Due to the terms of its open source license, Red Hat cannot effectively prevent Oracle from licensing, reselling, and supporting its version of Linux. In effect, Red Hat – and almost any other open source software developer or distributor – provides well-positioned competitors, especially large IT “Master Brands” such as Oracle, with the ability to compete directly, and possibly to put them out of business.

The Oracle move is strategically brilliant. Oracle gains an almost-instant, solid foothold in open source, which is one of the fastest-growing software market segments in the world, and which has extremely broad appeal to users in every geographical and industry market.

Oracle also gains commercially-leveragable access to a wealth of leading-edge technology and users without significant capital investment. It needs to train and deploy/redeploy its technical services resources to support Red Hat Linux, of course, but resource software training and deployment is typically considered a cost of doing business among enterprise software vendors.

At Saugatuck Technology, we expect other enterprise software Master Brands (e.g., IBM, MSFT, SAP) to employ similar tactics, not just in Linux but in all open source software arenas including desktop and server-based applications. The dam has broken.

Finally, open source developers and distributors now must face a threat that always existed – but which many had not taken seriously for a number of reasons, including the ongoing skepticism of many old-line IT and vendor executives about the commercial attraction and viability of open source software.

Saugatuck’s own research since 2004 has shown continuing, significant increases in open source adoption in all markets, from operating systems to enterprise productivity software to server desktop applications. Growing markets attract competition; large markets attract large competitors.