Since I first began covering open source in 2005, it has been considered separate from the software mainstream. There were “proprietary” software companies like Microsoft (NASDAQ:MSFT) and Oracle (NASDAQ:ORCL), and there were “open source” software companies like Red Hat (NYSE:RHT) and Google (NASDAQ:GOOG). The split was always arbitrary and artificial. Microsoft and Oracle both contribute to open source projects; Red Hat and Google have always held some things back as proprietary.
So just as “Internet Commerce,” which I covered in the 1990s, became just “commerce” a decade later, so open source is being absorbed into the software mainstream.
A good example is Quest Software (NASDAQ:QSFT), an enterprise software company. It's usually placed on the proprietary side of the ledger, but has just joined a number of venture capitalists in an $11 million financing round on behalf of JasperSoft, an open source business intelligence software company.
Why? From a balance sheet point of view this is relative pocket change. Like many tech companies, it carries a lot of cash -- $285 million in this case -- relative to its total asset base of $1.6 billion.
Quest now stands in the way of any ambitions Red Hat might have to buy JasperSoft. But why should Red Hat be assumed to be the only suitor? Why couldn't Quest emerge as a buyer?
Quest has operations that touch on business intelligence, mainly around SQL Server, and buying JasperSoft might be a good fit, especially if it offered management some operational autonomy. Quest uses open source components in its products and is sponsor of the Sudo Project, part of its play in the fast-growing identity marketplace.
Most analysts are negative on Quest, which has rolled over after nearly doubling in value between 2008 and late 2010. It will take strategic smarts for CEO Douglas Garn to turn that around, and who's to say open source wouldn't be a big part of it?
The point here goes beyond Quest. Don't look at open source or proprietary software when seeking investments in this space. Just look at software.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.