you are in the open source world and understanding the kind of leverage you are looking for from this type of model is key for Enterprises.

Here are some personality traits of open source players

Three kinds of players
»Innovators – Model : Build Great Products - Achieve Critical Mass very aggressively ---Make $$$ by any/all of the Business Models
- Hibernate , Spring , Linux : started by a developer to scratch an itch and then they got a life of their own
- Eclipse , Netbeans , Tomcat : started by Big product companies as a strategy to achieve Critical Mass ASAP and leverage economies of scale

»Contributors - Ride on the success of a good open source product. Strategy is to start contributing to successful products. Come on the main contributor list and then you sell your expertise in that area by virtue of having IP on the product. Example JBoss/Tomcat story , numerous one person outfits.

»Consultants - Neutral parties who look at open source as another IT Solution for the their client. Build the expertise by working on the technologies and tools