David Menninger's Analyst Perspectives

Talend, a vendor of open source data integration tools, recently announced its acquisition of Sopera, an open source application integration company whose products are based on a service-oriented architecture (SOA). It simultaneously announced an additional $34 million of funding. As I pondered what the announcements mean, I couldn’t help but think of the bigger picture. Is this entrepreneurial action typical of an open source vendor?

That begs the question of how an open source software vendor is supposed to act. Yves de Montcheuil, Talend’s VP of marketing, is certainly speaking a lot of “French” in a recent blog post aggressively defending open source companies and his in particular. Talend does provide an open source version of its technology and has developed a community of participants who work with and presumably contribute to the open source code base. And like many other open source vendors Talend uses a “freemium” model in which the base product is available in a free, open source version, but certain premium features are only available if you purchase a license or subscription for them.

Fundamentally, open source is one among several business models for the software industry. The appeal of the open source model is the potential to grow market share more quickly than with an enterprise software model. (I’ll use this term to distinguish traditional, “proprietary” licensed software vendors from open source vendors.)  By giving the software away you can attract more users to the product in the hope that some of those users will convert to paying customers before your company runs out of cash. It’s a balancing act to give away software with enough value to attract a significant community of users while also creating additional features and services that generate enough revenue to cover the entire costs of the organization. In fact it’s such a tough act that many open source companies struggle to stay alive.

This is where the announcements indicate Talend is not behaving like an open source software company, seeming to have reached a tipping point that many open source companies never reach. It is competitive enough in its market space to be able to make bold and aggressive moves such as acquiring another company. Its investors were confident enough to support the move and add $34 million to the coffers. These steps are foreign to many in the open source community.

Let’s look at that acquisition. Talend developed a portfolio of information management capabilities that includes data integration in the form of extraction, transformation and loading (ETL), data quality and master data management. Sopera adds SOA-based application integration capabilities as well as a services team. Service-oriented capabilities are particularly important when integrating cloud-based applications with on-premises applications or with other cloud-based applications. From a business perspective this gives Talend another item to add to its price list, and since Talend’s distribution and presence are much larger than Sopera’s that should help the bottom line. If you are an IT organization considering Talend, the broader capabilities could be a plus even if you don’t plan to use them initially.

While the acquisition is impressive from a business perspective, it’s not exactly innovative from a technology perspective. Open source vendors generally follow the lead of enterprise software vendors in competing primarily on price or total cost of ownership (TCO) rather than on head-to-head comparisons of features. Enterprise software vendors such as IBM, Informatica and SAP have a similar or broader suite of capabilities including application integration. But our research on information management shows the importance of managing costs to help drive return on investment (ROI), and enterprises have rewarded innovations in the form of a business model that reduces costs.

My conclusion is that Talend both is and isn’t acting like an open source vendor. It has used the open source business model to its advantage and now appears to be in a position to act more like an enterprise software company. Regardless of what the business model is, the new capabilities and new funding should make Talend products more attractive to enterprise IT organizations.

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Regards,

David Menninger