Update: I wrote this Econ paper in 2007 while I was still in college. At that time, I didn't even have installed Drupal. Thanks for the comments!
The market of CMSes has become hotter since the web 2.0 movement. Drupal and Joomla the top 2 open source CMSes are consolidating in the market. This consolidation could be beneficial to software giants Microsoft and Google; therefore Microsoft and Google could secretly finance Drupal and Joomla.
Beginning in 2004, when the first time the term “Web 2.0” was used, the development of Web-based technology has uncovered a revolutionary path for business that rely on the internet and computers. Even though the economy of United States cooled down in 2008, according to Dow Jones VentureSource, Web 2.0 businesses raised $1.34 billion, an 87% increase from 2006. In order to follow the new trend, higher quality and multifunctional platforms are in demand by all internet business. As a result, newly developed Content Management Systems (CMS) have drawn increasing attention from those businesses, including news, social networking, e-commerce, and so on. As the “content” in the new CMS has much boarder coverage than it used to have, CMS has become the solid framework for new-born websites or start-up companies. Also, increasing number of organizations and companies are switching to CMS structured websites. The market of CMS has certainly become one of the hottest technology markets. Therefore, the market of CMS is worth looking into in the year of 2008.
The competitors in the CMS market stand on two sides: the proprietary side and open source side. The competition between the two sides brings out a lot of new flavors and creates chaos in the CMS industry. The characteristics of the competition should be treated as an example of the war in the technology world between proprietary software and open source software. As Thomas L. Friedman concluded in his book The World Is Flat, open source is one of the ten major forces that are flattening the world, the snapshot of the current CMS market looks like an in-progress example of open source software trying to push the proprietary side out of the game. Furthermore, perhaps the pure competition among proprietary software companies such as Microsoft and IBM is no longer interesting, while the competition and collaboration between open source companies is definitely new and exciting. As we can see from the basic concepts of open source software which are free and have open source code for the public, open source competitors can easily enter the market and take some advantage of existing work from their opponents. On the other hand, the openness of open source allows collaboration on all kinds of levels.
In this article, we picked Microsoft SharePoint as a representative for proprietary CMS, and Drupal and Joomla as representatives of the most popular products for Open Source CMS. Moreover, since Google is a loyal supporter of Drupal and the biggest enemy of Microsoft, keeping eyes closely on Google’s relative behavior in the industry seems also good idea. We will see that even though Drupal and Joomla, as the Open source CMS, are offering zero-price products, Microsoft is not necessarily harmed. The open source CMSes are very different from proprietary CMSes. The growth of Drupal and Joomla indicates the consolidation of the open source CMS market. Meanwhile, at the other end, Microsoft, with very different products and customer services, is benefited by Drupal and Joomla’s consolidation. On the other hand, we see that Google has supported Drupal with Google engineers, revealing Google’s spirit of support towards open source, but it implies that Google uses Drupal to tie up with Microsoft SharePoint. There are also other speculations that Google is supporting Drupal: 1) it is possible that Google uses Drupal as the research and development for its underground developments CMS; 2) Google wants to buy Drupal, or, in other words “hijack” it when the condition is mature. With those potential gains for Google, it is possible that Google is secretly financing the Drupal development team.
The background of the market of CMS
As mentioned earlier, CMS is the software framework and system for all kinds of products relying on a web site. For example, many institutions’ websites and news websites are based on CMSes. Since CMS itself is a platform for other diverse works; the needs of the application from a CMS can be different, therefore it is reasonable for each of the successful CMSes in the market to specialize in the some particular applications. For instance, Wordpress is known for blog-like websites and MediaWiki is known for hosting a wiki type website. Therefore, in the CMS market, there are many generic CMSes such as Microsoft SharePoint, Drupal and Joomla; and niche-oriented CMSes such as Wordpress, MediaWiki and PG Real Estate Solution. This characteristic of the market creates some degree of segmentation. However, the more obvious market segmentation is the difference between proprietary software and open source software. In general, for the proprietary CMSes, no matter what marketing strategies are implemented by the company, there is a large amount of revenue coming from direct sales and much income coming from the customer services. On the other hand, the “free” in open source software simply means zero-price. In other words, the companies of the open source CMS software do not make any revenue directly from the software download. Nevertheless, zero price of the software itself does not mean the total cost for a customer is zero. Usually, open source software requires more technique skills from customer’s side. Installation, customization, maintenance and even backup of the CMS need to be done by either the customer or the software company. If the customer side does not have professional developers to do the job, they have to ask the open source company to do it, which is not free and usually not cheap at all. Otherwise, the customer is likely to hire engineers to perform the tasks, and as we know, the salary for software engineers is expensive nowadays. Therefore, open source solution is actually an option for business to internalize the cost of the regular performance of the software.
