Click here to close now.


Linux Containers Authors: Liz McMillan, Elizabeth White, Derek Weeks, PagerDuty Blog, Flint Brenton

Related Topics: Open Source Cloud, Linux Containers

Open Source Cloud: Article

How to Acquire an Open Source Software Company 2.0

Open source technology has added a complex variable to relevant parties calculating the M&A equation

These days, executives realize that there are “new school” ways of acquiring a company with a software asset.” For all of the immeasurable benefits it has brought to the development community, open source technology has added a complex variable to relevant parties calculating the M&A equation. Open source code, the general reuse of open source, and proprietary software components in software development have further complicated the process of acquiring a software asset.

These days, closing a deal that includes a software asset is not much different than shopping for a car. On the outside, the streamlined exterior and highly finished shell might look very glamorous, but the question needs to be asked: “Would you buy a car without first looking under its hood?” Purchasing any software asset demands that due diligence be paid to evaluating the integrity of that software’s code. It is in the best interest of the acquirer to make sure that the asset they are acquiring complies with all intellectual property and licensing requirements. In other words, you want to be sure that the amalgam of parts used to build the engine, assembled in piecemeal fashion, meet the criterion set for passing vehicular inspection.

View Doug Levin on SYS-CON.TV

Virtually all companies that develop software are now working in a “mixed-IP environment.” The reuse of internal and externally available source code by developers is inevitable. Most software architects use a “component assembly” approach to creating this hybrid type of software. It usually involves using a combination of third-party code, open source code, and proprietary code. However, such uncontrolled re-use of available source code introduces the need to assure that the code is used in accordance with applicable licenses.
Manually evaluating software developed through a “component assembly” approach is the “old school” way of performing due diligence. This approach can prove to be an exhausting and time-consuming exercise. The typical parties normally involved in the M&A of a software asset can potentially spend many hours trying to decipher what is in the code and what are the relevant licenses that apply to the code. For legal teams, auditors, and executives involved in such an M&A deal, time is of the essence.
All software carries licensing obligations, which may not be onerous, but companies are required to abide by them. In a mixed-IP environment, the volume of licenses to be understood and tracked can quickly become a challenge, especially if those licenses and their many different obligations conflict with one another.
Without insight into the composition of software and licensing restrictions, software assets can be laden with serious intellectual property problems. If license conflicts arise too late in the M&A transaction, it can lead to costly code reviews or redesigns for internal development teams. License violations can also cause embarrassing public and investor relations nightmares for companies.
With the onset of the Free Software Foundation’s release of General Public License (GPLv3.0) on the near horizon, now more than ever companies need to be able to quickly evaluate the code they are acquiring, and be able to distinguish usage rules from GPLv2.0 and v3.0.
Given the time-sensitive nature of M&A transactions, acquirers need a software-compliance management solution that streamlines the due diligence process. Furthermore, such a solution needs to provide the acquirer with a snapshot analysis of the software asset that they are acquiring. At the same time, the system also needs to be able to protect the source code and other intellectual property of the acquired party’s asset. The solution needs to be able to keep the two parties involved in the transaction separated, while providing each the information it needs to continue the process.
Essentially, such a solution needs to be able to move quickly, maintain confidentiality, and match the pace of the due diligence process. Also, all relevant participants in these types of transactions must be able to easily interpret the information produced by such a solution in a user-friendly format.
Both large and small companies have a need for this type of compliance management solution. Many large companies are typically involved in multiple transactions per year that could potentially involve licensing issues in software they are looking to acquire. If detected too late in the transaction process, these types of licensing issues could force the acquirer to renegotiate the value of its acquisition. Consequently, a company could save millions of dollars by investing in a software compliance management solution that would mitigate the risk.
Likewise, a small software company wishing to be acquired could certainly benefit from deploying such a solution. The company would need to rely on being able to utilize the solution to quickly review their code and remediate all issues prior to any potential transaction. In an era when many enterprise open source assets are being rapidly acquired, small software companies have a strong need for a solution that offers the ability to employ this functionality in record time.
The reality facing the industry is that software reuse is better, faster, and cheaper. By the same token, it is now harder to track and manage embedded code used in the development of a software asset. The risk of being in violation of certain license restrictions is heightened for a purchaser acquiring a software asset, when that asset originates out of a “component assembly” approach. A software compliance management solution that allows for both parties in an M&A transaction to mitigate the risks and reap the benefits is sorely needed in this age of mixed-IP environments.

More Stories By Douglas Levin

Doug Levin is the founder, member of the Board of Directors and former chief executive officer (CEO) of Black Duck Software, serving in these roles since December 2002.

Previously, Levin was CEO of MessageMachines (acquired by NMS Communications in 2002) and X-Collaboration Software Corporation (acquired by Progress Software in 2000), two VC-backed companies based in Boston. He also worked for Microsoft Corporation for eight years.

