What's In Your Code?

How Much is Open Source Worth?

Yesterday, I participated in a panel discussion at OSBC on the impact of open source and technology licensing on M&A.  It was moderated by Stephen Gillespie, a partner at Fenwick & West. The other participants were Sherman Chu, Director, Licensing & Technology at Cisco; Stephen A. Mutkoski, a Senior Attorney at Microsoft; and Richard Vieira, a Managing Director at Jeffries Broadview.

Some key points we discussed:

• All of the panelists indicated that they expect a very deep level of due diligence in the deals they are evaluating. No prospective acquirer these days will rely on the representations by the target company. It's nothing personal. It reflects a business climate that requires a higher level of vigilance in business transactions.

• Finding open source code in the target's software is certainly not a reason to pass on an acquisition. The acquirer is much more interested in the fundamental question: "How will it help us to meet our business objectives?"

• An attendee asked us how an open source project, or a company based on an open source project, makes itself more attractive to potential acquirers. In addition to the obvious things - downloads and the number of active committers - I suggested that it's important that the key individuals be able and willing to join the acquiring firm as employees. Acquirers want to employ and retain the brains behind the project. Michael Olson (former CEO of Sleepycat - joining Oracle as of this week) was in the audience and spoke up to agree. He implied that one of his big discussion points during his recent acquisition was why his development team should be enthusiastic about joining Oracle. He had to explain to his developers why the Oracle deal made sense for them. This InfoWeek article by Charlie Babcock quotes Olson as saying that 100% of the company came along with this acquisition.

We all had a chance for a last summary statement and mine was: "Transparency in advance is a good thing." In today's mixed code world, you should expect to be asked about the content of your code. It could be during a potential acquisition, or responding to a potential customer who lists this as a purchase criteria. In any case - rather that a last minute scramble, you would be way ahead of the game to be ready. Steve Mutkoski from Microsoft said that he has had both experiences - one with a firm that was not at all prepared and one with a firm that was. Being ready made a much more favorable impression, and the deal moved more quickly. And as we all know, deals don't improve with age.

OSBC Kicks Off

Today, OSBC starts just around the corner from our offices at the Argent Hotel. Based on the preview articles that are popping up, it looks like it's shaping up to be another active event for open source. This Cnet article includes a teaser on our announcement for today, as does this InfoWorld piece. We're constantly adding to our Compliance Library, but we decided to take advantage of the buzz around OSBC to give an update with this press release. The Library is expanding from 3 billion to over 5 billion recorded source code fingerprints. We also have the unique ability to scan for third-party code, even if users do not have access to source code. To support this, the Library is expanding from 200 million to 300 million recorded binary file fingerprints and from 8 million to 9 million recorded Java namespace names. We're also pleased to announce that for the first time, we're working directly with SpikeSource to include components that make up their tested Spike Stacks, along with their compatibility guidelines. We're also working directly with the Eclipse Foundation, where we are a member, to ensure we have a comprehensive repository of Eclipse components.

If you're attending OSBC, swing by our session on Weds. at 3:15 p.m., where we'll be talking about open source and the M&A process. We've got a great line-up with Sherman Chu, Director, Licensing & Technology at Cisco; Stephen Gillespie, a Partner at law firm Fenwick & West; Stephen A. Mutkoski, a Senior Attorney at Microsoft; and Richard Vieira, a Managing Director at Jeffries Broadview, the prestigious investment banking firm.

On a separate note, Palamida co-founder Theresa Friday braved the New England weather to attend an MIT Enterprise Forum conference on open source this past Saturday, where she spoke on an Entrepreneurs panel that included Andy Astor from EnterpriseDB. The JBoss rumors were the talk of the day, as Marc Fleury was the closing speaker. eWeek ran this wrapup, which includes the funny story of Fleury's wife's (understandable) reaction when he told her he was going to sell free software.

When asked if he had an exit strategy when he started the company, he apparently replied, "There was never an exit strategy; there was a naked ambition."  That's probably the best advice for the entrepreneurs who attended.