Leader: Open source to boom?

Is open source the next big boom à la dot-com?

Granted the fervour around all things open source, in particular poster child operating system Linux, has been fanned by a vocal minority for some time but more recently we've seen more mainstream support - and evidence of solid business models and revenues from open source companies.

And now the VCs are jumping on board.

According to venture capital firm FirstCapital, 10 first-round investments were made in open source companies in 2004, a level of activity not seen since the late 1990s.

The year saw backing for a variety of open source projects such as JBoss, an application server; SugarCRM, customer relationship management software; Narnia, Linux migration tools and support for SMBs; Zend, the company behind the PHP scripting language; and SourceLabs, a provider of support for open source applications.

These are all proof that open source is moving 'up the stack' from the operating system to databases, business applications and development tools. And with the LAMP stack - that's short for Linux, Apache web server, MySQL database and PHP scripting language - looking ready for prime time it shouldn't be long before adoption becomes widespread in the enterprise.

Speaking on a recent panel dedicated to open source venture capital in London, Danny Rimer, partner at Index Ventures, said open source has already snuck into IT departments through "guerrilla tactics", meaning IT staff and engineers often start using the software on projects without bosses' knowledge.

NASA was one such case. It had 10 MySQL projects in operation before management found out, according to Rimer.

The world has quickly changed from "no one ever gets fired for using IBM" to, Rimer said, "you can get fired if you're not coming up with at least an argument for why open source is not relevant for [a certain] type of application".

As further proof of the market's maturation, we're seeing consolidation such as the recent merger of second-tier Linux sellers Mandrakesoft and Conectiva.

And big traditional IT names such as IBM continue to ladle on the support in the form of cash and code donated to open source projects.

All we need for a true 1999 flashback is a blockbuster open source IPO - which some at that recent London event hinted could be on the way. No promises on the 'blockbuster' part but do expect flotations.

Of course, proprietary software development won't go away but will be used in niche applications and for projects that require considerable development and innovation - and big R&D budgets to support that.

It's all pretty convincing but we're not getting too carried away. We - and hopefully the VC community and rest of the industry - learned that lesson with the dot-coms.