Has database vendor EnterpriseDB found the business model for the next generation of open source companies?
A week or so ago I was chatting with a friend about a meeting I had scheduled for the following morning. I said I'd be speaking with a guy whose company markets a commercial database product built around open source software.
"Ah," my friend quipped, "a parasite."
A cynic, my friend was half serious. And yet, when I met with Andy Astor the next morning, he didn't seem like a parasite. On the contrary, he struck me as a genuine believer in open source, who, as CEO of EnterpriseDB, is striving to develop a business model that could become the archetype for the next generation of open source companies.
"I believe that open source software changes everything about enterprise applications," Astor says. "It is as fundamental a shift in enterprise applications as the Internet was or as XML was. It is at that level of importance. Exactly how it pans out, nobody knows, and exactly what the business models are, nobody knows."
So far, open source businesses have typically adopted one of two models. Linux distributors, like Novell/Suse and Red Hat, are mainly re-packagers; they assemble collections of open source software and sell them to customers for a fee that includes the price of support. Then, there are companies like JBoss and MySQL that do the lion's share of development on a new product while also accepting contributions from the community. Typically, they market the final product under a dual licensing scheme.
EnterpriseDB's approach represents something of a middle ground. At the heart of the EnterpriseDB product is PostgreSQL, a mature open source database. Astor's company provides support, but it also adds something extra: an engine that lets PostgreSQL understand Oracle's PL/SQL dialect of the SQL language. That means you can take an application written for Oracle and point it at an EnterpriseDB database, and in most cases it will run unaltered, at a fraction of the cost of an Oracle license.
For the time being, at least, EnterpriseDB's PL/SQL engine is proprietary software. That won't make everybody happy -- case in point: my friend's "parasite" comment -- but Astor says it's a mistake to expect the PostgreSQL community to provide features like Oracle compatibility.
"Frankly, it's a fairly purist group of people," he explains, "and they build a phenomenal, rock-solid product, but they don't build everything that people want. There are commercial needs that open source communities won't want to build, and there's an opportunity for companies to go and build them."
According to Astor, core database functionality has become a commodity. "If you can get a database of the quality of PostgreSQL for free, good God, if that's not a commodity, what is?" Astor asks. Databases just aren't being priced as commodities by companies like IBM (Profile, Products, Articles), Microsoft, and Oracle, he says.
Still, he adds, even in a world where databases cost nothing, there are yet opportunities for companies like EnterpriseDB. "It's the pricing that's commoditized. But the compatibility, the scalability, and the customer support -- those are differentiators."
What EnterpriseDB offers is differentiated from what other open source companies offer, as well. Consider: When you buy a commercial MySQL license, all you get is support and the right to use MySQL in ways that are incompatible with the GPL (GNU General Public License). When you buy EnterpriseDB, you get support for PostgreSQL plus unique compatibility features you can't get anywhere else. If that's a parasite, then maybe there really are no business models in open source.