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Bringing Up Open Source, Part 1: Enterprise Edition

In this rapidly changing economy, enterprise executives are paying moreattention to business processes that cost them less and deliver moreresults. The well-worn phrase “Getting more bang for less buck” isbecoming the operative selling point for open source software products.

One of the most vital decisions a newcomer to the enterprise software marketneeds to make is whether to develop a proprietary product or adapt tothe developing models surrounding community-based software. Some ofthe most successful startups in the enterprise service space cancredit their choice of open source over commercial business models asa major contributing factor to growing their customers.

“We’ve been tracking open source for four or five years. It is now notjust a thing for IT or application developers or IT geeks that haven’tbeen traditional open source users. It’s a viable choice for anyone inthe IT organization looking for technologies they have to deliver,”Mark Smith, CEO and executive vice president of research for VentanaResearch, told LinuxInsider.

As the first of a three-part series on open source startups to watch,LinuxInsider spotlights three relative newcomers to the enterprisebusiness sector. We spotlight data management company Infobright, Ruby and Rails app developer Engine Yard and software collaboration firm Open Xchange.

Open Source Model

Especially in the enterprise space, entering the business stream fromthe open source angle can be a challenging proposition. Often the jobinvolves balancing development and marketing with a reduced staff and cash flow.

“In this kind of a business model, you obviously have a significantlylower staff or traditional front office exercises. You still want toleverage the open source community in consultants as much as you wouldbuild out your own consulting services. You still have to develop andmaintain an organization. You’ll have a smaller finance admin staff,”explained Smith.

At the same time, your company size is dramatically smaller. However, youstill have to have a research and development and product team. Whilean open source startup has a lower cost and revenue structure, thecompany still has to balance cost and revenue to make sure it has amargin, he added.

“You have to drive that online traffic and get people to know about itbecause you don’t go out and hire sales reps in every state of theunion,” he said.

The Companies

Given this drastically different approach to business, the fact thatsome companies have managed to establish a solid footing is commendable.

Infobright was the brainchild of a team of internationally recognizedmathematicians who started in 2005 to pioneer a new approach toanalytic data warehousing. Run by data management experts, thecompany delivers a simple and cost-effective analytic datawarehouse that provides its customers with informationintelligence for their business operations. Infobright designed asolution from the ground up specifically to provide fast answers tocomplex, ad hoc questions involving massive amounts of information,without burdening IT with lengthy, resource-intensive projects.

Engine Yard grew in early 2006 to serve companiesdeveloping business-critical Rails applications but wanted to avoiddeployment issues and the need to hire IT staff to manage servers.Engine Yard provides the platform and expert support for deployingRuby on Rails applications to the cloud, giving customers a newapproach for building sites and applications on demand.

Open Xchange captured its first venture capital funding in early 2006.That provided the impetus to move forward with its products thatenable customers to scale and integrate open source e-mail andcollaboration solutions. The company provides an on-premise versioncalled “Open-Xchange Server Edition.” Its Open-Xchange Hosting Editionenables Web hosting companies to provide an easy-to-use andfeature-rich application delivered as Software as a Service (SaaS).The Open-Xchange Hosting Edition integrates into a hosting provider’sexisting infrastructure for functions such as authentication, provisioning, billingand e-mail storage. It does not require that users replace thesesystems.

Close-Up on Infobright

When Canada-based Infobright CEO Miriam Tuerk looked at the market she was entering, she found the field peppered with a number of early comers that had picked through versions of open source systemssuch as Ingress and Postgress and kind of forked the code and builtproprietary systems from there, she noted.

“We didn’t think that would help the market really move forwardand adopt new technologies, because you need to have IT data centeroperations, and people use tools that are familiar with them,” she toldLinuxInsider.

Wanting an alternative to a proprietary offering, she decided topartner with MySQL. Her company’s resulting product is a version ofthat system, but the company’s software developers ripped out the guts andinserted Infobright’s own technology. The outside wrapperis exactly Infobright’s system, she explained.

Filling a Niche

Her company’s goal was to focus on business analytics, any form ofanalysis that businesses want to do to help them run their businessesbetter. This could be to provide a business analytics tool to theircustomers via a Web-based application or do it for internal businessanalytics.

Infobright’s database is specialized on business analytics and the ability to do analysis on high volumes of data with really highperformance, Tuerk noted.

“That is not very different from our competitors. What makes usspecial is that rather than having us be able to be tuned andconfigured, you can organize your data in a special way. We focus onsimplicity and ease of use. It takes less than 10 minutes to installand get up and running the software and hardware system for us to run2 or 3 terrabytes,” said Tuerk.

Smaller Footprint

If you take a look at Oracle, for example, a 2- or 3-terrabyte Oraclesystem could take you six weeks to install and configure. BecauseInfobright has a huge amount of compression in its software, you couldtake a US$10,000 Dell server and download the Linux operating system,install it and get it up and running. Then you install her company’ssoftware and quickly start loading data, she detailed.

