Ten Bleeding-Edge Open Source Companies

Firms that represent the future of open source, from start-ups to established enterprise plays. We look at strategy, funding, and management.
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If financial backing is any indicator, open-source companies are hot these days. In the past year, Linux Networx raised $37 million, Zend Technologies hauled in $20 million, and MontaVista scored $21 million. For those keeping an eye on exit strategies, last summer saw JBoss acquired by Red Hat for a cool $350 million.

Of course, the VC stamp of approval comes at a cost. Open-source vendors with VC money in their coffers feel a certain warmth breath on their neck. It's time to make a profit, boys. Gone are the days when work can be done on an informal “project” basis. Suddenly, old-fashioned headaches like marketing and staffing are as important as forward-looking open source code development.

In other words: Meet the new boss, same as the old boss.

But whatever headaches they endure to get funded, there’s no doubt that this new generation of companies is remaking the software industry. New alliances are being formed, new attitudes are being shaped. What exactly the software business will look like when these firms mature is far from clear, but it won’t be the same.

Creating fertile ground for these pioneers are large enterprises which, driven by cost considerations, have a new willingness to consider open source. The bluest of the blue chips now buy open source. Furthering the process, proprietary vendors are losing their vise-grip, allowing open source firms to push into the cracks.

With this changing environment, hundreds of open source firms have sprung up in the last few years. They’re young, they’re hungry, and they’re smart. (And they’ve got ultra-hip VC funding in their pockets.) Ready or not, here they come.

With that in mind, we’ve chosen ten firms that reflect the future of the open source business.

1. GroundWork Open Source

Location: San Francisco, CA

Founded: 2004

Product or Service: GroundWork provides IT operations management software for Linux, Unix, Windows, and mixed-OS environments. GroundWork’s Monitor product centralizes management and monitoring and is intended for an entire network deployment, including servers, applications, databases and network equipment. It provides both active and passive monitoring via agent-based or agent-less methods. Users can select a combination of synthetic polling, log file monitoring, and automated actions based on policies and user-determined thresholds. GroundWork Monitor also includes tools to analyze and record the performance of an IT environment with features such as performance graphs, executive-level dashboards, and SLA business reports.

GroundWork is based on Nagios, an open-source IT monitoring tool. According to GroundWork, the value-add here is that the company takes Nagios and “transforms it into an enterprise-ready IT management solution by adding functional enhancements as well as deployment services and ongoing support.” In other words, this is yet another open-source company banking on the Red Hat model.

For enterprise deployments, a key consideration is that GroundWork Monitor enables an automated response to alarms, allowing system administrators to specify what should be done as a result of a specific event. Event triggers can automatically launch scripts to fix simple problems, such as by restarting servers or clearing disk space.

In 2006, GroundWork says that it had a 400% increase in subscription revenue while surpassing the 200-customer milestone. Those customers include Ingenuity Systems, UNC Charlotte, and Yodlee.

Funding: Secured $12.5 million in its third round of funding in February 2007, bringing its total funding to $24 million. Investors include JAFCO Ventures, SAP Ventures, Canaan Partners and Mayfield Fund.

Competitive Landscape: IT management is currently dominated by the “Big 4”: HP OpenView, IBM Tivoli, CA Unicenter and BMC Patrol. The opportunity for companies like GroundWork rests with the fact that these competitors offer big, complex, expensive platforms.

According to a recent Gartner report, Big 4 customers aren’t entirely satisfied. About 55% of those surveyed said they would be interested in open-source alternatives to the Big 4, which is well up from 29% in the 2004 survey.

According to GroundWork, they are competing in the $9 billion market for IT management software. They note that the market is being driven by two forces: First, basic systems and network monitoring functionality has become commoditized to the point where numerous products now reliably perform similar functions. Second, there is a growing ecosystem of open-source products and vendors specializing in systems and network monitoring, while other IT management applications have matured rapidly.

Thus, cost is the issue here, and it is GroundWork’s main selling point. According to the company, unlike competitors who price on a per-device monitored or per-agent basis, GroundWork is licensed per management server, with no restrictions on the number of devices monitored.

If all of these features are commodities, isn’t GroundWork trying to then carve a niche in an already commoditized market? Perhaps. However, customers haven’t yet recognized the commoditification of this market and still shell out top dollar to the Big 4. This fact alone should give startups in the space some breathing room and time.

Open-source competitors include Zenoss, Hyperic and Qlusters.

Management Team: Ranga Rangachari, president and CEO, spent 11 years at Legato Systems, an enterprise storage management company acquired by EMC in 2003. Tony Barbagallo, VP of product management and marketing, was formerly VP of marketing at EVault. Phil Bradley, VP of sales, was recently VP of sales for nCircle. Victoria Grey, VP of strategic alliances, was previously VP of sales and marketing at EMC Insignia. Craig Thomas, CTO and chief architect, was formerly CTO of Steelwedge Software. Stuart Thompto, VP of engineering, was previously VP of engineering at JasperSoft.

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