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Can Sun make MySQL pay?
InterOpNews ^ | 2008-01-23 | Jeff Gould

Posted on 01/23/2008 8:57:31 AM PST by N3WBI3

How can an open source software company with $70 million or so in revenue and no profits to speak of be worth $1 billion? That's the question Sun CEO Jonathan Schwartz has been trying to answer since he bought MySQL last week.

The question is not how can Sun make any money from MySQL – this is after all a commercial company that already has an established business selling enterprise support subscriptions – but rather, how can Sun make enough money to justify that incredible price? To get a feel for what a reasonable answer to this question would look like, let's consider the valuation the stock market places on Sybase, which is the only publicly held pure play database vendor still around. Right now Sybase's enterprise value is around $2 billion, or roughly double its current annual sales. By this measure, Sun would have to grow MySQL's revenues to $500 million per year to bring it into sync with the purchase price. Somehow that doesn't seem very likely, at least not in the foreseeable future.

Not surprisingly, Schwartz's first defense is that Sun will get its own back indirectly, by selling more servers, storage and networking gear to data centers deploying MySQL. That makes sense, because you can't run a database without hardware. What's not so clear to me though is why large numbers of MySQL users who have been happily using some other brand of hardware until now will suddenly switch to Sun. Sure, owning MySQL will open a few doors for the guys selling Sun boxes, and that may lead to a few extra sales. But it's hard to see how these relationships can translate into the large and sustained stream of new revenues Sun would need to make the acquisition numbers work from hardware alone.

So the question boils down to this: how can Sun hope to wring a lot more subscription sales out of MySQL than MySQL could by itself? Schwartz has a ready answer here. He says plenty of Fortune 500 CIOs are eager to use MySQL for mission-critical applications but have hesitated until now because they wanted the reassurance of support from another Fortune 500 company. One like Sun. This argument seems undeniable, as far as it goes. But I'm still left wondering, can Sun make MySQL subscription sales rise far enough and fast enough to justify that humongous billion dollar price tag?

Only time will tell. But in my humble opinion, MySQL's open source business model will make Sun's road to payback a lot steeper than if it had bought a software company with conventional revenues and profits. To see why this is so, we have to drill down a little into MySQL's business model.

Like most commercial open source companies, MySQL makes money by enticing well-heeled customers to pay for an enterprise version of its product that comes with more bells and whistles than the community version it gives away for free. Both versions are available under the GPL, but MySQL also offers a commercial license aimed mainly at OEMs and ISVs who want to bundle MySQL with proprietary software packages. Like Red Hat, MySQL limits access to the binaries of its Enterprise version to paying customers. If you want a free (but unsupported) copy of MySQL Enterprise Server, you'll have to compile it yourself.

Unlike Red Hat's RHEL and Fedora versions of Linux, however, MySQL's two versions are built from exactly the same source code, although their binary versions are not guaranteed to be identical at any given point in time. Fedora is a fast moving beta version that lets users try out new features before they are rolled into the more stable and less frequently updated RHEL. MySQL Community Server, by contrast, is updated on a slower and less regular schedule than MySQL Enterprise Server. Only Enterprise subscribers get the latest binary patches immediately. Free users have to wait for the next Community release (published at unpredictable intervals), or else recompile the updated source code themselves, or hope that their Linux distributor picks up the patch from MySQL. These differences of course have been cunningly designed to make the hack-it-yourself Community version an unattractive option for any enterprise running big time business applications in a production environment. Don't get me wrong. I'm not saying this is an unreasonable strategy for MySQL to adopt. After all, it's damn hard to make money if nobody ever buys your product.

It appears though that the additional features of the Enterprise version are not enough to compensate for the revenue-destroying effects of the free Community alternative. What else could explain the surprising fact that MySQL has quietly filled out its open source portfolio with a closed source proprietary management software tool known as Enterprise Software Monitor? This technically impressive product has a growing feature set that includes the ability to monitor and manage multiple MySQL instances from a single web console. The basic version of it comes bundled with the $1,999 per year Silver subscription to MySQL Enterprise Server. More feature-rich versions (including replication and memory usage management) come with the $2,999 Gold or $3,999 Platinum subscriptions.