“Our hardware footprint is 20 to 30 times smaller than any database.For example, a 30 TB database in these other systems is under a 1 TBfootprint in ours. We had one customer recently who took a 1 TBdatabase from Oracle. By the time they loaded into our software, itwas 12 GB. They could run that 1 TB database on their laptop,” Tuerksaid.

Being part of the LAMP (Linux, Apache, MySQL, PHP) stack — and the adoption and the communitymomentum around that LAMP stack — instead of being a strictly commercialventure was something that Tuerk was key on leveraging.

Future Prospects

Infobright launched its community edition on Sept. 15 of last year. Itcame out with an enterprise edition of the software in the beginningof January 2007 after partnering with MySQL eight months before that.

“Even at that point in time we had thought that we might want tolaunch open source. But the last thing you want to do when you start acompany is a project that was more informal. If you put money andequity in a company, you want to launch in a strong way. We wanted toprove that our technology was actually going to work and that we coulddeliver the value proposition,” Tuerk said.

In the previous year and a half her company had some customertraction. It was signing a couple customers per quarter. Now it hasmore than doubled its customer count in the last three months, accordingto Tuerk. She sold more new customers in the last three months than inthe previous year and a half.

Tuerk is forecasting that over the next year she will have more than100 customers.

Driving Open Source

For data warehousing and analytics, newcomers do not find muchcompetition in this segment. From a database perspective you do haveMySQL, but for business intelligence and analytics, Infobright movedinto that segment of the market, according to Smith.

“Infobright made a decision early last year that coincides with lotsof cost reduction and cost avoidance issues in IT organizations. Inthis economic environment, lots of organizations are looking at ways toput more priorities on being cheaper and finding ways to cut costs andfinding alternatives. They can’t continue to operate with certainsized budgets because revenue and profits have trended down. You can’tkeep your cost structure the same,” explained Smith.

Ingres has ventured down this path. But itsdatabase has not be quite as optimized. Bizgress has also been a lineof open source. A lot of people have taken the path where they offer acommercial thing for download and then they license it — that issomething the Infobright folks realized as they switched their modelinto more of an open source-based approach, he added.

The Engine That Could

Engine Yard has a well-recognized history of hiring expert talent andfostering open source innovation. This background includes stewardshipof the Rubinius and Merb projects.Headquartered in San Francisco, Engine Yard is backed by aUS$3.5 million investment from Benchmark Capital, New Enterprise Associates,and Amazon.com.

In July of 2008, the company closed $15 million in Series B financing.The new funding will help Engine Yard accelerate business, bolster R&Dof its forthcoming cloud computing cluster platform and continue todrive innovation with Ruby open source projects, Rubinius and Merb.Last November, Engine Yard introduced support for Merb, a lightweight,open source framework for building Ruby Web applications. The newoffering coincides with the release of Merb 1.0.

Engine Yard announced its new cloud offerings Jan. 14. The company hasbeen running its customers’ Ruby on Rails applications on its owninternal cloud. Engine Yard is capitalizing on that experience toimprove the development, deployment, management and security of cloudapplications.

First, Engine Yard will extend its Ruby on Rails stack to run onAmazon Web Services in addition to its internal cloud. Second, it willoffer the first open platform for developing and managing large-scaleapps in the cloud. Both of these address issues specific to running,managing and scaling apps to run in clouds and are designed toeliminate potential proprietary lock-in.

Open Collaboration

Open-Xchange is a privately-held company headquartered in Tarrytown, N.Y., withresearch, development and operations in Olpe and Nuremberg, Germany.Last November the companyclosed a Series B round of venture funding totaling $9 million. Itwill use the funds to further develop its software and continueexpanding its business in the U.S., Europe and emerging markets.

Open-Xchange offers its customers an affordable alternative tocommercial e-mail/collaboration platforms like Microsoft Exchange andSharePoint. This provides an equivalent user experience with featureslike mobility support for iPhones and BlackBerries, document sharing,shared calendars and shared address books. This gives users simple,intuitive software for effective teamwork through improvedcommunications.

The company is seeing unprecedented growth, according to CEO RafaelLaguna. Open-Xchange has increased by four times the number of paidmailboxes to 8.4 million. Laguna has said he envisions reaching a goalof adding another 10 million mailboxes next year.

In September of 2008 the company announced new versions ofOpen-Xchange software for both hosted and on-premise implementations.Also, the company recently announced agreements with O3SIS andFunambol that enable Internet Service Providers (ISPs), telcos and Webhosting companies, as well as on-premise customers, to offer end usersthe ability to access e-mail from mobile phones.

Another indicator of this startup’s growth came in May whenOpen-Xchange signed a broad cooperative agreement with Parallels tointegrate its software. Parallels management and automation softwareis a popular standard for ISPs and Web hosting companies.

Bringing Up Open Source, Part 2: The Consumer Side

Bringing Up Open Source, Part 3: The Mobile Movement

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