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Cloud and Innovation Driving Use of Open Source Software

By March 26, 2012Article

Editor’s Note: Michael Skok is General Partner at North Bridge Venture Partners. Together with Black Duck Software and 451 Research, North Bridge is now conducting the 6th annual Open Source Survey and will present the findings at the Open Source Business Conference in May. SandHill is a collaborator on the survey. In this article he shares insights on open source trends so far this year. This year’s open source survey has some new areas of focus and is taking a look at next-generation open source software. Please describe the next-gen.
Michael Skok: It’s the next generation of users, the next generation of infrastructure and the next generation of applications.
The next generation of users will be not only enterprises in the mainstream, but also new vertical industries – the automotive industry, for example. In fact, this industry is also an example of a super-community – a trend we intend to discuss at our OSBC panel.
When it comes to infrastructure, the next generation of open source is making its way very aggressively into cloud. We’ll see most clouds being built on open source. In fact, open source makes it possible for cloud economies of scale because it both enables the low-cost infrastructure and also enables the cloud providers to create more extensibility of their platforms.
Major vendors such as VMware, Red Hat and most notably Rackspace are offering their cloud platforms in an open source fashion. Increasingly I think we’ll also see people moving to open source in the cloud as a means of preventing lock-in from any one particular cloud stack. What is happening in the third area of next-gen open source, the application level?
Michael Skok: Next-generation open source applications are driving innovation in such segments as social publishing, mobile and Big Data. There’s tremendous interest in open source in those areas. In mobile the interest is not just in Android and mobile applications that are being built, but also in cloud services for mobile. Examples of these cloud services are giving people access to documents and information in the cloud and connecting people back to their systems with single sign-on. These types of mobile applications and cloud services are being built on open source.
Big Data is a major innovation area; there’s no question that open source projects like Hadoop are driving Big Data solutions. What are the key drivers for increased open source adoption in 2012?
Michael Skok: Innovation is the key driver now. Proprietary systems just are not able to keep up with the pace of innovation the way open source can. The pace of innovation in open source is giving competitive advantage to companies that build on it, and that advantage is a key driver.
For example take social publishing, where the leader there is Drupal, an open source project, and full disclosure, backed by my portfolio company Acquia. Drupal now has over 16,556 active participants in the community – it’s one of the largest, if not the largest community on the planet. And there are 15,482 modules being developed for Drupal. It’s impossible for a proprietary vendor or approach to compete with that pace of innovation. Do you see any key drivers for open source adoption that are different this year than in the past?
Michael Skok: We haven’t completed the survey yet, but we certainly think that key drivers are going to be faster innovation and cloud and in the areas of mobile, social publishing and Big Data as discussed. I suspect we’ll also find open source is being used in more vertical industries such as automotive and in more and more devices in an embedded fashion. What is the impact on next-generation open source from social media, the consumerization of IT and the need for collaboration technologies in the enterprise?
Michael Skok: You touched on an important point. The consumerization of IT brings new consumer approaches into the enterprise, such as people expecting things to work like Facebook with social feeds. So to your question, when enterprises look for collaboration they want social approaches to work together on things like blogs or wikis. More and more companies are adopting open source products such as Drupal in order to keep pace. Proprietary approaches such as SharePoint or build-it-yourself technologies from inside the enterprise simply can’t keep up.
For example, I am at DrupalCon Denver as we speak, and there are 3,000+ attendees here. That’s an enormous army of people bringing their innovation to the social publishing challenge. I’m amazed at how much innovation there is at DrupalCon every six months. I’m seeing some seriously interesting new capabilities being developed that were not even thought of a year ago.
In the last couple of days I have witnessed Drupalists simultaneously developing everything from the latest ecommerce integrations to social CRM modules to the latest social platforms such as Pinterest. Those integrations and modules get built much more rapidly and much more broadly by open source communities than would be possible by any proprietary approach.
The enterprise customers of Drupal today are everybody from the White House to eBay to Warner Music to Greenpeace and everything in between – an enormous number of very large enterprises use it. I think they’re all finding the same thing that you pointed out – that the set of things that they’re expected to do to keep pace with expectations from consumerization coming into the enterprise is overwhelming, and the only way to respond is through open source projects with a reach that is broad enough to meet those needs. I realize the survey is still in progress, but do you think that 2012 is also seeing a greater adoption of open source in small and midsize businesses (SMBs)?
Michael Skok: Yes, I’m sure that as cloud continues to penetrate more SMBs, in turn that cloud software will be built on open source. But I think the broadest adoption of open source in SMBs won’t be recognized as open source – it will just be recognized as cloud-based applications that are built on open source.
I don’t see the SMB market suddenly starting to build stuff on open source. They tend to be more of a buy-versus-build model. In this new fast-paced world, most SMBs look to use cloud services and cloud applications as a means to rapidly get their business value rather than building IT capability. And when they do that, those cloud applications will almost invariably be built on a deep open source stack. Do you think we’ll see more startups in the open source area in 2012 than in 2011?
Michael Skok: Yes, I bet we will. I think there are three reasons. First of all, it’s much cheaper to build a startup on open source than on a proprietary system. Secondly, for all the reasons we’ve been talking about, they’re much more able to prototype, build, iterate and innovate on open source than on a proprietary system. And thirdly – and this is not trivial – people in the venture community have become more and more aware that open source is a viable basis on which to build a business and there are business models on which to monetize it. What impact is open source having on software-as-a-service (SaaS) applications?
Michael Skok: SaaS has typically been a distinct category that people think of at the application level. But I think more and more this year we’ll hear people just talking about cloud and not making a distinction between SaaS and cloud. Not only will applications feel like they’re cloud-based but more and more the kinds of things that people will access from the cloud will be beyond applications. Can you give me some examples of this?
Michael Skok: Sure. People will spend a lot more time mashing up cloud services as composite applications. As an example, they will be able to pull up maps from the cloud together with user location data, demographic data from cloud-based social networks and even call up government statistical data from the Open Gov Initiative, and then write applications that target consumers with marketing apps that mash these cloud services as well as offer this up as a cloud service in and of itself.
I think we’ll therefore see the blurring of lines between SaaS and cloud and an increasing use of open cloud services such as data, mapping, information, etc. in these new kinds of applications. SaaS and cloud will increasingly become blended.
And I think the consumer is getting more and more comfortable with that. That may be because of things like the Apple iCloud where people are getting used to the fact that this is just the way they access information. There are so many things now where people access their information and applications from the cloud without thinking, for example getting their books from Amazon’s cloud on their Kindles.
Here’s what’s important about this: whether it’s the open source browser that’s on the Kindle or whether it’s the open source stack behind it that serves information, the extraordinary rise in the use of cloud will drive the use of open source because so much of cloud is built on open source.
Michael Skok joined North Bridge Venture Partners in 2002. Michael has been a software entrepreneur and CEO for 21 years. He founded, led and attracted over $100M in private equity to investments in several successful software companies, and built a significant multiple of that in value for investors as a VC. Michael focuses on market-changing technologies such as cloud computing and disruptive business models such as Open Source. He created the first industry-wide Open Source survey; in SaaS he led CIO forums as early as 2002, culminating in his work at 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 and @entrecapitalist.
Kathleen Goolsby is managing editor at

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