Levin has an advanced degree in International Economic from the College d’Europe in Bruges, Belgium and a BA from the University of North Carolina at Chapel Hill. He was awarded CEO of the Year in 2007 by the Massachusetts Technology Leadership Council.

He is considered an expert on technology start-up and emerging company formation.

Comments (1) View Comments

Share your thoughts on this story.

Add your comment
You must be signed in to add a comment. Sign-in | Register

In accordance with our Comment Policy, we encourage comments that are on topic, relevant and to-the-point. We will remove comments that include profanity, personal attacks, racial slurs, threats of violence, or other inappropriate material that violates our Terms and Conditions, and will block users who make repeated violations. We ask all readers to expect diversity of opinion and to treat one another with dignity and respect.

Most Recent Comments
EOS News 05/14/07 09:13:06 AM EDT

These days, executives realize that there are 'new school' ways of acquiring a company with a software asset. For all of the immeasurable benefits it has brought to the development community, open source technology has added a complex variable to relevant parties calculating the M&A equation. Open source code, the general reuse of open source and proprietary software components in software development, have further complicated the process of acquiring a software asset.

@ThingsExpo Stories
In his keynote at @ThingsExpo, Chris Matthieu, Director of IoT Engineering at Citrix and co-founder and CTO of Octoblu, focused on building an IoT platform and company. He provided a behind-the-scenes look at Octoblu’s platform, business, and pivots along the way (including the Citrix acquisition of Octoblu).
In his General Session at 17th Cloud Expo, Bruce Swann, Senior Product Marketing Manager for Adobe Campaign, explored the key ingredients of cross-channel marketing in a digital world. Learn how the Adobe Marketing Cloud can help marketers embrace opportunities for personalized, relevant and real-time customer engagement across offline (direct mail, point of sale, call center) and digital (email, website, SMS, mobile apps, social networks, connected objects).
The Internet of Everything is re-shaping technology trends–moving away from “request/response” architecture to an “always-on” Streaming Web where data is in constant motion and secure, reliable communication is an absolute necessity. As more and more THINGS go online, the challenges that developers will need to address will only increase exponentially. In his session at @ThingsExpo, Todd Greene, Founder & CEO of PubNub, exploreed the current state of IoT connectivity and review key trends and technology requirements that will drive the Internet of Things from hype to reality.
Two weeks ago (November 3-5), I attended the Cloud Expo Silicon Valley as a speaker, where I presented on the security and privacy due diligence requirements for cloud solutions. Cloud security is a topical issue for every CIO, CISO, and technology buyer. Decision-makers are always looking for insights on how to mitigate the security risks of implementing and using cloud solutions. Based on the presentation topics covered at the conference, as well as the general discussions heard between sessions, I wanted to share some of my observations on emerging trends. As cyber security serves as a fou...
Continuous processes around the development and deployment of applications are both impacted by -- and a benefit to -- the Internet of Things trend. To help better understand the relationship between DevOps and a plethora of new end-devices and data please welcome Gary Gruver, consultant, author and a former IT executive who has led many large-scale IT transformation projects, and John Jeremiah, Technology Evangelist at Hewlett Packard Enterprise (HPE), on Twitter at @j_jeremiah. The discussion is moderated by me, Dana Gardner, Principal Analyst at Interarbor Solutions.
With all the incredible momentum behind the Internet of Things (IoT) industry, it is easy to forget that not a single CEO wakes up and wonders if “my IoT is broken.” What they wonder is if they are making the right decisions to do all they can to increase revenue, decrease costs, and improve customer experience – effectively the same challenges they have always had in growing their business. The exciting thing about the IoT industry is now these decisions can be better, faster, and smarter. Now all corporate assets – people, objects, and spaces – can share information about themselves and thei...
Too often with compelling new technologies market participants become overly enamored with that attractiveness of the technology and neglect underlying business drivers. This tendency, what some call the “newest shiny object syndrome” is understandable given that virtually all of us are heavily engaged in technology. But it is also mistaken. Without concrete business cases driving its deployment, IoT, like many other technologies before it, will fade into obscurity.
The Internet of Things is clearly many things: data collection and analytics, wearables, Smart Grids and Smart Cities, the Industrial Internet, and more. Cool platforms like Arduino, Raspberry Pi, Intel's Galileo and Edison, and a diverse world of sensors are making the IoT a great toy box for developers in all these areas. In this Power Panel at @ThingsExpo, moderated by Conference Chair Roger Strukhoff, panelists discussed what things are the most important, which will have the most profound effect on the world, and what should we expect to see over the next couple of years.
Discussions of cloud computing have evolved in recent years from a focus on specific types of cloud, to a world of hybrid cloud, and to a world dominated by the APIs that make today's multi-cloud environments and hybrid clouds possible. In this Power Panel at 17th Cloud Expo, moderated by Conference Chair Roger Strukhoff, panelists addressed the importance of customers being able to use the specific technologies they need, through environments and ecosystems that expose their APIs to make true change and transformation possible.
