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Open Source Changes Software Acquisitions

It used to be that when one software company acquired another, it was frequently as much an acquisition of a customer base as it was one of technology. Often it was a “strategic acquisition” which frequently meant taking a competitor out.

These sorts of acquisitions are the worst: Some innovative company gives a major player a hard time by delivering a great product. It develops a fiercely loyal customer base. “Majorco” users start to ask “when are you going to implement feature X like ‘Smallco’ does”? Unfortunately feature X requires a complete re-write of the major company’s fragile solution, and being constantly reminded of this is no fun. So what does the major player do? Simple, acquire Smallco and throw their technology away. All the customers who hated you now really hate you, but they now have no choice and the customer bleed stops.

As a customer I’ve had this happen to me more than once, and it sucks. I’ve dropped entire lines of business partially because I couldn’t bear working with the purchaser’s sorry-ass excuse for a product.

The integration process must be something else in these situations too. The guys who run Smallco are now rich. They have a contract that makes them hang around and say nice things about Majorco for a couple of years. Then they can go off and do what they want. The rest of the staff, at least those who survive “cost efficiencies”, have a choice of working with a product they probably hate, or finding new employment.

In the open source era, customers are defended from this sort of thing.
More or less by definition, a successful open source product has to be built around providing good service to their users. In many cases, a major source of that support is the community itself.

We’ve seen a couple of attempts at the “take them out” strategy in the open source world. The guys who run the acquired company still get a lot of money, but the code can’t be killed. If the code can’t be killed, then the support community will try to continue on with it. The development and documentation teams are probably unhappy or soon to be unemployed, so they’re available. All it takes is someone with good management skills and a little funding to step in and reincarnate the project, slowly working its way back to vibrancy. The purchaser can spend a lot of money to get almost nothing. Now that is a reasonable and valid outcome for a company that resorts to a predatory acquisition!

Acquisitions in the open source world are different, by definition. A successful acquisition of an open source company has to be a contract to continue and enhance the work the company is doing, or it is doomed to failure. It’s also a contract to continue the work of the development team, and to support the community that surrounds it.

The business impact of the open source movement is really just beginning to be understood. Open source gives significant power back to the users of a product, even if they’re not programmers. It decimates the influence of financial might and makes features, functionality, quality, and user satisfaction the keys to a product’s success.

A couple of large companies, notably Sun and IBM, have clearly taken time to understand this. Others are going to do their best to keep ignoring it. The longer they wait, the more it’s going to hurt.

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