Black Duck's Financial Success and Indexing Open Source

by Sam Dean - Nov. 13, 2008Comments (4)

As noted on ZDNet, Black Duck Software, which services managed and secure implementations of open source software, just had a phenomenal third quarter, with quarterly bookings for its services up 62 percent. There were some other strong metrics for the company as well. This company has a shrewd approach toward the growing open source arena, participating in growth as many disparate kinds of projects are adopted, and the need for open source auditing rises. Here's what they've done right, and why more success may lie ahead.

As Mike noted all the way back in April, Black Duck bought the Koders search engine, which contains over 1 billion lines of open source code, and is used by thousands of developers each day. It's also increasingly used by organizations that need to manage their software assets and licensing obligations, and used within Black Duck's software tools.

Black Duck's core business is delivering products that can go through an entire code base, even enterprise level ones, reporting on open source components that are present, and the licensing obligations that pertain to them. (It also helps companies find, approve, and manage open source solutions.) Koders, a top tool for doing this kind of scouring and reporting, was a shrewd acquisition.

As Black Duck's rosy business report stresses, the company's mergers & acquisitions (M&A) business grew over 150 percent year-over-year in the third quarter--a miserable quarter for countless companies. The searching and reporting for open source components and code within large code bases that Black Duck does is an essential part of the due diligence process that goes on when one company wants to acquire another. Among many reasons for this, the licensing obligations, or freedom for them, that particular types of open source implementations have can have a profound impact on the valuation of technology assets.

The key thing to note here is how Black Duck has carved out a lucrative spot for itself sitting on top of the open source mountaintop. As M&A activity increases over time--and it may do so dramatically during the economic downturn--Black Duck benefits regardless of the fate of this or that particular open source project. It was early to lock up essential tools to differentiate itself at doing this, such as the Koders search engine.

This reminds me of the fact that, as Burton Malkiel established in his book A Random Walk Down Wall Street, over 80 percent of mutual fund managers lose to index funds--where investors are just buying the market, rather than anyone making individual stock picks.

Black Duck has taken a very interesting approach to indexing the growth of open source. As aggregate open source deployments and needs for audits grow over time, so does Black Duck, even in a terrible economy. Sometimes focusing on the haystack beats focusing on the needle. 

 


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4 Comments
 

Black Duck is a proprietary sofwtare company. It's surprising that it gets so much coverage in OSS blogs.


0 Votes

PS: I am not writing a marketing pitch for them


Yes they are not an Open source company. They use their software & services to manage open source deployments. I believe we need to discuss about companies such as them in the open source space. Although their revenue model is completely different from other open source companies. They are not a threat to OSS, I see them as a friend of OSS who support organization to get over their fear. I cannot see them becoming as big as Red Hat. As the market gets mature in this space their revenue will slow down.


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@Jay:

"At the same time, the issues of copyrights and licenses is huge."

"These issues can de-rail or kill many software projects if not managed early. "


Nice way to spread FUD here. Do you work for BD?


Their offering is good. But, the problem here is that the detractors of Open Source are claiming that THEIR IP is part of the Open Source domain. The issue is not so much that you re-packaged LGPL with a GPL library and now you will get sent to Gitmo. There is NO legal precedent for any GPL violation making it to trial. Pretty much all of the violations have been fixed by companies making good on their contributions, or releasing code if they should have.


Let's get real here.


BlackDuck providers a service - it's started by lawyers, who make a valid point, but let's not lose perspective here. Clubbing mixed Open Source license issues in with "killing/derailing software projects" is a bit naive. That is like saying "make sure all your p2p traffic is analyzed because the RIAA could come in shut down your company because your receptionist was downloading songs". Or, the IRS arresting you because you expensed personal calls to the company and didn't declare it as income.


Yes, that can happen. Yes, you need to worry about it. But, NO, that is not the most pressing issue when innovating. The lack of easy information for developers is the crux.


The real problem is the license-bloat that has happened in the community. Solve that by breaking out the licenses into a few broad camps, and you will be fine.


Lawyers who want to make money during M&A, and PHBs who need someone to sign off are the real customers.


Let's not make developing code go through the same crap that accounting firms need to go through to get compliant for taxes.


Don't feed the animals in this zoo.


Simplify the license compatibility issues and make that accessible to developers, and things will be fine.


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