What do Wal-Mart and open-source software have in common?

In a bad economy, the low-price leader gains market share.


Andrew Leonard
January 16, 2009 10:33PM (UTC)

The 451 Group, a market intelligence consultancy that proudly distinguishes itself from its "pay-for-play-propaganda" competitors, predicts that 2009 will be a big year for open-source software merger and acquisition activity. (DealBook has the tip.)

The reasoning goes something like this: In a down economy, software users are going to seek the low-price alternative, just as retail consumers flock to Wal-Mart. So established software companies will be looking to snap up likely suspects.

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The expectation is not that customers will divert funds previously allocated to proprietary projects toward open source software but that significant project spending will be delayed while open source becomes even more attractive for smaller, skunkworks-style projects.

But if times are going to be (relatively) good for open-source software start-ups, why would they want to sell? The irony is that a bad economy hurts them too, making them potentially more willing to be swallowed up.

If open source adoption is likely to flourish in 2009, then it begs the question as to why open source vendors would be willing to be acquired by larger rivals. One issue, as noted above, is that we expect to see more community open source software usage, rather than commercial open source adoption, in the short term. Converting community open source users into commercial open source customers has proved difficult during the best of times, and the economic malaise could make it even harder for open source vendors to generate revenue from downloads.

So, let's get this straight. It's harder for both open-source software and proprietary software vendors to generate cash in a recessionary economy, but somehow, by merging together, prospects will brighten? The 451 Group makes an argument that the key to capitalizing on popular open-source communities is to sell proprietary extensions to open-source software offerings, and that established proprietary software companies are better equipped to create such add-ons than struggling little start-ups, but it seems like a dicey proposition to me. Mergers may well go up, but there's going to be attrition on both sides, as well.

One final note. I was curious about the 451 Group's name, and, sure enough, it's a play on the title of Ray Bradbury's seminal sf novel "Fahrenheit: 451."

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Independence is a scarce commodity these days. The 451 Group is working to change this.

The company chose the name "451" because it sees an analogy between a world that burns books and a world in which the imperatives of objective and insightful research are subverted by those of pay-for-play propaganda.

Call me a sucker, but you just don't hear that kind of talk every day from a market intelligence group like, say, iSuppli.


Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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Globalization How The World Works Wal-mart

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