SUCCESS STORY
SourceForge Grows Up - and Out

SourceForge (Nasdaq: LNUX), a media services and e-commerce company that provides open source software downloads and development, is enjoying the best of both business worlds. It is one of the largest open source software repositories -- the SourceForge Web site has more than 30 million unique visitors per month -- and it reported more than US$40 million in earnings for its last quarter, with no outstanding debt.

Still, the company has no desire to rest on its laurels. Instead, it is pressing ahead with a makeover to become more useful to the open source community.

In March, SourceForge inked a deal with the Linux Foundation, a nonprofit organization dedicated to accelerating the growth of the Linux operating system. That arrangement set the stage for more collaboration with open source developers and software users.

Earlier this month, the company announced plans to close on an acquisition of Ohloh, an open source data and community service.

Both of those moves are aimed at hitting the company's main goal: to significantly improve the usefulness of the forge to the community. To that end, a significant investment is under way, according to Jon Sobel, SourceForge's group president of media.

"We want to move from the traditional Web site, where all the focus is on what happens within the site, to being a real modern Web platform, where we can serve the open source community and provide information and utility around open source software wherever it may be hosted," Sobel told LinuxInsider. "We want to make it a world-class development environment."

Meager Beginnings

At its inception, the intent was to build SourceForge as a marketing tool for a company known as "VA Linux" in the 1990s. That company's main business was the sale of embedded-Linux servers.

SourceForge grew beyond the marketing project and took on a life of its own with the support of the open source community. Much of the credit for where the company is today is due to those early workers, who were a big part of the community they served. Now, as then, the people working on it believe in it. This has been a wonderful asset to the company, according to Sobel.

SourceForge, the parent company, owns SourceForge.net, the repository, as well as technology news site Slashdot, and e-commerce company ThinkGeek, both of which it acquired in 2000. The company has evolved from one selling hardware in the 1990s to one that had an enterprise software business along with an e-commerce business. Now, it is trying to become a company much more focused on serving the open source community and its e-commerce business.

"The community has hung with us the whole way," Sobel said.

Brand Counts

The early experiences BA Linux had in establishing its employees deep within the Linux community had far-reaching effects on the company SourceForge has become. If nothing else, the reputation it established raised the bar for newcomers. Other repository or directory sites such as Ohloh and the OpenLogic Expert Community (OLEX) often played catch-up.

"While SourceForge may be best known for its repository, its business has been sustained mostly by its Slashdot and other media sites, and advertising and ThinkGeek e-commerce site," said Jay Lyman, open source analyst for The 451 Group.

"The company's greater opportunity is in connecting enterprise open source software users and customers with developers and vendors and providing insight on the enterprise open source software in use," Lyman told LinuxInsider.

Much of SourceForge's success has been a consequence of the continuing, expanding uptake of open source software in the enterprise, according to Lyman.

The company has done a good job of serving the open source software community by providing a directory for enterprises and a home for projects, he noted.

"SourceForge should continue to benefit from the growth of enterprise open source software, but it must provide the services and information that both developers and enterprise open source users demand. It must also ensure that its directory can interface with and reach into other directories, something the company is in the process of doing," explained Lyman.

Challenges Ahead

The company's biggest challenge is realizing the opportunity that comes with its large repository and brand recognition, said Lyman. This means continuing to build and advance its features for developers and its connections to other repositories. It also means growing the project data business it acquired with Ohloh.

Although his view of SourceForge's main challenge is a bit different, Sobel's game plan involves community service, of sorts. The company has transformed itself several times and is in the middle of another change now.

"The challenge of doing both -- serving the Linux community and doing well in business -- is a task that more and more companies will face," he said. "It's the nature of enterprises going forward. To be successful, you have to take care of your community and run a good business. We are trying to do both things well, which is an art."

Recent Successes

At the product level, SourceForge is rapidly modernizing tools that it makes available to software developers. These include adding three new search engine marketing [SEM] tools and more than 15 development-related applications to the Web site in the last six months, and opening up APIs to the forge data.

On the business side, the company has begun to improve the appearance and effectiveness of its Web site for both users and advertisers. It is working very hard to rapidly improve the platform and make it a better business at the same time, commented Sobel.

"So much of where Web activity is going is more site-centric than it was five years ago. So we really are working hard to transform our site into a platform," he said.

Business Horizon

Perhaps the company's very strong balance sheet, with more than $40 million in cash and no debt, gives SourceForge a bit more ability to forge ahead with growth. Clearly, it is a wonderful opportunity and a very interesting situation, acknowledged Sobel.

"We have the financial strength and the recognition within the open source community. Plus, we have a lot of smart, motivated people inside the company to make something really 'impactful' happen here," he remarked, adding that is is all the raw materials any company on a growth trajectory needs.

SourceForge's financials are not reflective of most open source software vendors, observed Lyman. The company is most reliant on e-commerce and advertising revenue.

"Most of the open source vendors we talk to and encounter base [their] business and revenue on support and services," he noted, "or commercial licensing connected to open source software in dual- and hybrid-license models."