This transaction is big news this week, and some have been tempted to call it the end of an era. But a few years ago, Microsoft joined the Linux Foundation, and if we needed a symbolic act to to mark it, that was the end of the era of Windows vs. Linux — a red versus blue dynamic that as already outdated by that time. So in a way, the acquisition of GITHUB by Microsoft is a bit of a coda.
Some open source advocates are still anti-Microsoft, and the announcement apparently caused many developers to move to competing services like GITLAB, which has reported a leap in subscribers this week. The philosophical divergence between GITHUB and GITLAB may not be obvious to the uninitiated. GIT was developed as a decentralized tool, in the spirit of the loose control of open source, and ironically, GITHUB used that to create a centralized hosting platform. In broad terms, this is kind of like creating a private Internet funneled through a single company.
But most observe that the truth is more nuanced, as Microsoft has been gradually joining the rest of the industry in the open source revolution for quite some time. We will leave aside, for the sake of politeness, their patent claims accusing Linux.
Setting aside the red versus blue dynamic, there are a few interesting aspects to this deal. The first is the valuation applied to GITHUB — a huge $7.5 billion in an all-stock deal. GIT, of course, is an open source product (the history here is a great read, particularly the explanation of the name), and that might lead some to conclude that open source can be big business after all. That’s a bout half true; open source business strategies always have to include an upsell element other than the code. Microsoft did not buy GIT, the open source software product, it bought GITHUB, a developer platform with a massive user base of 28 million developers — which happens to run on GIT.
Second, in recent years, Microsoft has made a strategic move squarely into the cloud services and SAAS space, with emphasis on products like Office 365 and Azure. Azure, provides, for example, cloud services for application development, and so perhaps the acquisition of a popular online development tool by Microsoft should be no surprise.
Finally, it will be interesting to see how the acquisitions may change the licensing landscape for GITHUB code. GITHUB has historically taken a hands-off approach to licensing: Unlike some other code repositories, it does not require an open source license to be applied to every project. Some time ago it started recommending the practice of using license terms, but stopped short of requiring it. It’s an open question whether this policy will survive acquisition by one of the world’s biggest proprietary licensors.