Among the current open source CMSes, Drupal and Joomla are the most popular ones, according to CMS ratings on OpensourceCMS.com. Also, Drupal and Joomla are generic CMSes for multiple purposes, which draw a lot of competition from proprietary CMSes. Therefore, this article mainly focuses those two as the open source CMSes. On the other side, Microsoft SharePoint with the solid background easily holds the leading position in the proprietary submarket. Thus, focusing on the SharePoint market behavior will make the analysis simpler and clearer.
Drupal and Joomla consolidation and the future market structure
In 2008, Drupal and Joomla are consolidating the open source CMS market; moreover, Drupal and Joomla are securing the leading positions in the market. As mentioned before, Drupal and Joomla are currently the most popular open source CMSes, their annual growth in terms of the number of downloads and subscription is also extremely rapid. Dries Buytaert, who invented Drupal, has published the relative statistics on his personal blog; the statistics consists of many graphic presentations of the growth as well as the growth comparison with Joomla. The sharply rising curve implies that in the recent years a fast increasing number of businesses have chosen Drupal and Joomla. Also, Packt Publishing in 2006 has announced Joomla to be the open source CMS award winner, and Drupal received the second place; in 2007 the announcement from the same publishing house includes Drupal was the overall open source CMS award winner, Joomla was best PHP open source CMS…almost in every award, Drupal and Joomla have their footprints on it. In the first half of 2008, Drupal won a CNET Webware 100 award in the publishing category and Businessweek picked Dries Buytaert, the inventor of Drupal as a 2008 top innovator. All these awards suggest that Drupal and Joomla have a leading presence in the open source CMS market.
The consolidation in the open source CMS market for Drupal and Joomla equals a rapid dying out of the competitors in the open source market. The first reason is that open source CMS is relatively new product. If a business has chosen to use other open source CMSes, switching from other open source CMSes to Drupal or Joomla probably is not as hard as switching from Windows server to Linux server. If the cost of the switching is relatively low, then we can foresee a larger number of switching occurring in a shorter time frame. If the customers would want to switch, then the developers in the competitive companies would follow, since all the software in this submarket is open sourced; switching for developers is also relatively easy, therefore staying with the old projects is usually not the case.
While the consolidation process is happening, there is also collaboration between Drupal and Joomla. If the collaboration continues, then the oligopoly would rise soon. Both Drupal and Joomla’s office websites have forums. Following the discussion about comparing Drupal to Joomla, people can see that Drupal and Joomla have their own strength and weakness, which make the two products more likely to complement each other. This fact generates many incentives for the top 2 open source CMS companies to collaborate. They have started learning from each other and working together: Both technique and customer service information are shared among the developers in the two companies; the front page of each site sometimes covers news from the other; and they held a website design contest at a conference together. Furthermore, Google has organized Google Summer of Code 2008 program for both Drupal and Joomla. As those programs would train the engineers with Drupal and Joomla, later those engineers would contribute to the development of the software. The significant intention of the program is probably to make the engineers physically work in the same building and improve the two products together. (But why Google is so devoted to the both CMSes will be discussed later in the section of Google’s roll.) This high level degree of collaboration can result in oligopoly in the CMS market. As Drupal and Joomla soon will sweep the open source CMS market, they will have more competitive power to stand against Microsoft SharePoint, which is backed up by the software giant. Or perhaps Drupal and Joomla would rather be integrated (more like horizontal integration) and steal a larger piece of the pie from Microsoft.