The fact that the second most famous open source company on the planet has been busy selling closed source software has attracted remarkably little critical notice from the usually vocal open source community. I don't think it's because people are applying a double standard to MySQL. Rather, it's simply that they haven't noticed. This is not completely accidental – you will look in vain on the MySQL web site for any explicit acknowledgement that Enterprise Software Monitor is not an open source product.

Again, don't get me wrong. I see absolutely nothing wrong with MySQL selling closed source software too, especially since their open code is a full featured version of their mature flagship product and not some truncated subset (a la SugarCRM) or bleeding edge beta (a la Fedora). I do find it amusing though that the company's marketing mavens obviously don't think it's a good idea to tout this aspect of their strategy. This only goes to show how much of the open source movement is driven by political correctness and hipper-than-thou posturing rather than business reality. Let's face it, open source is a gutsy, ingenious and entirely legitimate way for marginal software players to break into a market dominated by powerful closed source incumbents such as Microsoft, IBM and Oracle. It is not, however, a viable political or economic philosophy – last time I checked, there is still no such thing as a free lunch. Nor is it a way of saving the planet or even, sadly, the whales.

The reality is that – despite or more likely because of – its open source business model, MySQL wasn't growing fast enough or making enough money to entertain the prospect of an IPO. Its venture capitalist backers, in for many tens of millions of dollars, were no doubt getting nervous as they realized the company was never going to be another Salesforce.com or VMware. Of course, as Jonathan Schwartz recounts in his blog, people have been making private offers to acquire MySQL for years, and these offers have always been declined. But this time the owners – the VCs, founders and executives – agreed to sell. No doubt they concluded that, on the eve of a possible slowdown in IT spending and with a strategic buyer like Sun willing to pay many times the company's paper value, they weren't likely to see a better offer in the foreseeable future. I'm pretty certain they were right.


TOPICS: Business/Economy; Computers/Internet
KEYWORDS: mysql; opensource; sun
I certainly hope SUN keeps MySQL as a free product and sells enterprise support.. It would be ashame to lose such a great community tool...
1 posted on 01/23/2008 8:57:32 AM PST by N3WBI3
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To: N3WBI3; ShadowAce; Tribune7; frogjerk; Salo; LTCJ; Calvinist_Dark_Lord; amigatec; Fractal Trader; ..

OSS Ping


2 posted on 01/23/2008 8:58:05 AM PST by N3WBI3 (Ah, arrogance and stupidity all in the same package. How efficient of you. -- Londo Mollari)
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To: N3WBI3
I certainly hope SUN keeps MySQL as a free product and sells enterprise support.. It would be ashame to lose such a great community tool...

MySQL Community Edition (the version that the Enterprise Edition is based on) is GPL software. Sun can't make it not free.

Sun thinks it can do a better job of selling support than MySQL AB has done and it puts Sun in a position to compete with Oracle.

MySQL isn't up to handling the upper end of enterprise database needs but it can certainly take care of most LAMP and web services database needs. This is where Sun sees an opportunity.

But MySQL will stay free. If Sun has other ideas the source can be forked and MySQL will get a new name but it will still be available.

Considering how Sun has opened up the source code to Solaris and Java, I doubt we'll see Sun even try to close up MySQL.

3 posted on 01/23/2008 9:14:21 AM PST by Knitebane (Happily Microsoft free since 1999.)
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To: N3WBI3

I’ve been meaning to check out SQLite for a while. Now that Sun has bought MySQL, I’ll be doing that soon. There’s also Postgres, which has had a terrific reputation for a long time.

I’ll miss MySQL, which has served me well for years. But in the years I’ve been working with Solaris, I’ve come to think of Sun as an annoying Microsoft wannabe who does not deserve my support. Linux is better.

