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Bringing Up Open Source, Part 1: Enterprise Edition

In this rapidly changing economy, enterprise executives are paying more attention to business processes that cost them less and deliver more results. The well-worn phrase "Getting more bang for less buck" is becoming the operative selling point for open source software products.

One of the most vital decisions a newcomer to the enterprise software market needs to make is whether to develop a proprietary product or adapt to the developing models surrounding community-based software. Some of the most successful startups in the enterprise service space can credit their choice of open source over commercial business models as a major contributing factor to growing their customers.

"We've been tracking open source for four or five years. It is now not just a thing for IT or application developers or IT geeks that haven't been traditional open source users. It's a viable choice for anyone in the IT organization looking for technologies they have to deliver," Mark Smith, CEO and executive vice president of research for Ventana Research, told LinuxInsider.

As the first of a three-part series on open source startups to watch, LinuxInsider spotlights three relative newcomers to the enterprise business sector. We spotlight data management company Infobright, Ruby and Rails app developer Engine Yard and software collaboration firm Open Xchange.

Open Source Model

Especially in the enterprise space, entering the business stream from the open source angle can be a challenging proposition. Often the job involves balancing development and marketing with a reduced staff and cash flow.

"In this kind of a business model, you obviously have a significantly lower staff or traditional front office exercises. You still want to leverage the open source community in consultants as much as you would build out your own consulting services. You still have to develop and maintain an organization. You'll have a smaller finance admin staff," explained Smith.

At the same time, your company size is dramatically smaller. However, you still have to have a research and development and product team. While an open source startup has a lower cost and revenue structure, the company still has to balance cost and revenue to make sure it has a margin, he added.

"You have to drive that online traffic and get people to know about it because you don't go out and hire sales reps in every state of the union," he said.

The Companies

Given this drastically different approach to business, the fact that some companies have managed to establish a solid footing is commendable.

Infobright was the brainchild of a team of internationally recognized mathematicians who started in 2005 to pioneer a new approach to analytic data warehousing. Run by data management experts, the company delivers a simple and cost-effective analytic data warehouse that provides its customers with information intelligence for their business operations. Infobright designed a solution from the ground up specifically to provide fast answers to complex, ad hoc questions involving massive amounts of information, without burdening IT with lengthy, resource-intensive projects.

Engine Yard grew in early 2006 to serve companies developing business-critical Rails applications but wanted to avoid deployment issues and the need to hire IT staff to manage servers. Engine Yard provides the platform and expert support for deploying Ruby on Rails applications to the cloud, giving customers a new approach for building sites and applications on demand.

Open Xchange captured its first venture capital funding in early 2006. That provided the impetus to move forward with its products that enable customers to scale and integrate open source e-mail and collaboration solutions. The company provides an on-premise version called "Open-Xchange Server Edition." Its Open-Xchange Hosting Edition enables Web hosting companies to provide an easy-to-use and feature-rich application delivered as Software as a Service (SaaS). The Open-Xchange Hosting Edition integrates into a hosting provider's existing infrastructure for functions such as authentication, provisioning, billing and e-mail storage. It does not require that users replace these systems.

Close-Up on Infobright

When Canada-based Infobright CEO Miriam Tuerk looked at the market she was entering, she found the field peppered with a number of early comers that had picked through versions of open source systems such as Ingress and Postgress and kind of forked the code and built proprietary systems from there, she noted.

"We didn't think that would help the market really move forward and adopt new technologies, because you need to have IT data center operations, and people use tools that are familiar with them," she told LinuxInsider.

Wanting an alternative to a proprietary offering, she decided to partner with MySQL. Her company's resulting product is a version of that system, but the company's software developers ripped out the guts and inserted Infobright's own technology. The outside wrapper is exactly Infobright's system, she explained.

Filling a Niche

Her company's goal was to focus on business analytics, any form of analysis that businesses want to do to help them run their businesses better. This could be to provide a business analytics tool to their customers via a Web-based application or do it for internal business analytics.

Infobright's database is specialized on business analytics and the ability to do analysis on high volumes of data with really high performance, Tuerk noted.

"That is not very different from our competitors. What makes us special is that rather than having us be able to be tuned and configured, you can organize your data in a special way. We focus on simplicity and ease of use. It takes less than 10 minutes to install and get up and running the software and hardware system for us to run 2 or 3 terrabytes," said Tuerk.

Smaller Footprint

If you take a look at Oracle (Nasdaq: ORCL), for example, a 2- or 3-terrabyte Oracle system could take you six weeks to install and configure. Because Infobright has a huge amount of compression in its software, you could take a US$10,000 Dell (Nasdaq: DELL) server and download the Linux operating system, install it and get it up and running. Then you install her company's software and quickly start loading data, she detailed.

