Opensource Coming for WebEx

Ah opensource. Is there no sound sweeter to the ears of those feeding the coffers of enterprise software behemoths? It’s a sweet sound to VCs as well. They have made plenty of dough on exits such as JBoss’s $420 million sale to RedHat last summer.

The most recent target for opensource toppling is WebEx Communications (Nasdaq: WEBX). The company, which charges an individual user $39 per month for its web conferencing service, controls more than a third of the web conferencing market, according to research by Goldman Sachs. Its closest competitor is Microsoft, which controls 13% of the market. WebEx earned $12.1 million on $96.7 million in revenue during the third quarter of 2006, slightly less money at a slightly worse margin than during the same period last year.

Part of that margin erosion may be going into the development of WebEx Connect, which will allow the company to deliver on-demand applications along with its conferencing service. But analysts are mixed on their predictions for the success of this new strategic direction and the company’s stock has been flat for the last two years.

Its competitors are coming. Foremost of which is opensource company Dimdim, which has raised $2.4 million in Series A financing from Index Ventures and Nexus India Capital, according to a regulatory filing. Bernard Dallé, a general partner at Index, joins the board along with Suvir Sujan of Nexus.

Dimdim’s web conferencing software is free for download, but users who want audio and video sharing, the ability to take polls or chat will have to pay for those features. The company, which is based in Burlington Mass., has yet to disclose what kind of prices it will be charging for these additional services. Downloads of Dimdim’s free software from SourceForge.net have hovered around 200-300 per day, but hit new highs during January, topping over 2,000 downloads a day.

This is the second startup CEO Deb Dutta Ganguly has founded. He started Advanced Internet Management, a company that helped businesses stay available to online consumers, which was sold to Computer Associates (NYSE: CA) in 2001.

Ganguly knew from his experience that running a startup can heighten your blood pressure, so he started tracking his anger levels each day. He keeps a spreadsheet that tracks his personal “Peace Index” of how angry he is each day and how long he spends doing yoga to counteract the effects of stress.

In addition to inventing new web conferencing software, the company has also developed and trademarked a new meal, according to its weblog. It offers the simple acronym:

BrUnNer™ = Breakfast +lUnch + dinNer

Company cofounder Saurav Mohapatra suggests taking the meal at 6:30 pm with generous doses of caffeine.

It’s too early to tell if Dimdim could pose a significant threat to WebEx. Opensource companies can steal customers and may be better poised to tap into small businesses, but WebEx has a strong customer base and a low churn rate: less than 2% per month. The company tracks its Monthly Recurring Revenue (MRR), or the money it would get if it sold to no new customers. It booked $33.4 million per month in MRR during the third quarter. Big customers may be reticent to switch, even for a cost saving.

WebEx may even find itself as a target for a buyout. Its constant cash flows could be attractive and its margins might easily be squeezed by looking more carefully at strategic acquisitions instead of internal R&D.

One thing’s for sure. There’s bound to be a lot more BrUnNers at Dimdim before the founders dancing on WebEx’s grave.