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An Open-Source Lightning Rod


One weekend back in December, Marc Fleury was hunched over his computer, absorbed in writing a fervent, almost preachy and completely self-serving blog about why IBM (IBM) and BEA Systems Inc. (BEAS) will never be able to best his tiny but growing open-source company, JBoss Inc. His 6-year-old daughter walked up to him and asked: "Daddy, why are you still working on a Sunday? Is IBM still after you?" He laughed and replied: "Yes, darling...but now a whole industry is ganging up on us."

That's life in the Fleury household. The entrepreneur's favorite movie is The Matrix because, like its protagonist, Neo, he has long fancied himself working a boring day job and then saving the world at night. Fleury's company, JBoss, is a key player in the booming open-source movement that's shaking up every software company from Microsoft (MSFT) to Oracle (ORCL) to IBM, forcing them all to change their strategies or to collaborate with younger, faster-moving competitors that develop "open" software, distribute it freely on the Net, and make money by providing support and training for it. When JBoss took in venture capital in 2004, it was valued at $200 million, and those close to the company say Fleury and his family own nearly 50%.

PROFIT MOTIVE

But while Fleury, like Neo, is something of a cult figure, few people in the old or new software world want to think of him as their savior. Brash, outspoken, and frequently insulting, Fleury has clawed his way to the top of the open-source pile over the past six years. Part of the dislike arises because he's a threat. Even though JBoss brings in only $50 million a year in revenues, at most, from providing training, support, and maintenance services to its users, it has siphoned off some hundreds of millions in market value from the likes of BEA Systems and IBM by giving away free software.

Meanwhile, some open-source companies are put off by what they say is Fleury's money-grubbing, controlling style. It's out of keeping, they say, with the cooperative, do-it-for-the-greater-good ethos of the open-source movement. Stuart F. Cohen, head of Open Source Development Labs Inc. (OSDL), a nonprofit group that advocates for the development of Linux, the open-source operating system, remembers the first time he met Fleury. He had been invited to Atlanta to be on a panel at a JBoss customer event, and Fleury kept asking when he was going to take OSDL public. "To him, everyone is out to make money," he says. "That's not what this idea is really all about." Even competitors from the traditional software world criticize Fleury for having what they say is a cynical profit motive. "Marc Fleury has really exploited the open-source hype for his own personal financial gain," says one. Fleury's reply: "That's like someone telling the rapper 50 Cent he's not street enough."

If Fleury is focused on making money, perhaps that's because he spent a few frustrating years in Silicon Valley making none. His ambitions were nearly crushed in 2001 when he and his wife, Nathalie, and their young daughter left Silicon Valley penniless after he had spent years trying to build a software hosting company called Telkel. He was disillusioned and sick of playing the Silicon Valley game: putting together a business plan and shopping it around to "snooty" venture capitalists.

So he moved into his in-laws' house in Atlanta and focused on contributing to an open-source project that he and others had started in 1999, JBoss. All he wanted to do, he told his wife, was write code for free all day long. "She told me I was stupid," he says, and gave him a year to make $70,000 or else get a job. Then companies downloading JBoss software started asking him for training and support -- and offering to pay. A year later, Fleury had made more than $100,000.

DEMANDING PERSONALITY

He's worth a lot more now, to the dismay of his critics. Some investors have even refused to invest in JBoss because of Fleury's style. "It's a strength and a weakness," says David R. Skok, a partner at Matrix and the company's biggest outside investor. "Because he's so disliked, it creates incredible controversy and incredible press. I think he knows that, and kind of plays that up." His personality may have played a part in what insiders say was an offer from Oracle Corp. earlier this year that fell apart. Oracle is said to have valued the small company at nearly $500 million -- a big endorsement of open source that had entrepreneurs and venture capitalists licking their chops along with JBoss employees, who own a large chunk of its stock.

Neither Fleury nor Oracle will comment on what happened, but insiders say the deal died because of Fleury's demands about what his role would be at the combined company. With Oracle paying such a premium, the deal was going to be integrated its way, not his. Fleury will say only this: "One of the conditions of me selling to anyone is we remain whole and I remain the boss."

Fleury owns up to the reputation that he has developed. Sitting in an unkempt office in a flashy Atlanta building, he downs a giant cup of coffee before dribbling Visine into red-rimmed eyes. He spits sunflower seeds in a cup as he talks about why people hate him. The old software world? They're jealous. Open-source zealots? "They probably hate me at night because they didn't have the cojones to go out and do [what I've done]."

Of course, no one says you have to be a nice guy to make it in software -- just ask people who have worked for Microsoft's Bill Gates or Oracle's Lawrence J. Ellison, whom Fleury names as personal heroes. And although Fleury didn't write the most salient parts of JBoss code and wasn't the one to fine-tune the business model, JBoss probably wouldn't be where it is without him. As much as he is despised outside the company, its executives and developers describe him as the visionary who holds JBoss together. "The public face of Marc is very abrasive, but inside the company, he really cares a lot about what you have to say," says Sacha Labourey, JBoss's chief technology officer and one of its first employees.

Fleury has hired some of the best contributors to the open-source project, who work for him remotely from around the world. He fancies himself a sort of record label managing "rock stars." He has always wanted to be a hotshot programmer himself. During his first tech job at Sun Microsystems Inc. (SUNW) in France, the company kept trying to push him into sales or middle management, and he insisted on software development. When he came to Silicon Valley with Sun in 1997, he continued to be frustrated when he couldn't break into its elite programming teams.

Now, as an employer of elite programmers, he gives them the freedom to take months on projects of their choosing. He rewards them with "genius grants" when they do something particularly innovative. "Managing superstars is one of the things I can do," he says. As Fleury talked to BusinessWeek, he was planning a surprise birthday bash for one of his "geniuses." The details: "We are going to get this horrible stretch limo and go out to dinner and [the clubs]."

A few weeks ago, Fleury's daughter had another question for him: "Daddy, is JBoss still going to be around when I'm big?" She's not the only one wondering about that. Red Hat (RHAT), Novell, and Oracle are all said to be interested in the company. But quietly, several industry watchers say the cocksure Fleury blew his chance. Aside from Red Hat, there are few businesses that have proved they can scale up using the free-software model. Red Hat's steep earnings multiple, which tops 80, along with the $500 million that venture capitalists pumped into startups last year have some worried about an open-source bubble that may be nearing its limit.

If Fleury is kicking himself, he's certainly not doing it publicly. He and his investors say they're focused on getting ready for an initial public offering, which will come "sooner rather than later," according to Chief Operating Officer Rob Bearden. "They'll be rich," Fleury boldly says of investors and employees. "I'll create a generation of open-source millionaires, and I'm damn proud of that."

By Sarah Lacy, with Brian Grow in Atlanta


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