They always cancel the TV shows I like. And Fred dropped out of the presidential race. No use crying over it. Just look at the options that remain.


4 posted on 01/23/2008 9:14:38 AM PST by irv
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To: Knitebane

“MySQL Community Edition (the version that the Enterprise Edition is based on) is GPL software. Sun can’t make it not free.”

But they can let it die on the vine...

“If Sun has other ideas the source can be forked and MySQL will get a new name but it will still be available.”

If the resources are out there to fork it, it could set MySQL back a couple of years while the infrastructure for that materializes..

“Considering how Sun has opened up the source code to Solaris and Java, I doubt we’ll see Sun even try to close up MySQL.”

I agree give who their enterprise java apps are, for the most part, free to use sans support.


5 posted on 01/23/2008 9:29:51 AM PST by N3WBI3 (Ah, arrogance and stupidity all in the same package. How efficient of you. -- Londo Mollari)
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To: irv

“Now that Sun has bought MySQL, I’ll be doing that soon”

I would not be so quick to discount sun, they are a very OSS friendly company.


6 posted on 01/23/2008 9:30:43 AM PST by N3WBI3 (Ah, arrogance and stupidity all in the same package. How efficient of you. -- Londo Mollari)
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To: N3WBI3

Powder..patch..ball FIRE!

I just finished a Mysql 5.0 database conversion to Sql Server 2005.

Man am I happy not to be using Mysql any more.


7 posted on 01/23/2008 9:45:17 AM PST by BallandPowder
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To: BallandPowder

Ive had nothing but good experiences with MySQL of course I was running it on a redhat distro so all the patches applied were nice and vetted..

Ive administered both MqSQL and SQL Server (RHCE and MCDBA) they are pretty comparable in power and with the right interface (which you get with the mysql enterprise) just as easy to manage..


8 posted on 01/23/2008 9:51:11 AM PST by N3WBI3 (Ah, arrogance and stupidity all in the same package. How efficient of you. -- Londo Mollari)
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To: N3WBI3
they are a very OSS friendly company.

More so than some others (*cough* Microblech! *cough*), sure. But as a customer of Sun products I have not been very impressed. Solaris is a good, stable, solid OS (though we had some trouble with 10 on Intel). When I've needed support, however, I have found that dealing with Sun raises my blood pressure.

I dislike the company and seek to avoid them where possible.

9 posted on 01/23/2008 9:51:33 AM PST by irv
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To: N3WBI3
If the resources are out there to fork it, it could set MySQL back a couple of years while the infrastructure for that materializes..

Since most of MySQL's developers don't work for MySQL AB, the resources will be there.

10 posted on 01/23/2008 9:52:03 AM PST by Knitebane (Happily Microsoft free since 1999.)
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To: N3WBI3

Powder Patch..Ball FIRE

We were using 5.0 community version on windows.

Hated it. Hated having to code around bugs. Hated the dreaded mysql lost connection error. Hated having to code around the slow spots in the code.

and I like open source products and use them.


11 posted on 01/23/2008 10:28:13 AM PST by BallandPowder
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To: BallandPowder
We were using 5.0 community version on windows.

Ewwwww.. That does not speak poorly of the product its speaks poorly for whoever decided to run it that way in the first place! Thats like running SQL Server 5 on wine and complaining that its a pain to setup and maintain.

12 posted on 01/23/2008 11:35:52 AM PST by N3WBI3 (Ah, arrogance and stupidity all in the same package. How efficient of you. -- Londo Mollari)
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To: N3WBI3; HAL9000; nickcarraway; Incorrigible; ShadowAce; backhoe

This brings to mind the classic old essay and the discussion it spawned...

A Second Look at the Cathedral and Bazaar
http://firstmonday.org/issues/issue4_12/bezroukov/


13 posted on 01/23/2008 10:13:23 PM PST by The Spirit Of Allegiance (Public Employees: Honor Your Oaths! Defend the Constitution from Enemies--Foreign and Domestic!)
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