The VAR Guy

The open source world is cheering as Red Hat joins the S&P 500. It’s a huge vote of confidence in Red Hat. But is it a vote of confidence in the open source business model? Or more of a sign that Red Hat is miles ahead of its open source rivals on Wall Street and in the channel? Some clues from The VAR Guy…

First, some background. Generally speaking, Red Hat is the only publicly held open source company that’s consistently profitable — thanks to both Red Hat Enterprise Linux and JBoss middleware. Sure, Novell is publicly held but the company’s quarterly net income frequently swings from the black to the red. Plus, much of Novell’s revenue involves closed-source opportunities.

So, the big question: Just how healthy are open source companies? And which ones are best positioned to launch IPOs (initial public offerings) once financial markets further improve? Here are some quick educated guesses.

• Open Source Channel Alliance: Keep an eye on this group, involving Red Hat, Synnex and roughly 10 open source software providers. The goal is to train Synnex’s 15,000 resellers on open source solutions. The group plans to host an educational summit on July 23. Hewlett-Packard will be among the guest advocates. Plus, there are rumblings the Open Source Channel Alliance will attend a major channel conference later this summer. Take a close look at the group and you might find tomorrow’s household open source names.
• Potential Profit Centers: When The VAR Guy stumbled onto Sopera — a profitable open source company — earlier this month, our resident blogger asked readers which other privately held open source companies were profitable. Chatter from both Alfresco (open source content management) and Digium (open source IP PBX, Asterisk) suggests both companies are profitable and in growth mode. In fact, The VAR Guy will be attending Digium’s Astricon conference in October to get a better feel for Digium’s business and channel partner performance.
• Evolving Strategies: The VAR Guy has closely watched a CEO change at SugarCRM, and special pricing incentives from both SugarCRM and Groundwork Open Source. Now, Jaspersoft — an open source business intelligence specialist — also is offering special pricing incentives. But are the incentives signs of weakness or accelerated strength? Buried within this press release, Jaspersoft says it has enjoyed 21 consecutive quarters of record sales growth.
• The Canonical Factor: Word on the street suggests that the Ubuntu Linux promoter is approaching $30 million in annual revenues, according to a New York Times article. But would Mark Shuttleworth ever launch an IPO? The VAR Guy wonders…

Publicly, the evidence is clear: Red Hat seems to be the poster child for a successful, publicly held open source company. But privately, there are indications that more open source companies will join the IPO party once financial markets show continued strength.

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