What goes wrong when a proprietary company buys an open source one?

The past few years have seen many open source companies being bought by proprietary ones. Back in 2003 Novell bought German Linux maker SuSE. A few years ago Sun Microsystems bought database maker MySQL in a landmark $1 billion deal, and then last year Sun Microsystems was itself snapped up by Oracle. One of the more recent deals is VMware’s acquisition of Zimbra.

What happens when one proprietary company buys another open source one? Can the two co-exist or are the cultures between them too disparate for a healthy future? Although it’s hard to generalise it’s often the case that the open source-proprietary match is an uncomfortable one.

The Novell acquisition of SuSE had some positive spin-offs, particularly for Novell which was briefly revitalised, but generally the merger was detrimental to SuSE Linux. And although Sun’s purchase of MySQL was a reasonable match the purchase of Sun (and MySQL) by Oracle, it has generally affected MySQL negatively. There has been a fair amount of pressure from MySQL fans and developers for Oracle to sell MySQL, the worry being that MySQL is just a fraction of Oracle’s database market and will suffer neglect at the hand of its new owners.

Bumpy road
There are a number of things I believe that proprietary companies do wrong when buying open source companies.

One of the mistakes is to try too quickly to merge the new product into the purchaser’s channel structure. Successful open source products already have their own distribution channels and forcing a change in channels on existing distributors is to risk alienating them. Resellers are also forced to re-establish themselves in the new channel structure, a time-consuming and disruptive process. And the major risk is that many of the distributors that made the open source product successful in the first place may move on to new rival products through frustration.

It’s also worth remembering that for most proprietary vendors the open source acquisitions they make are very often just a tiny part of the business that they do. For the vendors that have been reselling and installing the product, however, it may well be the majority of their business, or even their only business. It is these very vendors that helped the product to grow to its current prominence and simply alienating them is bad business practice.

These potential problems are also compounded by the fact that most proprietary vendors do not have an open source mindset. Marketing and selling open source software is not exactly the same as selling proprietary software, not the least because there are different licensing systems and, in many cases, freely available versions of the product in circulation.

The second mistake that proprietary companies make on the open source front is to assume that they are purchasing a homogeneous business. This is often not the case because while most successful open source products are developed by a core group of developers they typically also rely on a broad external community of developers and advocates for their evolution. A good case in point is OpenOffice.org, the office suite now owned by Oracle. Although Sun Microsystems was a primary contributor in terms of software code to the project it also relied on a global community of developers, advocates and documenters to fully develop the software to its current state. When Oracle bought Sun Microsystems last year the community reacted badly to the news. As a result a new project was formed — LibreOffice — to take the office suite forward and took many of the major developers of the software away from OpenOffice. Only time will tell exactly how much this will affect future development of OpenOffice but what is clear is that Oracle has lost part of its development team.

Another thing that proprietary vendors have a habit of doing when buying a piece of open source software is to increase the price of that product. Obviously the buyer is eager to get its money back quickly but simply bumping up prices to achieve this is short-sighted and illogical. In most cases pricing is well established for the product based on market conditions. Again, simply imposing arbitrary needs onto the existing market is disruptive and damaging.

It’s encouraging to see that open source software continues to grow in popularity and as a result we’re likely to see many more acquisitions in the future. Let’s hope that buyers don’t repeat these mistakes and recognise the benefit of working together with the open source communities that made the software successful in the first place.