Wednesday, May 15, 2013
Editor’s note: A cultural revolution is taking place in the open source world. Michael Skok of North Bridge Venture Partners, who together with Black Duck Software hosted the 2013 Future of Cloud survey, says “open source is eating the software world.” He sheds light on where and why change is happening, what’s on the horizon for open source and the implications for buyers and vendors from the significant survey findings.
SandHill.com: 822 execs (58 percent non-vendors) responded to the survey — nearly double the number of respondents in the 2011-2012 surveys. And there was a dramatic uptick in the adoption rate in the healthcare and media industries and the government sector. What’s driving the move to open source?
Michael Skok: What really moved the needle this year is that open source software (OSS) has become trusted because of its high quality and because in so many instances it’s driving innovation. Open source is no longer an afterthought; it’s a forethought. It’s what people think of first when they go to develop their next project.
SandHill.com: I noted that the ranking for better quality software moved up from number five in 2011 to number one in the 2013 survey. What’s happening regarding the quality?
Michael Skok: On the quality side, we consistently hear three aspects in the conversations we have:
1.Reduced defects faster from open source projects because they get to move at the speed that they need rather than being held to vendor time lines.
2.Better security due to broader open inspection from thousands of developers rather than limited testing from vendors.
3.Feature enhancements are prioritized by market demands in an open market.
Together, the three aspects result in significantly faster time to quality.
SandHill.com: And the first and third aspects also impact innovation.
Michael Skok: Yes, and over 60 percent of the survey respondents indicated open source is driving innovation, especially in three areas: cloud, Big Data and mobile.
In cloud, for example, projects like OpenStack are innovating in a way that you’re not seeing in closed source projects. The same thing is happening in Big Data with projects like Hadoop or derivatives of that, which are attacking problems that heretofore were not addressed in proprietary software. Open source opened up a whole new industry there. And in mobile, Android and other projects there are enabling people to develop a broad class of applications that are not available in the proprietary world.
SandHill.com: Is the pace of change the reason for the uptick in the healthcare and media industries?
Michael Skok: Yes, it’s stunning how much change is going on in healthcare mandates. The traditional vendor road map is not going to be responsive enough, and it will be tough to keep up with the pace of change unless you take an open source approach. There are already 2,000 open source projects in healthcare. We’re seeing an increase in both the range and scope of healthcare open source.
The media content and publishing sectors are also being revolutionized. Every company must become a media company these days to stay up to date with all of their audiences and maintain an ongoing dialog to build strong relationships with customers, audiences and other stakeholders. The pace of change and the interest in new media and the social world is so great that there is no way a proprietary platform can ever meet these broad needs. Successful firms will be the ones who foster friction-free networks, channel valuable content that flows through them and build engaging communities around them.
SandHill.com: Can you give an example of a media company benefiting from open source?
Michael Skok: Pinterest wasn’t even on the map 12-18 months ago, but now it’s an important social phenomenon. It was rapidly integrated into projects, like Drupal, in open source.
The depths of challenges that are being addressed in the Drupal platform are so broad, spanning everything from enabling governments to serve their communities better to the other extreme enabling music artists to reach their fans better. There’s no way a single development organization in a proprietary company could keep pace or cope with this breadth of needs. This is especially true when they’re up against the largest open source community on the planet churning out tens of thousands of modules that extend functionality and respond near instantly to market needs. It’s one of the reasons why Acquia is the fastest-growing software company in America. (Disclosure: Acquia is one of my investments.)
Open source enables a different breadth of market solutions because of its faster pace of innovation. People are getting what they need quicker, and they’re getting it in a more open way that enables them to solve their business problems more effectively and with higher quality.
SandHill.com: The most interesting survey finding around innovation is the high number of respondents that are engaging in collaborative innovation.
Michael Skok: Yes, that’s a big finding that we’ve not seen in the surveys prior to this year. It came out in two distinct points: nearly half of the respondents said that they are collaborating in partnerships, and 57 percent of them said that they are willing to collaborate with competitors in industry-specific communities (such as GENIVI in the automobile industry or OpenStack in the high-tech arena) over the coming years because it’s a win-win. The implications of this mindset are huge.
SandHill.com: There are still some barriers to adoption. The survey respondents ranked deployment complexity as number two. What causes the complexity?
