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He's a soft-spoken 42-year old Virginia gentleman from the Tidewater region who shuns the limelight. But software giants watch this fellow like a hawk. Meet Frank Batten Jr., CEO of holding company Landmark Communications in Norfolk, Va. An understated man who won't even reveal the names of his children, Batten invested $2 million in a small startup called Red Hat and its ambitious founder, Robert Young, back in 1997. At the time, Linux, the "open-source" operating system (as opposed to Microsoft's proprietary Windows) behind Red Hat software, was considered a geek's toy and commercially irrelevant. Batten knew better. Linux subsequently took off -- as did Red Hat. Batten's 15% stake is now worth more $500 million.
Having sent a scare through the likes of Microsoft's Bill Gates & Co., Batten is now taking aim at the hot database market, where Oracle rules. Companies spent $8 billion last year on new database-software licenses and increased spending by 18% over 1998, according to tech-analysis firm Dataquest. It projects that spending could grow to nearly $13 billion by 2004, an irresistible target for an open-source devotee such as Batten. "I think databases are the next place for open source," he says.
That's where Great Bridge comes in. A wholly owned Landmark Communications subsidiary, with $25 million in backing from the parent company, Great Bridge plans to package and service commercial versions of the open-source PostGres database. Great Bridge's prices will dramatically undercut rivals such as Oracle's 8I or IBM's DB2. The company, like Red Hat, intends to make money on services and software upgrades rather than licensing fees.
BRED IN THE BONE. But convincing corporations that an open-source database, created by thousands of unknown contributors, is secure and stable enough to trust could prove difficult. That reluctance comes, in part, from the crucial role databases play in everything from stock-market transactions to air-traffic control -- a role many information architects claim is even more crucial than that of operating systems. Should Batten overcome this skepticism and maneuver open source from the operating system to the database sector, he would make a handsome profit and possibly give Ellison the same headache he has given Gates. "It's a hell of a gamble, but I like Frank's odds," says Red Hat's Young.
At first glance, Batten hardly seems to fit the role of software revolutionary. The son of an extremely wealthy publishing family (Forbes estimated the Batten family worth in 1996 -- the year before Frank Jr.'s Red Hat investment -- at $780 million). Clearly, Batten could have rested on his nest egg. But that doesn't appear to be in his genes. Batten's father, Frank Sr., won a Pulitzer Prize in 1960 for a series of controversial antisegregation editorials printed on the front page of the newspaper he published, the Norfolk Virginian-Pilot.
In 1963, long before cable television existed on a mass scale, Batten Sr. formed TeleCable Corp. and bought up cable franchises. The system would grow to serve 750,000 people before John Malone and Tele-Communications Inc. bought TeleCable for more than $1 billion in 1995. Batten Sr. also was an early backer of the Weather Channel, a concept that met with much derision in television circles. Today, it's a mainstay in tens of millions of homes through cable and satellite TV. "They are pretty conservative guys, but their investment strategies are pretty canny. They are looking for things that are quite contrarian and quite unusual," says Young.
RADICAL IDEAS. Batten Jr. graduated from Dartmouth, then spent time as an Associated Press reporter and a small-town newspaper publisher before going to the University of Virginia's Darden School to earn an MBA. After a series of jobs inside his family's media holding company, including executive vice-president for new ventures, Batten ascended to the CEO slot of Landmark in 1999, much as everyone had expected. Not a techie by nature, he nevertheless developed a fondness for technologists in his company and an eye for new trends in the land of silicon.
In 1996, Red Hat founder Young came to Infinet, a joint venture of Batten's Landmark and Gannet Corp., looking to sell Red Hat's Linux product. Infinet provides back-office archiving and transaction services to media companies. Infinet's info-tech team turned Young down cold. But the presentation piqued Batten's interest.
A few weeks later, he called Young to discuss the radical ideas behind Red Hat -- that software should be cheap or almost free and that the best software development would come from a collaborative effort that allowed open access to the code. That open-source code, so the argument goes, would tap the collective IT mindpower of the world far more efficiently than any closed shop of programmers laboring among themselves. "What intrigued me about Linux at that time was how far it had come in a short period," says Batten. "I came to conclude that the open-source method of developing software was a better process."
