People credit MySQL and JBoss back in 2004 for reigniting an open source bubble of investment. That's definitely been covered to death this year as you've picked up. It's true that it's [open source is] so hot, right. As far as staying in front of the pack, we need to continue innovating. Being the leader in open [source] is a very entrenched position in the sense that the differentiators once your software is free are about the quality of support and your capacity to scale up innovation. Today, JBoss writes a lot of the key specifications inside of the Java world, the EJB 3.0 [specification] or a new innovation like Seam, or some of the innovation we're coming to market with in January that comes from our collaboration with Microsoft. We are accelerating the pace of innovation in open source with open standards.
For our future, we have a number of ways to grow, with organic growth being one. With [our] app server today, we have 40% market share. IBM and BEA [Systems] are at 20% each. Open source upstarts are going to have a tough time fighting against both those worlds. I'm not so worried. Actually, with the open source upstarts, I want them to succeed. It validates the business model and is the future of the ecosystem anyway.
The second way to grow, which has proven successful, is by federation -- bringing projects like Hibernate, Drools, etc. -- consolidating these platforms for SOA under the JBoss professional open source banner. We're federating communities that are not just JBoss.org, but Apache.org.
More importantly, as we look forward, we just announced that we acquired Arjuna Technologies from Hewlett-Packard. What that means looking forward is we can actually go out shopping for premium IT that didn't meet with the commercial success it deserved, and put it in our distribution machine and our marketing machine to create a new market in open source.
Nobody expected, not even us, distributed transactions and integration to reach open maturity so fast, but in the past few weeks you've seen Sun open sourcing SeeBeyond and us [JBoss] open sourcing Arjuna, previously a closed source technology. I'm describing an accelerating machine where we can feed that machine with financially acquired IT now, which we didn't know was possible in 2005. The year ends with that very positively. So open source has found new avenues in terms of how to operate as a business?
If you look at 2005, one of the successes, at least in the VC community, is the story of SugarCRM. What they're proving is that, through financing, they can build a product and distribute it for free and create a community that way, which is sort of the reverse of the traditional open source business of MySQL and ours to make a community, then start making money on top of it. That the financial angle can now bootstrap open source communities is a positive thing for the open source business model in general. You don't depend on this luck and this magic touch to create a community and that takes years. The real power of open source is becoming apparent. It's about the distribution model. It's not those that work for free, it's those that consume for free.
The new financing means we're able to accelerate the timeline at which open source reaches maturity in the infrastructure industry. That's goodness. What's the biggest challenge facing the open source model in 2006?
I don't mean to sound non-paranoid -- I am actually very paranoid -- even with my paranoia 2006 is very bright. All of the businesses I know in open source, we're leaving 2005 with booming businesses. 2006 is going to be a transition year now that all the big players are falling over themselves to embrace open source, some more elegantly than others, some more willingly than others. For example, Sun's open sourcing wasn't a big financial hit because it represented such a small part of their revenue; specifically, the software was 1% of Sun's revenue. So they could afford to go the full Monty on open source.
For other players like BEA or IBM, it's a different ballgame, where they have to protect their revenue streams. I think the challenge in 2006 is you're seeing an explosion of business models around open source and how exactly those dynamics play out is what concerns me. Are the big players going to roll up? Are you going to see mushrooming business models and an ecosystem that's thriving? I'm hoping for both. I'm wondering how this is going to play out, not in a negative way. Professional open source is the way of the future. That's for sure. How it's going to play out, nobody knows. You've made no bones about the fact that you're pursuing an open source SOA stack and that you've got an ESB coming in 2006. Yet many analysts consider the ESB an inessential SOA ingredient. Are there any more dramatic SOA-related steps you think you can take in 2006?
You have the ESB in there. You have the JBI container for component deployment in there. You have the Seam release and the portal that integrates the front ends with that, but to put this discussion in perspective, SOA is 80% a business approach and 20% a technical approach. On the business approach, people will say SOA's just not taking off because it's too much of a shift. It requires too many resources, too much coordination. I think we need to distinguish between the vendor hype around SOA and the reality in the field. At JBoss, we focus on the reality in the field from a technical angle. Because we don't sell licenses, we have no interest in pushing a hyped story just to sell our wares as the solution for SOA. Rather, we monitor very closely what our customers are doing and enable their SOA strategies through technology.
On the technology front, I think we have it nailed, to be honest. The roadmap delivers a modular approach to SOA. It maps very well to the reality of the field where people are taking baby steps. On the SOA front, what we push is more a story of raw technology and an ecosystem of partners to implement best of breed while some analysts may be looking at the IBM/Oracle marketing message: one size fits all, for everybody. Truly, this SOA thing strikes me as a business consulting approach and what do the vendors really know about that? Even IBM's trying to position itself as the business consultants that can really help you -- but what we hear from the market right now is we don't want to eat that elephant right now. Give us a modular approach so we can do step-by-step and proof of concepts and integrate some departments and have a rev up to SOA, as opposed to this big supernova you're supposed to swallow at once. I'd say we're very well positioned on the SOA front as a technology enabler and I feel very strongly about that position.