The role of Microsoft
The consolidation of Drupal and Joomla in open source market seems like a big threat to Microsoft SharePoint. But is this really true? Would Microsoft only sit back and watch Drupal and Joomla take over? The answer is no. As mentioned briefly before, Microsoft SharePoint is a proprietary CMS, which offers comprehensive web solutions for a variety of needs. The more distinguishable characteristic of SharePoint is that SharePoint has more mature products compared to open source CMSes reducing the technique requirement for the customer’s side. If the customers run into difficulties, Microsoft also has technique support 24/7. On the whole, SharePoint is an expensive product that bears the most of work. Because of the very large difference from open source CMSes, when Drupal and Joomla offer better open source solutions, it would not steal many of the Microsoft SharePoint customers, who have different need in their mind. On the other hand, the fewer competitors in the open source sub market could increase the chance that Microsoft would get more clients. If we think the Microsoft SharePoint is at one end, and the other is Drupal and Joomla. Now Drupal and Joomla reduces the competitors from the area belongs to Drupal and Joomla, the action is actually reducing the middle ground, which SharePoint, Drupal and Joomla fight for.
Another reason that Microsoft would benefit from Drupal and Joomla’s consolidation is that the zero-price Drupal and Joomla would act as a block to the CMS market entries. Even though Microsoft has been the software giant for a decade, the Microsoft SharePoint 2007 is relative new product, which is a merger in 2005 between Microsoft Content Management System and Microsoft SharePoint. This three year old CMS still has a lot of room to improve and move far away from domination. Therefore, Drupal and Joomla’s zero-price would function more or less as a block for entries, which is also a good tool for minimizing the middle battlefield between Microsoft SharePoint and open source CMSes. So, Microsoft could use next a few years to focus on the improvement of SharePoint and from there on invade the other end of the market which is the open source CMS.
The role of Google
Microsoft is definitely not the only one seeking a piece of the pie in the CMS market. Google, the other IT giant, also has put their hands into this market, but in a very different way. As people know, Google has been investing in all the technology markets, and starts wars with Microsoft in any possible field. The CMS market definitely has enormous potential since the Web 2.0 movement, and Google is certainly catching up with the trend. However, Google does not have its own CMS-related product; whether it is too late to start its own CMS-development is difficult to see right now. Thus, one easy way for the giant to do self-introduction is by supporting the existing players in the game. As discussed earlier, Google has organized the summer code programs to support Drupal and Joomla. Google has paid well the smartest young engineers (most of them are college students) to study the two systems and contribute to the development work. Economists call this human capital investment in open source CMS. Even after the summer code program, some of the Google-educated engineers have kept working with the two systems. The reason that Google has been very generous to Drupal and Joomla is probably not as it is advertised that Google is a big fan of open source. The first thing that Google could get out of this donation-type investment is that Google wants to use Drupal and Joomla as competitors to Microsoft. If later Google decides to officially step in, it would not as hard as it was that only Microsoft had dominating power. This seems to be contradictory to that Microsoft likes Drupal and Joomla being the entry-blocker as discussed above. In fact, whether that Microsoft SharePoint would achieve the monopoly if the competitors Drupal and Joomla quit or that SharePoint would capture larger market if Drupal and Joomla block the new entries is speculation. But Google definitely does not want to see if without Google’s help, Microsoft drove Drupal and Joomla out and achieved another business miracle, as Microsoft did with Internet Explorer against Netscape.
Another reason that Google is investing on Drupal and Joomla is that since Drupal and Joomla are open source, if Google is developing its own CMS underground, Google could use Drupal and Joomla as their research and development agency. Since Google is able to pay the highest rates, once Google needs the experience and technique skills in the CMS products, Google can simple hire those engineers back and found a large team to produce the Google-CMS in a very short period. On the other hand, if Drupal and Joomla are really going to rock and roll, maybe when the merger occurs, Google would hijack Drupal and Joomla, since Google has enough engineers who know how to take over Drupal and Joomla.
