How To Value Open Source Software

 
I'm looking out for PushToTest when I say this: I hope SpringSource revenue was very low to show a good multiplier for an Open Source Software (OSS) business. The multiplier is a key factor in determining a successful OSS company. VCs want a 10x multiplier. Put $10 million in and get $100 million out. It is my sincere hope that SpringSource revenue was less than $30 Million (annual run rate.) (Matt Asay's blog seems to think the number was just above $20 Million in mixed license/services revenue. That would put the valuation at 10 times.

 

 

I interviewed Rod Johnson and Javier Soltero in May 2009. Here is what I wrote at the time:

 

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Reducing the time it takes a Java developer to build an application is valuable to organizations. SpringSource is betting that making management of the resulting Spring-based application easier will unlock huge new benefits to organizations. This is the reasoning behind the SpringSource Hyperic merger.

I had a chance to speak with Rod Johnson (CEO) and Javier Soltero (CTO of Management Products) of SpringSource. Johnson and Soltero make a happy pair. They even finished each other’s sentences at times. This seems to be a continuation of their earlier technology partnerships. For example, Spring Enterprise comes with Hyperic HQ. Spring uses AspectJ technology to transparently instrument enterprise applications.

I have a business interest in understanding Spring’s management technology for Java enterprise applications. PushToTest built a monitoring API that reads performance metrics from Glassbox (http://www.glassbox.com). Glassbox integration comes in TestMaker 5.3 and provides correlation for root cause analysis and mitigation. PushToTest designed its monitoring API (PTTMonitor) to read other performance monitoring systems through the same JMX interface that Spring uses to publish performance metric. Look for an announcement from PushToTest shortly!

Spring-based applications are automatically instrumented for monitoring and management. Hyperic then monitors internal operations and presents the data as a set of dashboards, consoles, and reports.

On the face of it the merger makes business sense too. Johnson told me owning an open source business is nothing different from anything else: “Pre-revenue requires hand waving. Hyperic had million dollar revenue streams and a definable growth rate.”

Johnson said SpringSource aims to achieve $1 Billion in sales and make its IPO in 18 months. That would certainly make SpringSource’s venture capitalists (Benchmark and Excel) happy. 

Soltero gave some details on the upcoming product roadmap for the combined companies. Cloud management announcements are coming down the track. They are getting rid of JBoss and will do new development based on Spring. Hyperic Sigar (http://www.hyperic.com/products/sigar.html) low level parts are going into other parts of Spring.

SpringSource’s reach into management may extend beyond Java enterprise applications. Johnson told me SpringSource contributes to the Apache group httpd server.

Johnson told me the black box nature of PHP and Ruby on Rails improves developer productivity but lacks the visibility into the internals to make it manageable. Java has JMX, .NET has Perflib and CLR application management. Java and .NET have a centralized management model that you can plug into, including performance counters, service and statement management. Johnson said, “With SpringSource we can make JMX and related capabilities leveraged past the ISVs.” 

-Frank