Richi Jennings

MySQL's IPO and disruptive pricing (and g'astronomy)

February 01, 2007 6:40 AM EST
Rabbits. White rabbits. It's IT Blogwatch: in which MySQL disrupts Oracle's game. Not to mention bad science on kids' food packages...

Matthew Aslett talked to MySQL CEO, Marten Mickos:
Open source database vendor MySQL AB is preparing itself for an initial public offering, and could even be ready to go public before the end of the year [said] CEO Marten Mickos ... it has long been predicted that MySQL would follow the likes of Linux distributor Red Hat with a public offering. Now entering its twelfth year, the company has built up just less than 10,000 paying customers, and an installed base estimated to be close to 10 million.
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MySQL also spent much of 2006 responding to [Oracle's] acquisition of the vendor behind its database storage engine of choice, negotiating a new deal ... as well as partnerships with open source alternatives, and creating its own new engine, codenamed Falcon, which is now in alpha testing.
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When it does go public, MySQL will be one of only a handful of open source vendors to do so. Red Hat, VA Linux (now VA Software), and Caldera (now SCO Group) led the way in 1999 and 2000 before the dot-com crash took its toll on the IPO market. Since then, Madrakesoft (now Mandriva) made its debut on the Euronext Marche Libre in July 2001, Turbolinux eventually found its way to the Japanese Osaka Securities Exchange in September 2005, while Trolltech announced its initial listing on the Oslo Bors in July 2006.
Om Malik ponders:
MySQL had raised $18.5 million in series C funding in early 2006 (total $39 million) and Mickos says that half of that capital is unused. The company has started talks with bankers.

Long a favorite of web developers, MySQL saw serious growth in 2006 and added 2,500 new customers, and also introduced MySQL Enterprise. There seems to be a renewed interest in open source IPOs. SourceFire, an open source company is looking to raise $75 million and list on the NASDAQ. There are quite a few others with similar plans. This is not as crazy as the LPO (Linux Public Offering) boom during the 1990s bubble. For starters, the corporations have taken a shine to the open source software. Secondly, most companies with IPO dreams have been around for a while and have been able to build solid businesses around their offerings.
Alex Fletcher muses on Oracle providing "unbreakable" support for MySQL:
Here are some things to take into consideration:
  • Oracle already realizes that MySQL AB is eating its lunch from the bottom up ...
  • MySQL continues to gain some serious traction ... It only makes sense to respond to their growing status as a competitive threat in some form or fashion.
  • ... countering the growth of open source ecosystems will entail different methods and approaches from those which are used with closed sourced types. The Microsoft-Novell pact is an example ...
  • [Oracle's] in this for the long haul and will continue to remain increasingly active in parallel areas ...
  • Open source and proprietary software are already being deployed juxtapose within progressively heterogenous IT environments ...
  • No, Oracle isn't going to fall off the end of the earth, but all this talk about disruption isn't for nothing. The traditional software business is, in fact, experiencing a shakeup ... The result will be an entirely new landscape that is being shaped as we speak.
I'm looking forward to seeing how Oracle plays its cards, especially against the backdrop of a potential MySQL AB IPO. Oracle doesn't need to undercut MySQL in the traditional sense, but it can't afford to totally disregard this gathering snowball either. I still view this as Oracle attempting to bottle and clone naturally forming disruption while it continues to refine its competitive strategy.
Taking his life in his hands, MySQL CEO Marten Mickos posted to Slashdot:
Yes, the majority of our users choose not to pay. The current ratio is something like 1 in 1,000. But as you probably know as an open source user, there is great benefit to a project also from the ones who don't pay. Those who pay do it for the value-add they receive: production support, scheduled binaries with only bug fixes, the monitoring and advisory servce, etc. From a business perspective the great thing is that the ratio of paid to non-paid is changing and our business is steadily growing.

We are proud at MySQL to build something that has great value to the FOSS communities and is a great business at the same time.
drix wondered what you get when you pay for MySQL:
Iiiinteresting. Says here you get 24x7 web and phone support plus 30 minute emergency response time ... You also get consultative support from people who spend all day tuning MySQL installations for max performance and reliability ... Lots of other goodies too numerous to mention that might be worth paying for.
Here's MySQL's Zack Urlocker on disruption:
I think the same pattern that happened with PCs disrupting minicomputers and Salesforce.com disrupting Siebel is now happening with open source software including Linux, the LAMP stack and MySQL. Many corporate IT managers considered Linux to be woefully inadequate in its early days and for the most part, they were right. But it was good enough for quick and dirty applications and for provisioning non-critical systems like file & print servers and web servers. As the web started to grow in importance, those niche applications became more prevalent and Linux continued to get better. Now you find Linux in pretty much every corporate data center in the world.

We see the same thing happening with MySQL. It gets deployed on a lot of niche applications, like web sites, ecommerce, data warehousing, reporting, custom applications and telecommunications infrastructure. And those niches are growing faster than the rest of the database industry.
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For $40K (the price of a single CPU of Oracle) you can get an enterprise wide use of MySQL Enterprise, with production 24x7 support and unlimited use of the MySQL Network Monitoring & Advisory Service for a year.  For customers that are used to spending $1 million or more on closed source licenses, this is a heckuva good deal. 
Matt Asay gasps:
It's $40,000. Gulp. When Zack told me this last week, I was shocked. I had to ask him for clarification. Several times. The price differential is so huge between Oracle/DB2/etc. and MySQL now that it's almost ridiculous.

How can MySQL offer this low of a price? Well, for one thing, it's dealing with a mature product that costs little to nothing to support. Instead of taking (vendor) advantage of this moment to crank up the price and charge monopoly rents for the next several years (until it, too, is disrupted), MySQL is choosing to cede advantage to customers and grow its market by dramatically changing the economics of the database industry.

Zack told me over email ... "The reason we can make money is because the software really works and we don't have expensive Armani-wearing Ferrari-driving sales reps closing 40K deals." I powered down my Ferrari at that point, feeling a little chastened. :-)
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Richi Jennings is an independent technology and marketing consultant, specializing in email, blogging, Linux, and computer security. A 20 year, cross-functional IT veteran, he is also an analyst at Ferris Research. Contact Richi at blogwatch@richi.co.uk.