The long-predicted consolidation of the open-source software market is finally starting to happen. But which path will the market take--disappearance of the pure-play open-source vendors, or a winnowing to a few strong ones?

Those were the two scenarios proffered by Kim Polese, CEO of SpikeSource Inc., when I spoke with her in late February. SpikeSource sells testing and tech support for open-source packages of business software such as JBoss, MySQL, and SugarCRM. If any of those companies get acquired, she said then, "It doesn't change our business model." Now one has, and it fits Silicon Valley veteran Polese's definition of a "major acquisition" in the open-source world.Linux distributor Red Hat Inc. last week said it would buy open-source application server company JBoss for $350 million, creating the first potential powerhouse of open-source software, as my colleague Charles Babcock reported in this week's issue of InformationWeek. Database giant Oracle Corp. is also on the acquisition path: CEO Larry Ellison told the Financial Times this week that Oracle had considered buying Novell Inc., owner of Suse Linux, to add an operating system to its portfolio.

According to Polese, investors value small companies that are the open-source leaders in their markets--JBoss in app servers, Zend Technologies in the PHP programming language, Sleepycat Software (acquired by Oracle February 14) in database software--differently than they do other tech companies. They tend to assign value to market share and leadership perception versus using traditional multiples of revenue. JBoss and Zend are taking share from proprietary software vendors in the IT shops of the largest companies. "That's making people sit up and take notice," she said.

Two ways the market can go then. Those leaders will either grow in size and up their quality, attracting new customers. Or traditional software firms will buy more open-source companies and become a central point for tech support--something CIOs can't always count on from small vendors. Or, as Polese said, "There's no Microsoft making it all work together."

Ellison told the FT he thinks JBoss generates $16 million in revenue a year, and MySQL tallies $30 million. Both break even, he said. Oracle averages more than $38 million in sales a day. While the idea of open-source companies standing on their own two feet seemed plausible just a couple of months ago, recent events look to have tipped the trend in the opposite direction.