Docker is sticking close to Red Hat’s playbook, open sourcing its code. Not content to stop there, however, Docker has also been buying companies and open sourcing their code, too–just as Red Hat has done (Gluster, 3scale, etc.). Docker founder Solomon Hykes, in boosting Docker’s most recent acquisition, Infinit, also pledged: “[W]e’re going to open-source the whole thing.”
That’s great. But arguably, Docker’s larger need right now is cash, not code. This is where it diverges from the Red Hat playbook.
I’m not suggesting the company is going out of business anytime soon. Rather, I’m suggesting that, to truly follow Red Hat’s model, Docker (and other open source companies like it) must figure out how to make open source pay. After all, some of its biggest competitors, like Red Hat, have already cracked the revenue code for the containers Docker popularized.
What, me worry?
Docker doesn’t seem to be in a hurry to open the cash register. In April 2015, the company raised another $95 million, taking its total to over $180 million in funding. At that time, Docker CEO Ben Golub noted that Docker hadn’t spent all of its Series B money, much less the $40 million in Series C cash it had in the bank. A few months later, however, Golub appeared to say that the B and C money had been mostly spent, but not yet the Series D cash.
Even so, that relative parsimony is welcome, given that other open source companies have raised far more money and have managed to blow through it at an astounding rate.
Startups do not live by VC money alone, however, and this is where alarm bells start to ring. Asked in mid-2016 about pressure from investors, Golub replied: “They’ve said, focus on building great product, focus on users, focus on ubiquity–monetization can come. And monetization is coming.”
The problem with ubiquity is that it actually doesn’t pay. This was the “eyeballs” argument made in the dot-com boom-and-bust era. Popularity doesn’t guarantee a paycheck. At least, not from customers. Sure, a big buyer may come along and make an offer (Microsoft reportedly offered Docker $4 billion), because it has the means to monetize, but maybe not popularize, the infrastructure. But, to convince lots of enterprises to pay for Docker’s products? That’s the real measure of success.
Getting to sales first
Though Docker has been coy on revenue numbers, Golub hasn’t made a secret of the company’s traction with its Docker Datacenter product. As he told GeekWire, “We’ve got plenty of customers who were $40,000 customers in Q4 who are now becoming six figures as their usage expands.” All good.
However, Docker faces stiff competition here as its open source infrastructure mentor, Red Hat, is already making more money on Docker than Docker is. This isn’t dissimilar from Amazon Web Services making far more money from MySQL than MySQL AB ever did, operationalizing a popular, de facto industry standard with a more efficient model.
In OpenShift, Red Hat doesn’t have a “more efficient model,” per se. Docker Inc. offers Docker Datacenter, and is closest to the underlying Docker container technology to know how to manage it. (Red Hat is the #2 contributor to Docker.) However, Red Hat benefits from having built OpenShift on Kubernetes, the Google-spawned community darling for container management, where the real battle for revenue in the container wars will be fought. No one does more than Red Hat to make Kubernetes enterprise-ready.
In other words, Red Hat, with $2 billion in annual revenue and a trusted enterprise brand for open source infrastructure, almost certainly has the lead on managing containers at scale. Docker can continue to invest in ubiquity, but that helps Red Hat (and other container orchestration and management players) as much or more than it helps Docker, Inc. Docker can also invest in (proprietary) product, but there, too, Red Hat already has a lead.
Talking to one industry executive, he told me that a “big risk is that Docker Datacenter doesn’t sell and gets outpaced by other solutions that don’t care what the container format is,” because that’s an IT decision. But I’d go one step further: The big risk for Docker isn’t that things like Docker Datacenter don’t sell. Rather, the big risk is that they don’t sell at the same pace that larger, better positioned competitors can manage.
Time to crank up that monetization engine, Docker.