Microsoft announced the acquisition of the most popular resource for open source projects. But will developers appreciate it?
Microsoft has begun a $ 7,5 billion purchase of the GitHub developer platform. Perhaps for an outside observer, this is a strange acquisition. But from a business point of view, it seems that it could not be otherwise.
Situation in the IT market
Gartner analysts have estimated the global IT market in 2018 at $ 3,8 trillion. Segment leaders among public corporations are among the top 20 largest companies on the planet with an estimate of hundreds of billions of dollars. But the structure of the Internet giants' income looks completely different:
What do we see? Most IT companies build their financial ecosystem around their top products:
- Facebook and Alphabet (Google) get 97% and 88% of their advertising revenue;
- Apple earns 63% of the total turnover from the sale of iPhones;
- Amazon rescues 72% from online merchandise trading.
Only Microsoft sees its strategy in balanced business diversification:
- Microsoft Office - 28% revenue;
- Azure and Windows Server - 22%;
- Xbox - 11%;
- other projects - 18%.
The concept is simple: in the long run, betting on a single product can be dangerous for the entire corporate development strategy. This is their business vision.
Market position github
Free online projects with a multi-million audience, as a rule, have one main problem - monetization. Yes, GitHub is the largest repository of code and the largest community of programmers on the planet. But this super startup had to raise $ 100 million in investment in 2012 and another $ 250 million in 2015.
Most often, a super-popular project with an army of users is simply sold to the IT giant for a huge amount. So it has been repeatedly:
WhatsApp - Facebook, 2014 / $ 19,3 billion
Instagram - Facebook, 2012 / $ 1 billion
Skype - Microsoft, 2011 / $ 8,5 billion
YouTube - Google, 2006 / $ 1,65 billion
This is what happened with GitHub. Yes, this is a niche project. But in this niche audience in 20 million people. And this audience was needed by Microsoft in their “equal profit” strategy between projects in their portfolio.
Deal
The main audience for GitHub is open source solution developers. Their first reaction to the news of the sale of the project is skepticism. Moreover, within a day from the date of the transaction, users have already transferred about 40 projects to their direct competitor - the Gitlab platform.
Part of the reason for such a negative in the “IT” tradition is to reject most of the new products in the industry: gadgets, interfaces, tariff plans. Partly - in the global image of Microsoft as a "corporation of evil" and "killer of creative development."
Anyway, GitHub received $ 7,5 billion and resources of one of the most powerful companies in the world. The advantages of the seller and its founders are clear: the three founders became billionaires according to estimates of the American Forbes.
Why this Microsoft deal?
The first is the “purchase” of a huge audience of developers. Investment in their attention. It is the audience, not the code, idea, infrastructure or development team that is the most valuable asset in the modern IT industry.
Facebook bought WhatsApp and purchased not just another messenger. Mark Zuckerberg had his own. Facebook has bought more 1 billion new users.
Microsoft had its own developer platform - CodePlex. But it did not “take off”, despite the huge resources of the corporation, leverage to attract developers, support for various version control systems - Subversion, Mercurial, Git. As a result, the CodePlex was closed. And now Microsoft buys the strongest competitor of its own project - GitHub.
What other goals does the new GitHub owner have in addition to “buying” a new audience?
Strongest tech-PR. In the long run, working with GitHub and supporting the developer community can go a long way in helping Microsoft move from being an evil corporation to being a good guy in a professional setting. This goal was supported by the head of Microsoft when he announced that the corporation will continue to support open source projects. But it was the Open Source products for which GitHub is free that helped this platform to become the most popular among developers.
Profit from paid services. Microsoft will continue the strategy of the founders of GitHub - to make money from subscriptions and other service options. This fits perfectly with Satya Nadella's strategy to diversify the services of the corporation. The IT giant has long been making money not only and not so much on Windows.
The integration of GitHub with Microsoft’s development tools, Visual Studio, and the Microsoft Azure cloud platform looks very interesting and promising. Developers will be able to access code repositories directly from the development environment, quickly deploying projects, scaling under high load, building a fault-tolerant architecture in the Azure cloud.
Additional bonuses. Microsoft, on the one hand, will strengthen its position in the competition with the clouds of Amazon and Google, and on the other hand, it will “tie” developers more strongly to the subscription to its products. For example, Office 365 OneDrive lets you store user data in the cloud and encourages users to continually renew their entire office suite. Likewise, a GitHub code repository in a duet with the Azure cloud service can become the strongest subscription model driver for professional developers.
Conclusions
Microsoft has a huge experience in the purchase of IT-projects - and with a similar business model, and with absolutely the opposite. What is the scenario for a GitHub purchase?
The worst option. Microsoft will confirm the fears of critics, “spoil” the most popular repository of software on the planet and, in general, will not add any extras to the platform. In the opinion of the author, this has already happened with the acquisition of Skype.
Not a bad option. Microsoft will try to combine GitHub with its products and services into a new hybrid model, deep integration will not work, and the platform will continue to “live” as an independent project. Like LinkedIn or not so good example, Yammer.
The best option. Microsoft will make a good tight GitHub integration with both its cloud platform and Visual Studio development tools. If the integration turns out to be successful, everyone will benefit from it, because the IT giant will be able to make developers an advantageous offer “3 to 1”: development environment + code repository + cloud platform.