Michael Skok: Companies are dealing with more and more components. The complexity is associated with organizing all those modules into a solution and then the testing and certification of them. This is a critical part of what Red Hat provided in the way of value to Linux. I don’t think that’s going to go away soon. But it may be different for certain projects and SaaS can reduce those complexities in some cases.
It was very interesting to me in the survey to see that vendors dropped complexity as the top issue in open source projects. But the reality is there will be more complexity associated with more and more capability available in open source, and that gives room for open source vendors to create packaging and production-ready solutions and support them.
Communities are also gaining critical mass, so they have in their own rights a broad enough set of contributors and people who support them that make it easier for a potential user to adopt them without vendor support.
However, I don’t think it’s going to diminish the opportunities for vendors because there are so many more projects available now in open source; and, of course, the broader they get, the more complex they get and the more opportunity there is for vendors to simplify and package them and deliver them in a consumable fashion.
It’s a reason why we’re seeing vendors’ growing interest in SaaS as a means to monetize because that way they can hide all the complexity and deliver it as a service.
SandHill.com: Please discuss the investment in open source as revealed in the survey. Where is the investment activity happening these days?
There are three big areas. The first is cloud, where we’re seeing significant investment in the core of cloud capabilities to enable the next generation of what I would call utility computing services.
The second investment area is in Big Data, where there is obviously a huge business problem continuing to grow in importance as people try to make sense of the enormous amount of data that’s being collected everywhere from the Internet, user-generated content from the devices we carry and wear and the revolution of the “Internet of Things.” Every two days we create as much information as we did from the dawn of civilization up until 2003. That’s five exabytes of data every two days and the pace is accelerating. Open source has been leading the charge to manage and process data at this incredible scale with projects like Hadoop. As you might expect from those data points, there is a massive uptick of investment in this area.
Mobile is the third big area of investment. Now, mobile devices and sensors enable us to have computation follow our activities both at work and at play enabling the area of “Quantified Self.” So there’s an endless opportunity there of new investment areas for people to fund.
I’m not sure it’s obvious yet which of those will emerge as the winners. But we think some of the combinations are really interesting. For example, one is mobile applications that can track activity and collect data in the cloud and use Big Data techniques such as Hadoop to produce insights into how to be more effective in our business processes.
So when you look at the dollars invested in open source it’s not surprising to see dollars going up from $200 million to over $550 million. But what was interesting is the number of deals went down. So we’re seeing fewer higher-quality deals being done but with an average deal size that is up over $15 million.
SandHill.com: You have been a champion of OSS for over a decade. Do you have any assumptions about the degree of change that we might see over the next 12 months?
Michael Skok: I fully expect the adoption trends to continue. If we can make the claim that software is now eating the world, I think open source is eating the software world. I predict that open source will continue to lead innovation in all the major areas where software is advancing and it will therefore continue to take more and more of the significant component of value that would have been traditionally assigned to proprietary solutions.
If I were to get very aggressive about this prediction, I think we’ll see major traditional proprietary vendors (such as Oracle and SAP, although Microsoft has already responded) having to pay more attention to open source both as a source of innovation and as the new model for development and delivery of their software or risk becoming laggards.
SandHill.com: Will that result in the proprietary vendors acquiring more of the open source vendors?
Michael Skok: I hope not. I think we’re going to see some significant new vendors getting to critical mass of being public. I think you’ll see vendors like Cloudera, Acquia and hopefully many others we don’t even know of today defining the new software landscape. They’ll do it through their communities, their innovation as well as their business models and the value proposition for customers. I think that players like these will be the future of the industry.
SandHill was a collaborator on the 2013 Future of Open Source survey conducted by North Bridge Venture Partners, Black Duck Software and Forrester Research. Click here to view a slide presentation of survey findings.
Michael Skok joined North Bridge Venture Partners in 2002. Michael was a software entrepreneur and CEO for 21 years and now a VC for over a decade. He founded, led and attracted over $100M in private equity to investments in several successful software companies. He created the first, industry-wide open source survey; in SaaS he’s led CIO forums for over a decade, culminating in his work at mjskok.com/cloud. Michael also focuses on ecommerce, mobile and Big Data applications. Representative investments include Acquia, Akiban, Apperian, Demandware, Unidesk, Actifio and Revolution Analytics. Contact him at firstname.lastname@example.org.
Kathleen Goolsby is managing editor of SandHill.com.Back to all News