Open Source Eyes Telecom
The last few weeks have seen a couple of open-source ideas step beyond cult status into the "real" business world. Digium Inc. -- which supports the Asterisk open-source telephony platform -- picked up $13.8 million in its first round of funding last week. And recently, router startup Vyatta Inc. launched the first commercial version of its software along with offerings for services and subscriptions. (See Digium Raises $13.8M and Vyatta Launches Router.)
The start of a revolution? Maybe, but it's going to take a while. In the case of Vyatta, Forrester Research Inc. analyst Robert Whiteley says he doesn't see "any wide-scale movement toward it in the next five years."
Still, as networking hardware and software get commoditized, open-source products are starting to make sense. Whiteley points to the example of Cisco. One of its primary roles, years ago, was protocol translation. But with IP and PPP winning out, that's not a necessity.
Instead, Cisco, Juniper Networks Inc. (NYSE: JNPR), and others are concentrating on areas such as application-aware networks and security, not raw IP routing -- and that's why open-source routers won't usurp either company, Whiteley says.
He likens it to the server market, where Linux has made the operating system a commodity but hasn't killed off Microsoft Corp. (Nasdaq: MSFT). "Microsoft still thrives in that environment, because from the OS up they can still add value," Whiteley says.
The telecom world is opening up to non-proprietary wares anyway. The whole Advanced Telecom Computing Architecture (AdvancedTCA) set of standards, for example, is geared at creating a generic baseline for telecom equipment, a change from the old days of OEMs doing everything in-house. (See AdvancedTCA .)
Asterisk -- used as the basis of all manner of equipment, including PBXs and interactive voice response systems -- has been burrowing into the telecom consciousness since 1999. It's got 1 million users and serves 1,000 downloads per day, according to the Digium site. Digium, which employs 60, makes its money selling services and hardware related to Asterisk.
Digium doesn't actually need money -- it's been profitable since 2002 -- but president Mark Spencer, Asterisk's creator, says he wanted to wring the most out of Asterisk's success. That's going to take extra funding and some advice from people who've succeeded with startups before.
Digium's funding came from Matrix Partners , which had also invested in JBoss Inc. , an open-source middleware company recently acquired by Red Hat Inc. (NYSE: RHT). (See Red Hat Makes SOA Buy.)
Matrix gets a seat on Digium's board, but Spencer says he's not selling out.
"I've always said, if you give up control of your company to VCs -- either by the percentage you sell or the way the board is structured -- then you're selling your company," Spencer says. "I would not do something like that."
Asterisk supports old-world TDM networking as well as newfangled VOIP applications, and that's helped it gain fans among business users. "What we found is, there are enterprises that see the opportunity in this. A lot of enterprises are not happy with their existing vendors," Spencer says.
But for all its popularity, Asterisk hasn't had much effect on the business of giants like Avaya Inc. , says analyst Sam Wilson of JMP Securities . Nor does he expect Asterisk's influence to be a bother to them: "Incumbency entrenchment is going to win out," he says.
Spencer himself isn't yet talking about toppling anybody. He notes that open-source products might just push the giants to focus more on services, which is where the real money is anyway. "The jury's still out on what this means for Avaya, Nortel Networks Ltd. , and Cisco," he says.
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Open source community proves that large high quality projects is not an exclusive area of commercial cos with VC financing.
Linksys is one of the companies which build their products on Linux and opened the source and i think gained significantly in the process.