Because of the new trend in the web related business, which is so-called web 2.0 movement, the CMS market is one of the hottest markets with a high potential of return. Microsoft is ambiguous about its attitude towards the existing open source CMSes because Microsoft likes them as entry-blockers to the CMS market, but it definitely does not want them to have too much power. Google, on the other hand, is more direct in their support of open source CMSes. With the potential gain from using Drupal and Joomla as weapons to fight Microsoft SharePoint, Google has invested human capitals on Drupal and Joomla in particular. However, even though the open source projects are making money by offering the related services, to keep up long term research and development for a pure open source project is difficult. If Google has built up a long term goal based on Drupal and Joomla, which seems very likely from the previous discussion, Google is probably also secretly financing both Drupal and Joomla’s development teams. Furthermore, Microsoft also has a history of purchasing other companies, as Drupal and Joomla could help block new entries and contrasts products from SharePoint, Microsoft could also hijack Drupal and Joomla and become a monopoly. Therefore, Drupal and Joomla might not only receive funds from Google but also Microsoft.
Dries Buytaert, My Drupal predictions for 2008, http://buytaert.net/drupal-predictions-for-2008 , Retrieved on May 15, 2008.
 Olga Kharif, BusinessWeek, The Business of Startups Is Business. Special Report April 17, 2008, http://www.businessweek.com/technology/content/apr2008/tc20080417_388737...
 There is no official definition for Content Management System. For a broad explanation, see Ohnoitsjamie, Wikipedia, May 14, 2008, http://en.wikipedia.org/w/index.php?title=Content_management_system&acti...
 PG Real Estate Solution Website: http://www.realtysoft.pro/realestate/
 Some CMS companies have fixed price for all the clients while some other companies charge the money according to the size of its clients or the number of functions needed.
Since there is no official website or documentation could provide the market share information for each company, therefore studying the highest rated company seems to be the best choice. According to OpensourceCMS.com on May 14, 2008, Drupal has 1452.19 points, which is the highest rating; Joomla 1148.61—the second highest; CMS Made Simple makes to the third place with 961.67 points.
 "Drupal Download Statistics," http://buytaert.net/tag/statistics , retrieved on May 14, 2008
 2006 Open Source Content Management System Award Winner Announced. http://www.packtpub.com/article/open-source-content-management-system-aw... , Packt Publishing (2006-11-14). Retrieved on May 15, 2008.
Joomla Wins Best PHP Open Source Content Management System. http://www.packtpub.com/article/joomla-wins-best-php-open-source-content... ,Packt Publishing (2007-10-31). Retrieved on May 15, 2008
 Webware 100 winner: Drupal, Webware, http://www.webware.com/8301-13546_109-9913290-29.html , Webware staff – Publishing April 21, 2008. Retrieved on May 15, 2008.
 Olga Kharif, BusinessWeek, The Business of Startups Is Business. Special Report April 17, 2008, http://www.businessweek.com/technology/content/apr2008/tc20080417_388737...
 Announcing the 2008 Drupal Asia Pacific Conference, Drupal.org, http://drupal.org/node/229048 , published by rcross on March 2, 2008. Retrieved on May 15, 2008.
 Drupal back for another round of Google Summer of Code 2008!, Drupal.org, http://drupal.org/node/235590 , published by JBrauer on March 2, 2008. Retrieved on May 15, 2008.
Joomla! Google Summer of Code 2008 Projects, Joomla.org, http://www.joomla.org/content/view/4844/1/ , published on April 30, 2008. Retrieved on May 15, 2008.
 MS CMS and MS SharePoint Merging Architectures, CMS Wire, http://www.cmswire.com/cms/microsoft/ms-cms-and-ms-sharepoint-merging-ar... Published by Brice Dunwoodie on Jul 26. 2005. Retrieved on May 15, 2008.