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Citrix+XenSource : Does buying an company with an open source arm make sense?

There was also talk about VMware releasing an open source version of ESX. I did blog about it in the past (do read it if you are the CEO or even an influencer who wants to tap on a crazy but dedicated blogger's advice) as so why should VMware not turn from being a "only proprietary" into a firm with an open source appendage. While statements that I make will not directly suggest what Citrix ought to do, they do tell us how things move in the markets and what open source's role is in the emerging market.

What are the challenges of a firm which continues to lend an open source arm:

  • I let you fork on my dinner plate: Look at ditributions of the likes of CentOS, Whitebox and the latest inclusion of Oracle who forked into the source code and developed its own Enterprise Linux version. Redhat continued to shown, and to the investors surprise, increased revenues but in the long run, this is going to take a beating. Unless Redhat takes a serious stance, and calling the legendary integrative thinker like Bob Young, will definitely help, it is bound to face challenges.
  • Why let anyone fork from my plate?: Citrix's acquisition of XenSource is not a simple one, in fact on the contrary, its a very complex one. I did report how firms like Oracle are betting on developing modules for their hero applications, like RAC, for Xen readiness. Oracle, as I have understood from some resources, has been ignoring VMware's Oracle RAC initiative, despite having strong partnership, only to move in the other direction and put in all the developmental effort in Xen. So what happens now? And there are loads of other scenarios you can think of: there are resellers; there are firms developing plugins around Xen; there are firms that totally rely on Xen's technology. But there is also the danger of losing your revenue, should someone pull off a trick and start offering a better supported Xen.
  • VMware's open sourcing of ESX: This might be a trick up their sleeve but the acquisition of XenSource makes it a bit confusing. Argument: Why should I open source my product when the open source is marrying the proprietary. But should Citrix come up with a model, by throwing several cards on the table, and thus accelerating the developments around Xen , VMware might too work on a similar idea. Maybe modifying the ESX version to created a PSX version, a paravirtualized solution, that will be open source as well and compete head-on with the Citrix-XenSource offerings.
  • XenSource's reputation among the investors: XenSource has been rather blunt in its actions. This lash out at Virtual Iron was not the nicest of the moves. XenSource's then CTO's response to the news is to be found here. But again not they have Citrix so it might improve under Citrix's regime.
  • Xen Source's commitment to open source: In any case XenSource's commitment to Xen still is to be seen. for instance this blogger muses about Citrix's motive of buying into open source. Although Citrix has the choice also to go the Redhat way:

    The real question Citrix should be asking itself is whether XenSource has much impact on the Xen source, as Red Hat has with Linux. The buzz I always heard was that major enterprises were happy to be using Xen...and saw no need for a relationship with XenSource to extract value from the project. I think XenSource's tepid revenues (close to $0.00 in 2006 and on track to hit $8 million or so in 2007) reflect this. The company reports having 650 enterprise customers at an average deal size of $2,000 (shockingly low), according to The 451 Group. There's only one way to go from there...

    Which may make Citrix quick bite on the hype premature...or a very wise bet. There's no doubt that its inflated price was driven by the VMware IPO. $500 million is very cheap compared to VMware. Citrix believes it can turn XenSource into a $50 million growth engine by next year. I think it's kidding itself, but it still may be a great bet over the long haul.

    Still, it comes down to source of code. And that, my fellow open-source bloggers, comes down to open source. If all XenSource has is some proprietary software that helps to manage an open-source project, it's got nothing and, by extension, so does Citrix.

  • Do full open source or do full proprietary, in either case check the cask influx: I will merely rephrase what I said in my previous post (do a search for "should esx open source" on my blog).
  1. Did your sales shoot up after the release of your OSS?
  2. What is the added value (I know community and all that stuff but still, where are the figures)?
  3. What about reputational advantage or disadvantage: (Think of that prolific developer who walked out of fedora because of poor patching and other issues. This guy was a loyal, not on payroll, but loyal. Then he defected to Ubuntu)
  4. Manageability: You'll need a huge and a long arm to manage that OSS initiative, do you have the capacity to do that? Do you pay those project members enough so they can help you out and give you a good report?
  5. Cash and Investors: what do the investors think?

Buying XenSource can make Citrix the hero in the desktop and server market but it can also be one of those forgettable acquisitions. The XenSource acquisition was definitely overpriced but Xen source, the source code i.e., is a very powerful tool for many. I guesss in the coming months it will get clearer what Citrix has to say to its partners about what their strategy is going to be to take on that $20 Bn market.Remember also what I said, this could also be a move become the cynosure for a possible acquisition itself. We will watch this very closely!


  1. Excellent post! You ARE on our radar , and we do listen to bloggers!

  2. You have quoted him twice ;)

  3. Thanks for pointing it out, I've corrected it!

  4. You don't seem to differentiate between whether XenSource has a lot of impact on the source -- it contributes over half of it, so that would have to be a "yes" -- and whether a business relationship with XenSource is required for other companies to deliver value on it -- wqhich the GPL vserves well by turning into a "no."


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