Investing in Open Source Companies & Solutions is Smart Business

Peter GroenWho would really want to invest in companies that have embraced the 'open source' movement?... It turns out there just might be a lot of 21st century companies that have embraced open source, open access, open data, open standards, open architecture… and are overtaking or outperforming major companies that used to dominate in the last century...

"Bill Gates, VCs Invest $35M In ResearchGate",  "Mirantis Fuels Open Source OpenStack with $10 Million Investment", "One day, three deals, $150 million in open source funding", "Open Source technology investment to increase significantly by 2018". Pay attention to these headlines from recent news articles related to investing in 'open source'.

Obviously, there must be something wrong with these news stories. Who would really want to invest in companies that have embraced the 'open source' movement? Google must be a one time phenomena. Facebook, a flash in the pan. Red Hat, an anomaly. Canonical's Ubuntu solution? C'mon.  Amazon, Acquia, SugarCRM, Alfresco, eRacks, Jaspersoft, OpenBravo, Pentaho, EnterpriseDB, Talend, VMWare, Zenoss, …

It turns out there just might be a lot of 21st century companies that have embraced open source, open access, open data, open standards, open architecture… and are overtaking or outperforming major companies that used to dominate in the last century.  Some of them have figured it out and embraced the 'open movement', recognizing it’s a key strategy to succeed as we complete the transition into the 21st century Information Age. Witness IBM, Oracle, Microsoft and many others that have stopped swimming against the tide.

In the Health IT marketplace, there are also quite a few companies providing 'open source' solutions and services that you might want to look at.  Check out some of the growing community of companies associated with the development and deployment of VistA, OpenEMR, OpenMRS, and the OSCAR 'open source' electronic health record (EHR) systems. In the areas of 'open' health information exchange (HIE) solutions, personal health records (PHR), clinical imaging, public health clinical trials, health information portals, and genomic information look closely at companies like Clear Canvas, DSS, Clinovo, Kitware, Medsphere, Mirth, OpenClinica, Tolven, ZocDoc, and many others. See the Resources Section of Open Health News (OHNews).

One of the major bright spots in the 'Great Recession' was the continued growth of open source companies that persevered and thrived as many other traditional companies failed. In a report back in 2009, a 451 Group report stated that "almost universally, every open source company reports the same thing: economy down, sales up." Open source businesses like Red Hat have  cracked the $1 billion dollar revenue mark and leading proprietary IT software firms are creating new subsidiaries to invest in, develop, and market open source solutions and services.  These companies have figured out the the 'open source' strategies & business models needed to succeed.

The open source community knows that the best days are still yet to come. Open source is now recognized as a genuine alternative to proprietary software with serious offerings that will empower businesses across the globe. Many of the 'open source' solutions and companies mentioned in this article are entering the final stages of the 'open source' maturity model.

Venture capitalists (VC) have spent billions on open source investments and the numbers are growing. Investing in the marketplace of 'open source' companies is no longer the preserve of a handful of intrepid VC fund managers . More and more individuals and companies recognize the value of investing in these new companies and are testing the waters.

Which brings us back to the headlines mentioned at the start of this article:

• Bill Gates, VCs Invest $35M In ResearchGate
• Mirantis Fuels Open Source OpenStack with $10 Million Investment
• One day, three deals, $150 million in open source funding
• Open Source technology investment to increase significantly by 2018

The bottom line for many future investors is that one should not evaluate software companies based on whether they are selling open source or closed source solutions and services.  Instead, you'll evaluate them on how they implement open source strategies within the context of their overall business model. Most of these companies will be offering 'hybrid' open technologies and solutions.

In closing, aside from this discussion about investing in open source companies, you might also want to use open source investment resources and tools to help you evaluate them.  Check out the following:

• Twitter Sentiment 140
• Open Source Investing Service (OSIS)
• CapGroup Open Source Investment Research