redhatWe’ve been attending Red Hat Summit and JBoss World in Boston this week along with over 3,000 others. It’s been a great opportunity to talk to their execs about their specific approach to the market and consider how the company fits into the world of virtualisation. Red Hat crossed the $1 billion revenue mark towards the end of last year. We’re particularly interested in it because it bases its offerings on Open Source Linux, which now includes the KVM hypervisor as a standard feature. KVM is available from other Linux distributions, such as SuSe, although we believe Red Hat accounts for the majority of the deployments, which in total run on 7% of the world’s virtualised x86 servers.

A shift from Linux distribution to Enterprise software and Cloud provider
Red Hat’s role has changed over the year from an Open Source software provider to a commercial organisation providing tools for business: in the process expanding from Red Hat Enterprise Linux (RHEL) to Virtualisation (RHEV) and now offering.
At this week’s show it announced new offerings, including:

  • In OpenShift – its Cloud based PaaS offering – it launched its ITOps offline service for administrators and previewed its DevOps – a hosted service for developers
  • Red Hat Hybrid IaaS
  • Red Hat Cloud with Virtualization Bundle
  • Red Hat storage – the beginnings of on premise and Cloud offerings from the technology it acquired from Gluster last year

It remains true to its Open Source roots by allowing most of its software to be downloaded and used for free, picking up revenues from subscriptions in (typically) annual service contracts, which currently account for 87% of its revenues.
We note that it is more cautious in its acquisition strategy than Citrix, which had revenues of $2.3 billion in the last year: Red Hat focuses more on sustained revenue growth and profitability. It also hasn’t been as successful as VMware, which had revenues of $4 billion in the last year and whose ESX hypervisor is used on 72% of virtualised x86 servers. Much to its advantage is its ability to provide operating system, hypervisor and systems management (albeit with Open Source products available to others) – a status it shares only with Microsoft in the x86 server world.

Open Source is less important than great products that work
We believe that Open Source in itself is becoming less important in a market in which suppliers are building ever more tightly integrated solutions: its main advantage is in sharing the cost of software development for vendors, which is offset by its free use by others under General Public License (GPL) rules. Users currently seem less concerned about avoiding future vendor lock-in than buying great products which work, otherwise Apple and VMware wouldn’t have enjoyed such strong growth.
Nevertheless Red Hat is doing a good job of shifting focus, having moved from Linux distribution, to Enterprise and now to Cloud. We’re particularly interested in its potential as a storage hypervisor vendor and will be writing about that soon.

Image Credit: Martin Hingley

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