THE ADVANTAGES: SCALE AND ACCESS

There's another potential advantage to business IT when open source companies and projects get acquired: The project suddenly gets access to a large enterprise customer base. Sun brings MySQL to its high-powered client base and can pitch it as part of a larger strategic picture--MySQL, combined with its Java middleware and NetBeans open source development tools, makes open source code adoption more of a coordinated transition and enterprise cost-saving move. While there's a risk of losing volunteer developers after an acquisition, big vendors may be able to bring more paid developers to a project, letting them work long term on it, and draw new perspective from top-tier user companies.

All these factors are playing out in Citrix's acquisition of XenSource, centered on the open source Xen virtualization project. When Xen, with its roots at Cambridge University, showed it had the smarts to virtualize the x86 instruction set, Hewlett-Packard, IBM, Oracle, Sun, and others flocked to the project as a ready-built alternative to VMware. IBM, for example, contributed a designed-in approach to virtual machine security that some consider superior to measures that VMware has been adding through third parties.

As VMware threatened to dominate the virtualization market, XenSource's leaders agreed to sell to Citrix, a close Microsoft ally. XenSource on its own had been building ties to Microsoft, and after the acquisition, the joint work accelerated. Once XenSource was inside Citrix, one of the first announcements concerning the renamed XenServer hypervisor was that it would support the Microsoft virtual machine file format, VHD. (VMware has its own incompatible format.)

Xen continues as an open source project, and Sun and Oracle are producing their own hypervisor software based on Xen, something they couldn't have done as quickly without an open source option. But the combination of a Citrix proprietary XenServer and Microsoft's Hyper-V, both sharing a common file format and managed by Microsoft's System Center Virtual Machine Manager later this year, suddenly looks like a formidable competitor in its own right--perhaps not the outcome other vendors had in mind when they flocked to the Xen project. Says Sun VP Green, "We always knew somebody would buy XenSource."

	Crosby goes proprietary with XenSource

The emergence of an alliance of Hyper-V and XenServer changes the competitive landscape for VMware. Under CEO Diane Greene, VMware outflanked Xen, making the low end of VMware's product line free just as the enhanced Xen 3.0 became available. VMware was miles ahead of Microsoft, commanding the high ground in virtualization en route to $1.3 billion in revenue last year as businesses raced to virtualize servers to cut energy, equipment, and space expenses.

Citrix, as a Microsoft ally, has always benefited from having its code in Windows Server, speeding operation of its flagship Presentation Manager, while Microsoft benefits from having an ally that concentrates on a high-end presentation option on top of Windows Terminal Services. In April, this partnership was extended from application presentation to server and desktop virtualization.

"The next year is going to be the most interesting year in virtualization," predicts Simon Crosby, former XenSource CTO and now CTO of Citrix's virtualization unit. Gartner put XenSource's 2007 market share at 4%, he says, based on less than $10 million in revenue. In 2008, XenSource will generate $50 million in revenue and be on a growth path that rivals VMware's, Crosby says. XenSource has close to 3,000 customers, compared with 1,800 at the time of the acquisition.

The product line fueling that growth won't be open source Xen but a proprietary Citrix version, XenServer, working with Microsoft System Center Virtual Machine Manager in the near future.

To pull it off, XenSource still must prove it can push a proprietary product line without invoking the wrath of the open source community. But it has advantages. The Xen hypervisor, produced by XenSource and other Xen contributors, remains freely available. Xen doesn't have a mass following of open source developers or a big following of large-scale users. There are open source alternatives--such as KVM, now in the Linux kernel--which likely are more interesting to many open source developers. The Citrix product line was never free, so there's not a switch.

Crosby is unapologetic about proprietary advantages. "Strange to say, it's been easier to work with Microsoft than with some of the members of the open source community," he says. "They tend to be more surly--not surly, a little more difficult to partner with." Xen, for example, got roughed up in the Linux kernel development process when XenSource asked for support in the kernel. Crosby says the people he's working with at Microsoft "aren't the old Microsoft guys. There's a new generation more interested in reaching out to the community."