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The Smart Techie was renamed Siliconindia India Edition starting Feb 2012 to continue the nearly two decade track record of excellence of our US edition.

April - 2006 - issue > Cover Feature

Open source VC: Who's giving money?

Sanjeev Jain
Saturday, April 1, 2006
Sanjeev Jain
Oracle chief Larry Ellison loves acquisitions. But not for the reason you think. Sure, he is a terrific acquirer of companies that complement Oracle but this time his targets are open source software database companies- Innobase Oy, based in Finland and Lincoln, MA based Sleepycat Software. Oracle is in talks to purchase JBoss, an open-source company that makes middleware. Oracle’s acquisition is the opening of a shopping spree by top players like the IBM and Sun Microsystems who have become major backers of open source software, utterly changing the way software is marketed.

Credit for the success of open source goes to ubiquitous Linux, which has spread to more than 25 percent of the world’s servers and has become a legitimate rival to Microsoft Corp.’s Windows. Linux not only brought to life an industry long considered a poor cousin to Windows, but also to various companies working on making open source a industry standard both for the developers and the users.

This big bang approach has attracted VC attention to this industry that has seen revival of sorts. “Good VCs listen to customers. What they are listening and hearing from customers is that conventional areas of enterprise software overtime and up through the bubble became very loaded with features, costly and expensive. In response many IT departments consider open source solution as a response to packaged, closed solutions and because of that they were willing to try open source,” says Stephen J. Harrick, Managing Director and General Partner, International Venture Partners.

He says, “The open space has attracted a lot of attention from the VC community. It is one segment where companies have been launched. There are a huge number of projects in the open space that are currently on.” Venture Capitalists invested $191 million in 51 companies in this space in 2005, the highest in five years, according to Pricewaterhouse Coopers Money Tree survey. The VC community will continue to invest in this area this year as more companies try to get into space largely due to massive demands from the IT companies and the government. Faced with the dilemma of paying huge license fees to buy a proprietary software that can neither be upgraded nor tuned to user’s specific needs, companies have moved towards open source. “Companies will take more interest as they are seeing how fast open source software has grown. Add to this the desire among customers to buy open source, good pricing, no lock in, transparency are compelling reasons. They are causing more customers to buy open source products,” says Kevin Harvey of Benchmark Capital, based in Menlo Park, CA.

There has been a realization that if companies are not using open source, then they aren’t managing their business properly. Reason? Open Source lets companies to do what they want. Just download a specific software with the source code, hire a few coders to change the source code the way you want it and there you are-a good company with up to date technology.

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