"HEART OF COMPUTING." The marketplace now echoes Batten's confidence. According to research firm Netcraft, as of May, 2000, 36% of all public Web sites run on Linux-based operating systems, a bigger share than any other OS. And Oracle Senior Vice-President Jeremy Burton says programmers are downloading the company's Linux databases over Windows NT databases nearly two to one. Red Hat claims it holds the dominant portion of the commercial Linux market, with 52% of worldwide Linux server software shipments last year, according to International Data Corp. Meanwhile, the WinTel behemoth is backpedaling, as everyone from chipmakers to handheld designers scramble to put Linux in the places that Gates once said he would own.
Batten retired from the Red Hat board earlier this year. And now for an encore he has stepped up to the plate at Great Bridge. The company emerged when Batten, fresh from his Linux triumph, commissioned wonks at the new-ventures arm of Landmark to come up with ways to use open-source software architectures. Their conclusion? It was time to take on Oracle's lucrative database market.
Along with operating systems and server software, databases are an essential and ubiquitous element in today's commercial-computing environment. That means a wide range of entities, from hospitals to fast-delivery services such as Kozmo.com, rely on databases to manage their information and allow workers to retrieve it in a timely and useful manner. "[Databases] are at the heart of computing, perhaps even more than operating systems. Every business system needs to interact with a database," explains Batten.
SKEPTICAL MARKET. That means open-source development efforts could prove effective for databases, as the pool of potential code contributors would likely be very large. And until now, serious database operators at big corporations had little control over the source code. "We are actually talking about giving the database developer and administrator control over something they have never been able to control before," explains Great Bridge Marketing Vice-President David Mele.
Control is half of the open-source attraction. The other is money. And Batten is betting that CFOs have grown tired of forking over cash to Ellison, who holds dominant leverage over customers in much the same way Microsoft strong-armed the PC market in the company's heyday. "When Microsoft tanked and Bill Gates was no longer the richest guy in the world, who replaced him? It wasn't the Sultan of Brunei. It was Larry Ellison," says Young. "And you begin to wonder what's wrong with that industry that all of the value goes to one guy. I think what Frank sees so clearly is the same dysfunctional element in the database market as he does in the OS market."
But establishing open-source databases in a skeptical marketplace won't be easy. Two other open-source database companies, MySQL and Interbase, have failed to catch the corporate eye and floundered. According to Dataquest, Oracle holds the No. 1 slot, with 30.7% of the worldwide database market in terms of revenues from new licenses. Oracle dominates the rapidly going Web-applications database sector, as well. Industry insiders say Oracle, with its 3,000 database engineers, also snaps up the lion's share of database talent. Even Batten admits Oracle has a great product.
TRICKY DIPLOMACY. From a technical standpoint, questions remain about PostGres' battle-readiness. Great Bridge trumpets benchmark-test results that show PostGres running on par with or better than Oracle's 8I database as well as Microsoft's less powerful and less popular SQL Server. But Oracle and others point out that PostGres was tested at a fraction of the capacity required for wide-scale Web applications.
And ensuring the security of database products built by a faceless development community could prove tricky. "If a developer wants to put a back door into a project, what's to stop him?," asks Oracle's Burton. Even open-source advocates admit they are not ready to put PostGres or other similar databases in truly mission-critical operations. "I don't necessarily want software that some guy put together as a hobby running my elevator," says Bruce Perens, principal of the Linux Capital Group. Still, programmers at Chrysler, NASA, and California Pizza Kitchen, among others, have used PostGres for in-house data functions.
More than technical acumen, building an open-source company requires tricky diplomacy. Great Bridge will need to make sure that the myriad developers working on the software for free don't feel exploited or fearful that the laissez-faire development process will get corporatized. To that end, Great Bridge has hired the core developer in the PostGres community and retained a handful of others as paid consultants. And Batten and his hacker evangelist Ned Lily (also a VP at Great Bridge) have taken pains to assuage the fears of PostGres coders.
Great Bridge has zero market share and has yet to release a commercial product. Even tracking how many unofficial PostGres installations are up and running in corporations and universities is difficult since no one sells PostGres yet. But Batten has already seen value where others saw folly. "He has an acute sense of valuation. That's his biggest strength," says Ted Snyder, the dean of UVA's Darden B-school who has worked with Batten on several programs. If past is prologue, then Batten, perhaps more than anyone else, can build a company out of free software. Larry, look out.
By Alex Salkever in New York Edited by Douglas Harbrecht
Copyright 2000, by The McGraw-Hill Companies Inc. All rights reserved.
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