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URL:  https://boards.fool.com/muji-wowthat-was-a-very-long-and-technical-34208503.aspx

Subject:  Re: An Elastic technical review. Date:  5/14/2019  5:52 PM
Author:  dumaflotchie Number:  55726 of 69401

Muji:

Wow....that was a very long and technical series of posts.....thanks for the effort!

There a few negative issues with ESTC including:

1) margin declining from 77% to 71% over past year and half.
2) Revenue growth rate declining
3) Huge stock lockup right after this next earnings call...date of earnings not yet announced?
4) AWS competitive open source environment (Open Distro)

These items probably explain the stagnation of the stock the past couple months and the impact of AWS remains yet uncertain IMO......will they recruit some of the more prolific open sourcers to their camp??

I agree with you that MDB and ESTC have somewhat different approaches to trying to protect their IP....but I am not convinced that ESTC’s model of trying to innovate their way to competitive advantage without licensing protection is more sustainably competitive than what MDB and other open source have been doing by trying to license their IP AND ALSO innovate.

In fact, it will greatly surprise me if ESTC doesn’t follow the same playbook as MDB and Redis labs. IMO, we are more likely to see these open source model companies walk in step than to go separate business paths/models (witness the recent dual announcements of GOOG partnership for BOTH MDB and ESTC).

But recognizing that ESTC has had the overhang of the above 4 items.....the top three likely go away assuming they continue to grow revenue at a breakneck speed.

The larger more financial discussion is whether there is really an open source business model that can wildly succeed for a profit-based company......that has really been called into question of late with the growing near supreme power of the large cloud providers and AWS in particular.

This article looks at this open source business model as it pertains to MDB but it really is about all open source models. It questions the viability of the open sourced for profit by parallels with the record industry:

https://stratechery.com/2019/aws-mongodb-and-the-economic-re...

Economic Realities and the Future
Little of what I wrote is new to folks in the open source community: the debate over the impact of cloud services on open source has been a strident one for a while now. I think, though, that the debate gets sidetracked by (understandable) discussions about “fairness” and what AWS supposedly owes open source. Yes, companies like MongoDB Inc. and Redis Labs worked hard, and yes, AWS is largely built on open source, but the world is governed by economic realities, not subjective judgments of fairness.

And that is why I started with music: it wasn’t necessarily “fair” that music industry sales plummeted, and yes, companies like Apple with its iPod business made billions off of piracy. The only reality that mattered, though, was that music itself, thanks to its infinite reproducibility, was as pure a commodity as there could be.


The argument that he makes is that it really doesn’t matter how much better ESTC or MDB get (the innovation part)....the question remains as to what minimum performance is demanded/acceptable to the market to accomplish what just needs to be accomplished.

Anyway, just food for thought for long-term holders of any of the open source companies and their business models. The Gorilla game of yesteryear started with a requirement for open “propriety” software as having leverage for the greatest moat......that is obviously not open source. MDB and Redis have tried to move closer to that modeling at least slightly using a new licensing model.....I expect ESTC still needs to do the same and stick together with MDB, work together and act together.

These open source companies are threatened in very similar ways from AWS. Etc......they can learn from each other for the benefit of them all.
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