Oracle’s seemingly wholehearted embrace of open standards and the open source movement has always seemed a little strange. Why would a leading developer of software for sale welcome without reservation the creation of free software by volunteers? As I prepare my presentation on Understanding Oracle for the upcoming Quest Northeast conference I think I am beginning to get it. Becoming a leader of the openness movement and fostering its continuing evolution was not done by Oracle for the benefit of mankind, it is simply very good for business.
Oracle was founded in 1977 as a provider of add-on software – the first relational data base management system. It became dependent on the emergence of de facto industry standards such as SQL. The subsequent evolution of officially blessed standards through which software from different providers could work efficiently together was one of the reasons Oracle was able to become a market leader. Those standards benefited all software vendors by making the entire market much larger than it otherwise would have been.
When Linux popularized the concept of open source it was not clear if established vendors would fight or endorse this innovative new extension of the openness concept. Oracle became and remains one of the leaders of that movement as well for reasons that on the surface may not seem obvious.
Like open standards, open source also tends to expand the whole market. At the same time, it can appear as if open source takes away sales from for-profit vendors selling the same category of products. It would seem to make sense for such vendors to fight against open source incursions into markets in which they compete.
Last year the European Union certainly bought into the idea that Oracle was likely to try to kill off the mySQL open source DBMS after acquiring it along with Sun. Why would Oracle do anything to promote a free alternative to its most important cash cow offering? The acquisition of Sun was held up for half a year in order to extract a promise that no such thing would happen.
I am now convinced that the EU did not understand how Oracle thinks. Open source efforts represent an opportunity for Oracle to increase its revenue and profits. Oracle loves the idea that virtual communities of volunteers are willing to create sophisticated software on their own and offer it for free. Such software fills niches that paid for products rarely address. Having a no cost option also generates demand that would not otherwise exist.
Oracle always saw mySQL as a source of incremental revenue, profit and market share and not as a meaningful threat to its other DBMS offerings. In a similar way, the executives at BMW likely did not get too worried when Tata Motors decided to introduce a very low cost car in India. Eventually, some of those buyers will be ready to move up in class.
The real reason Oracle loves open source is that the volunteers that create it do not have the ability to support what they build – something that commercial users are willing to pay for. Oracle understands that the profits from software do not come from selling it once but from developing a stream of maintenance revenue. Open source reduces the cost, effort and risk of bringing new product to market while opening up a new opportunity for very high margin support services. In addition, there are always opportunities to surround the free open source code with add-on products that can be sold at a profit.
I suspect that the only thing Larry Ellison does not like about open source is that someone else thought it up before he did.