Tony Bain

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Should Oracle Have Bought MySql? (Part 2)

July 07, 2008 | Tony Bain

I am not against Open Source at all so I don’t want this to become a debate about that.  But a commenter saying that Open Source business models are well understood is not correct on this scale in the RDBMS market.  In large multi national RDBMS players such as IBM, Oracle, Microsoft we have seen free/Open Source software offered as teasers that lead into purchase software.  We have not seen an Open Source offering as a primary offering.

The economics of what Sun has done is interesting.  It has paid $1 billion for MySQL.  But remember, MySQL’s revenue is largely services* based, not intellectual property based, which means each and every sale they make they have all their standard delivery overheads.  In all service based organisations I have been involved, a 20-30% profit margin is considered normal.  So if everything stayed the same, it could take Sun an estimated 41 years to get their money back based on MySQL’s current revenue.

But this doesn’t take into account reinvestment into R&D.  For MySQL to not only grow, but simply maintain its market share they are going to have to invest heavily into expanding MySQL’s capabilities.  So assuming they are making standard returns on their services, this doesn’t leave a very large bucket to pipe back into R&D at the current time.  So when does Sun start getting payback on their $1b?

One would expected then that Sun believe they can increase MySQL revenues significantly.  Very significantly.  How they plan to do this is the unanswered question at the moment.  Obviously the cross sell opportunities will add a lot to the bottom line, but with the numbers we are talking one would hope they had a revelation, if not a revolution, up their sleeve.
* I think MySQL does sell some management products for MySQL that are not services based