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March 26, 2008

MySQL CEO says Sun acquisition is already paying off

The CEO of open source database firm MySQL, which was recently acquired by Sun for $1bn, said in a Computer Business Review interview that being bought is already boosting the firm's business.

By Jason Stamper

As soon as the deal closed we immediately secured a big deal with a major European national police agency, said MySQL CEO Marten Mickos. Key to them choosing MySQL was that we are now part of a much larger public corporation. The deal wouldn’t have happened when we were private.

Downloads of the firm’s free, open source database have accelerated too, from around 50,000 a day before the deal was announced to around 60,000 per day now – 67,000 copies were downloaded on Monday.

But perhaps the bigger question is how many of those downloads get beyond people just kicking the tires, and turn into active installations.

My own estimate is that of those 60,000, around 6,000 are new, active installations, said Mickos. Even that is a staggering volume.

Seeding the market with a free, open source database is clearly no longer a challenge for the originally Swedish firm. But how many of that 6,000 eventually buy into MySQL Enterprise, with the monitoring tools, support, and subscription that actually lines Sun’s pockets?

I would say the ratio is between one in one hundred and one in one thousand, said Mickos. If you look at averages you get useless information, because we might get 10 million downloads in China and we know almost none of them will pay anything in the near future. In the web 2.0 space, most will pay. In countries with a high GDP, many will pay, and in those with a low economy absolutely nobody will pay today.

But even for those who use the software but do not pay anything, Mickos argues that the firm still benefits. We get something before the user starts paying, said Mickos. We get bug fixes, articles, community input. We have more engineering resource than IBM puts into DB2, even though they have 20 times more resources in-house.

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Sun, of course, is hoping that as many customers as possible get their wallets out and pay for the Enterprise edition and its support package. Compared to MySQL’s 200 field sales people, Sun has 17,000 at its disposal to sell the open source database.

But as Sun CEO Jonathan Schwartz explained on his blog, there is also the belief that many MySQL punters will also be looking for hardware and services, and he hopes they can be encouraged to choose Sun when that time comes.

But do people downloading MySQL really also procure their hardware in tandem? When customers come to us for the first time there is no denying they come to us because we’re free, said Mickos. And at that stage they will run it on the cheapest, crappiest hardware they can find because they have no money. There’s no business for any hardware firm there; not even Dell would make any money there. But although they start frugal, for many of them they then scale to the next level and that’s when they start buying stuff.

Mickos said Sun should be able to sell hardware and services to non-paying customers as they start to scale up their use of the database.

It’s a marathon, not a sprint, he said. If a 15-year-old downloads MySQL now, when do we get our money? In about 15 years’ time when he is head of IT at a company and he loves MySQL. But in many cases it will happen sooner than that.

In open source we say fail fast, scale fast. Many web 2.0 ideas will fail, but when Google or Facebook [two of MySQL’s biggest customers] get it right they suddenly need to scale like crazy, Mickos said. Open source is the only model where they can scale fast on exactly the same code base; it’s the same product. All of the [commercial] database players have free versions, but when you need to scale you need a slightly different version [of the database].

If waiting up to 15 years to see tangible revenue from these huge numbers of free downloads – the firm has seen over 10 million downloads of its software so far – sounds like a message that would have been hard to sell to shareholders had MySQL continued with its planned IPO, instead of being acquired, Mickos is unbowed.

I would have no problem explaining it to shareholders, he said. Number one is employees, number two customers, and number three shareholders.

Our View

While some observers baulked at the price tag for MySQL of $1bn when its current revenue is a mystery, we believe this was a particularly shrewd move by Sun CEO Schwartz and his team.

In the open source LAMP stack (Linux, Apache, MySQL, PHP/Perl/Python), MySQL is the only element owned by a specific company and for which there are no other realistic open source competitors.

With Sun now pinning its flag to the open source movement (note the open sourcing of Java and Solaris), it is probably the biggest contributor to open source of any commercial vendor, and it has the most to gain from widespread open source adoption as a result.

So while Sun’s shareholders may question the logic of spending $1bn on an open source technology, being involved in so many IT projects right from their inception could open doors to Sun that it would not formerly had known existed.

In many cases, as Mickos candidly conceded, it may be up to 15 years before many of the MySQL faithful turn into paying subscribers, or buy into Sun hardware, services or other software. But even if it’s a marathon rather than a sprint, the history books are likely to recall that Sun’s MySQL purchase was key to its continued relevance in enterprise IT.

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