Open source Aussies land $500m VMware deal

SpringSource, a software company founded by Australian open source entrepreneur Rod Johnson, has been acquired by virtualisation kingpins VMware in a transaction valued at over US$420 million (AU$505 million).

SpringSource's founders - among them several Australians - will earn a share of several hundred million dollars courtesy of a generous employee share and option plan, plus incentives from VMware for key staff to remain with the company after the acquisition.

Under the terms of the deal, VMware has offered US$362 million (AU$436 million) in cash and equity plus the assumption of approximately US$58 million (AU$69 million) of unvested stock and options.

iTnews understands that SpringSource is not particularly diluted and is substantially owned by its founders and employees. The majority of SpringSource's 150 employees will share the winnings.

SpringSource founder Rod Johnson told iTnews from his Silicon Valley office today that he and his staff were tremendously excited about the deal, not only for their financial gain but because VMware is "likely to be the defining software company of the next five years."

Johnson will now report directly to VMware CEO, Paul Maritz.

SpringSource's Sydney roots

Johnson was born and raised in Sydney, studying arts and computer science at Sydney University. He completed a Ph.D in Musicology, studying 19^th century French piano music, before teaching at Sydney's Conservatorium of Music.

Moving to the United Kingdom in 1997, Johnson finished a book on Java programming he had begun writing in Sydney called "Expert One-on-One J2EE design and development" and kicked off an open source project called the Spring Framework from code published alongside the book.

The book and open source framework were both aimed at simplifying enterprise Java development.

"Five or six years ago, Java development was way too complex," Johnson said.

"The so-called architectural blueprints Sun [Microsystems] were promoting for writing enterprise Java applications were ridiculously complex. A lot of projects went over budget and there were a lot of project failures. In my book, I proposed a simpler way."

The Spring Framework, and several subsequent offshoots, became very popular in the open source and Java communities.

"People would find the open source software fulfilled 90 percent of what they wanted," Johnson said. "They would need to build the other 10 percent, and contribute that code back into the project."

Within 12 months, the Spring code had been downloaded some 100,000 times - prompting Johnson and peers spread from Sydney, London, Austria and Canada to formally establish SpringSource as a company.

SpringSource has since acquired three similar organisations to become a "one stop shop for enterprise Java development."

SpringSource principal software engineer Ben Alex, one of the original contributors to the open source project, remained in Sydney and opened SpringSource's APAC headquarters in North Sydney in 2007, where he now works with a team of ten staff.

The VMware buy

Johnson said the company wasn't necessarily looking to be acquired but he knew the young company had "tremendous potential."

"Gartner was telling us our developer community numbered over two million," he said. "We've been able to grow the business 100 percent year on year. We felt we were doing a whole lot of things right."

He says he does not see the acquisition as an "exit", but rather a "turning [of] the next page of the book."

"Fundamentally, VMware is a software company that helps people manage and simplify their IT assets, compared to traditional approaches," Johnson said. "It has parallels to what we do - we simplify from the development perspective."

Another great aspect of the deal, Johnson said, was that VMware "really sees our people as being a key asset of the company.

"They are showing that not only in terms of the existing options of SpringSource but also the very generous retention packages offered in addition," he said.

Ben Alex told iTnews from the company's North Sydney office that local staff felt "well looked after" under the terms of the deal.

"This isn't just well deserved for Rod professionally, but also personally," he said. "Rod has always shown a great level of fairness and decency in the way he runs the company."

Australia's unrealised potential

Johnson said that while life in Silicon Valley was "pretty exciting", he was surprised there weren't more success stories coming from the Australian software industry.

"We have so much going for us as Australians - look at the great education and skills we have. I wish there were more companies able to do this from Australia.

"It may just be the cultural environment. It may be the bad side of that tall poppy syndrome. With our irreverent sense of humour, you simply can't say you'll build a billion dollar business when you are two guys in a garage. People in Australia will say you're crazy. People in Silicon Valley will believe you can do it."

Johnson said global organisations would be wise to consider Australia as a place to develop software.

"When I think about the banks I developed applications for in London, they could have done it with better people and at lower cost in Sydney."