I came across two headlines on Google in the last couple of days and assumed they would lead me to some long-forgotten 2004 or 1994 articles, the sorts of stray dogs that Google search dredges up from the depths of the Internet every once in a while even when you filter by "last 24 hours." Over on the web site of my long ago IDC big boss Dave Vellante, wikibon, I found "Open Source is the Future of Software." And on IDG News Service there was "SAP Enters Complex Event Processing Market."
I found it hard to believe but the two articles were datelined February 2011 and -- although the articles covered two different subjects -- it was old/questionable news in both cases.
You can look at the open source headline, a quote by an MIT professor, two ways:
- From a market research perspective, open source has been around as an enterprise software market dynamic since decades before it was even called open source. More here. So it can't be the future.
- But more apropos to investing in enterprise software companies, the MIT professor says the reason is that the cost of sales for software deployed with open source terms and conditions (Ts&Cs) is less than the cost of sales for software deployed with different Ts&Cs. I can find no research that backs up that claim and I wouldn't expect to because:
- The major providers of open-source-licensed software are also the major providers of non-open-source-licensed software: HP (HPQ), IBM, Oracle (ORCL), a lot of long-time second-page-of-the-leaderboard software suppliers, and increasingly Microsoft (MSFT).
- These companies do not employ separate salesforces depending on the type of license. (Microsoft can't be fairly compared because most of its software flows indirect, although that percentage is shrinking.)
- The professor uses Red Hat (RHAT) as an example of "the future" but its "sales and marketing" expense looks like Oracle's to me as a percent of revenue (in fact, Oracle's is lower but there's a lot of reasons for that). Overall, Statements of Operations look roughly similar allowing for different tactics and sizes. That's not a criticism of Red Hat. Red Hat is successful because it is a good software company. The fact that Red Hat sells open-source-licensed software exclusively is just a marketing tactic.
As for SAP entering the complex event processing market, I swear they told me that in 2004. (It was somewhere in Arizona. It was late fall in the northern hemisphere. I got in my last round of the golf season as the November sun set over the desert. But I digress because I am sitting here watching a wild February New England rain storm.) The IDG story says the latest product is based on a Sybase product but I swear Sybase also told me it had CEP in 2004 too. (It was right off I-80, across from the old PeopleSoft complex. There was a Starbucks in the strip mall across the parking lot. But I digress because I could be describing anywhere in the Bay area.) File this one as "The CEP buzzword is making a comeback." Anyways, my point is
"Don't buy shares in an enterprise software company because a news headline implies the news is "new.""
-- Dennis Byron
(No financial interest in companies mentioned but I have done consulting for Red Hat and about all the others in the last year.)