"Our hardware footprint is 20 to 30 times smaller than any database. For example, a 30 TB database in these other systems is under a 1 TB footprint in ours. We had one customer recently who took a 1 TB database from Oracle. By the time they loaded into our software, it was 12 GB. They could run that 1 TB database on their laptop," Tuerk said.

Being part of the LAMP (Linux, Apache, MySQL, PHP) stack -- and the adoption and the community momentum around that LAMP stack -- instead of being a strictly commercial venture was something that Tuerk was key on leveraging.

Future Prospects

Infobright launched its community edition on Sept. 15 of last year. It came out with an enterprise edition of the software in the beginning of January 2007 after partnering with MySQL eight months before that.

"Even at that point in time we had thought that we might want to launch open source. But the last thing you want to do when you start a company is a project that was more informal. If you put money and equity in a company, you want to launch in a strong way. We wanted to prove that our technology was actually going to work and that we could deliver the value proposition," Tuerk said.

In the previous year and a half her company had some customer traction. It was signing a couple customers per quarter. Now it has more than doubled its customer count in the last three months, according to Tuerk. She sold more new customers in the last three months than in the previous year and a half.

Tuerk is forecasting that over the next year she will have more than 100 customers.

Driving Open Source

For data warehousing and analytics, newcomers do not find much competition in this segment. From a database perspective you do have MySQL, but for business intelligence and analytics, Infobright moved into that segment of the market, according to Smith.

"Infobright made a decision early last year that coincides with lots of cost reduction and cost avoidance issues in IT organizations. In this economic environment, lots of organizations are looking at ways to put more priorities on being cheaper and finding ways to cut costs and finding alternatives. They can't continue to operate with certain sized budgets because revenue and profits have trended down. You can't keep your cost structure the same," explained Smith.

Ingres has ventured down this path. But its database has not be quite as optimized. Bizgress has also been a line of open source. A lot of people have taken the path where they offer a commercial thing for download and then they license it -- that is something the Infobright folks realized as they switched their model into more of an open source-based approach, he added.

The Engine That Could

Engine Yard has a well-recognized history of hiring expert talent and fostering open source innovation. This background includes stewardship of the Rubinius and Merb projects. Headquartered in San Francisco, Engine Yard is backed by a US$3.5 million investment from Benchmark Capital, New Enterprise Associates, and Amazon.com (Nasdaq: AMZN).

In July of 2008, the company closed $15 million in Series B financing. The new funding will help Engine Yard accelerate business, bolster R&D of its forthcoming cloud computing cluster platform and continue to drive innovation with Ruby open source projects, Rubinius and Merb. Last November, Engine Yard introduced support for Merb, a lightweight, open source framework for building Ruby Web applications. The new offering coincides with the release of Merb 1.0.

Engine Yard announced its new cloud offerings Jan. 14. The company has been running its customers' Ruby on Rails applications on its own internal cloud. Engine Yard is capitalizing on that experience to improve the development, deployment, management and security of cloud applications.

First, Engine Yard will extend its Ruby on Rails stack to run on Amazon Web Services in addition to its internal cloud. Second, it will offer the first open platform for developing and managing large-scale apps in the cloud. Both of these address issues specific to running, managing and scaling apps to run in clouds and are designed to eliminate potential proprietary lock-in.

Open Collaboration

Open-Xchange is a privately-held company headquartered in Tarrytown, N.Y., with research, development and operations in Olpe and Nuremberg, Germany. Last November the company closed a Series B round of venture funding totaling $9 million. It will use the funds to further develop its software and continue expanding its business in the U.S., Europe and emerging markets.

Open-Xchange offers its customers an affordable alternative to commercial e-mail/collaboration platforms like Microsoft (Nasdaq: MSFT) Exchange and SharePoint. This provides an equivalent user experience with features like mobility support for iPhones and BlackBerries, document sharing, shared calendars and shared address books. This gives users simple, intuitive software for effective teamwork through improved communications.

The company is seeing unprecedented growth, according to CEO Rafael Laguna. Open-Xchange has increased by four times the number of paid mailboxes to 8.4 million. Laguna has said he envisions reaching a goal of adding another 10 million mailboxes next year.

In September of 2008 the company announced new versions of Open-Xchange software for both hosted and on-premise implementations. Also, the company recently announced agreements with O3SIS and Funambol that enable Internet Service Providers (ISPs), telcos and Web hosting companies, as well as on-premise customers, to offer end users the ability to access e-mail from mobile phones.

Another indicator of this startup's growth came in May when Open-Xchange signed a broad cooperative agreement with Parallels to integrate its software. Parallels management and automation software is a popular standard for ISPs and Web hosting companies.

Bringing Up Open Source, Part 2: The Consumer Side

Bringing Up Open Source, Part 3: The Mobile Movement