Show me the Money
Mar 18th, 2008 by sharps
Matt Assay provides some good reading as usual this morning. He’s tried to correlate stock prices of a few companies who base some or part of their business on Open Source with their “Open Source Business Maturity”. Essentially he’s plotted the stock price (ie. the financial market’s appraisal of the company) of Red Hat, Novell and Sun against key events in the company’s forays into Open Source. This seems a reasonable proxy to gauge the market’s view of the Open Source phenomena as a way to make money.
What I think he’s discovered is that there are three phases a company goes through (or that the financial markets see) :
1. Words - become an “Open Source” company by announcing your intentions, plans and roadmaps. Wall street seems to respond favorably to such announcements.
2. Action - the words have to be backed up by some action (eg. Sun’s Open Sourcing of Solaris, Java, acquiring MySQL). And that action has to make business sense. And for Wall Street - business sense is about increasing return at some point in the future. These days - Wall Street doesn’t reward action or progress - it rewards results.
3. Sustainable, repeatable success - The plans and hard work have to result in sustained revenue growth, quarter over quarter; year over year. This Sysiphean task is common to all commercial ventures; irrespective of their affinity to Open Source.
I think the remainder of the decade will prove that Open Source (as a business model) is good for business - then we’ll see an inflection as it shifts from being a differentiator (for early adopters like Red Hat and MySQL) to being the price of entry.
NB. The Jerry McGuire “Show me the Money” scene still makes me laugh out loud.