Microservices are a very exciting architectural approach that many organizations are looking to as a way to accelerate innovation. Microservices promise to allow teams to move away from monolithic "ball of mud" systems, but the reality is that, in the vast majority of organizations, different projects and technologies will continue to be developed at different speeds. How to handle the dependencies between these disparate systems with different iteration cycles? Consider the "canoncial problem" in this scenario: microservice A (releases daily) depends on a couple of additions to backend B (re...
Growth hacking is common for startups to make unheard-of progress in building their business. Career Hacks can help Geek Girls and those who support them (yes, that's you too, Dad!) to excel in this typically male-dominated world. Get ready to learn the facts: Is there a bias against women in the tech / developer communities? Why are women 50% of the workforce, but hold only 24% of the STEM or IT positions? Some beginnings of what to do about it! In her Day 2 Keynote at 17th Cloud Expo, Sandy Carter, IBM General Manager Cloud Ecosystem and Developers, and a Social Business Evangelist, wil...
PubNub has announced the release of BLOCKS, a set of customizable microservices that give developers a simple way to add code and deploy features for realtime apps.PubNub BLOCKS executes business logic directly on the data streaming through PubNub’s network without splitting it off to an intermediary server controlled by the customer. This revolutionary approach streamlines app development, reduces endpoint-to-endpoint latency, and allows apps to better leverage the enormous scalability of PubNub’s Data Stream Network.
The cloud. Like a comic book superhero, there seems to be no problem it can’t fix or cost it can’t slash. Yet making the transition is not always easy and production environments are still largely on premise. Taking some practical and sensible steps to reduce risk can also help provide a basis for a successful cloud transition. A plethora of surveys from the likes of IDG and Gartner show that more than 70 percent of enterprises have deployed at least one or more cloud application or workload. Yet a closer inspection at the data reveals less than half of these cloud projects involve production...
Apps and devices shouldn't stop working when there's limited or no network connectivity. Learn how to bring data stored in a cloud database to the edge of the network (and back again) whenever an Internet connection is available. In his session at 17th Cloud Expo, Ben Perlmutter, a Sales Engineer with IBM Cloudant, demonstrated techniques for replicating cloud databases with devices in order to build offline-first mobile or Internet of Things (IoT) apps that can provide a better, faster user experience, both offline and online. The focus of this talk was on IBM Cloudant, Apache CouchDB, and ...
Container technology is shaping the future of DevOps and it’s also changing the way organizations think about application development. With the rise of mobile applications in the enterprise, businesses are abandoning year-long development cycles and embracing technologies that enable rapid development and continuous deployment of apps. In his session at DevOps Summit, Kurt Collins, Developer Evangelist at, examined how Docker has evolved into a highly effective tool for application delivery by allowing increasingly popular Mobile Backend-as-a-Service (mBaaS) platforms to quickly crea...
I recently attended and was a speaker at the 4th International Internet of @ThingsExpo at the Santa Clara Convention Center. I also had the opportunity to attend this event last year and I wrote a blog from that show talking about how the “Enterprise Impact of IoT” was a key theme of last year’s show. I was curious to see if the same theme would still resonate 365 days later and what, if any, changes I would see in the content presented.
Cloud computing delivers on-demand resources that provide businesses with flexibility and cost-savings. The challenge in moving workloads to the cloud has been the cost and complexity of ensuring the initial and ongoing security and regulatory (PCI, HIPAA, FFIEC) compliance across private and public clouds. Manual security compliance is slow, prone to human error, and represents over 50% of the cost of managing cloud applications. Determining how to automate cloud security compliance is critical to maintaining positive ROI. Raxak Protect is an automated security compliance SaaS platform and ma...
Internet of @ThingsExpo, taking place June 7-9, 2016 at Javits Center, New York City and Nov 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA, is co-located with the 18th International @CloudExpo and will feature technical sessions from a rock star conference faculty and the leading industry players in the world and ThingsExpo New York Call for Papers is now open.
With major technology companies and startups seriously embracing IoT strategies, now is the perfect time to attend @ThingsExpo 2016 in New York and Silicon Valley. Learn what is going on, contribute to the discussions, and ensure that your enterprise is as "IoT-Ready" as it can be! Internet of @ThingsExpo, taking place Nov 3-5, 2015, at the Santa Clara Convention Center in Santa Clara, CA, is co-located with 17th Cloud Expo and will feature technical sessions from a rock star conference faculty and the leading industry players in the world. The Internet of Things (IoT) is the most profound cha...
We are rapidly moving to a brave new world of interconnected smart homes, cars, offices and factories known as the Internet of Things (IoT). Sensors and monitoring devices will touch every part of our lives. Let's take a closer look at the Internet of Things. The Internet of Things is a worldwide network of objects and devices connected to the Internet. They are electronics, sensors, software and more. These objects connect to the Internet and can be controlled remotely via apps and programs. Because they can be accessed via the Internet, these devices create a tremendous opportunity to inte...