Open Source Weblog

I recommend reading the post in its entirety but given its length, here's a few salient points:

"We reach millions of folks with free distribution and then monetize this base. It is a very efficient way to acquire customers. The result is that we spend 30 cents for every dollar of maintenance revenue, while the competition, on average, spends $3 for every dollar that ultimately comes in as maintenance," he writes.

"This low cost of sales we achieve through mass distribution is what makes the model tick. The customer gets to make up his own mind as to whether the software is any good as opposed to having to go through the vendor’s pricey and biased sales force. This enables the OSS enterprise sales force to be very effective since they mostly are targeting highly pre-qualified potential customers."

As Fleury explains, this means that the company has to be good at value-added support and services, as "the only place where we make ANY money at all".

A recent survey from the Independent Oracle Users Group indicated that Oracle's user base is concerned about levels of open source support and indeed this is one of the reasons that Larry Ellison has hinted that his company might be about to enter the Linux distribution business.

This is a rumour that for one reason or another just will not go away, but Fleury for one is unconvinced. "Common sense says “it is NOT coming” but then, there is common sense and there is what Larry Ellison wants," he notes, before laying out a number of reasons why it would not make common sense in his opinion:

· To create its own Linux distribution would take a lot of time and investment. It's far from impossible, but does Oracle want to make the effort?

· Redistributing Red Hat without a relationship with Red Hat would require a fork and would invalidate Red Hat certifications, effectively creating a new distribution.

· Red Hat's is too dominant in the ISV/IHV certification market to make challenging with a new distribution worthwhile.

· Who wants another Linux distribution? Not Oracle's customers, apparently. Fleury says "only 2% of Oracle’s own customers say they would buy this".

· Oracle buying Red Hat would lead to a Linux distribution land-grab and a repeat of the Unix wars that would only benefit Microsoft or Sun's Solaris. Oracle knows it is not worth the risk.

Given these reasons, Fleury states that a Mexican standoff - or Nash equilibrium - is developing. "A simple way to describe this is the popular saying 'nobody move and nobody gets hurt'," he explains. "Some companies may not like the fact that Red Hat declared independence by buying JBoss. But it was bound to happen and everybody is going to have to live with it."

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