Red Hat President and CEO Jim Whitehurst expects the enterprise open source software business to emerge from the economic crisis stronger than the proprietary market.
In August Red Hat posted second quarter revenue 29 percent higher than the same quarter a year ago, while its subscription revenue also enjoyed double-digit growth to beat analysts’ estimates.
Whitehurst said that while predictions of a recession will likely mean fewer new projects, the economic benefits of going open source are already encouraging proprietary customers to switch.
Red Hat also appears to be eyeing the virtualization market
“I’ve had a couple of conversations with CIOs who said ‘we’re a Microsoft shop and we don’t use any open source whatsoever, but we’re already getting pressure to reduce our operating costs and we need you to help put together a plan for us to help us use open source to reduce our costs’.
“And we’ve had other customers literally looking at ripping and replacing WebLogic or WebSphere for JBoss, so I do think that we will pick up quite a bit of new business where companies are looking to save money from what they are doing…I think we’ll know in about six to nine months but there is no question that open source will come out of this in relatively better shape than our proprietary competitors,” he told Computerworld Australia.
Whitehurst, who visited Australia last week to promote the Open Source Collaborative Innovation program, said telecommunications is his company’s largest represented sector at around 12 percent, followed by government and the financial services sectors each about 10 percent of Red Hat’s business.
Since arriving at Red Hat at the beginning of the year, Whitehurst said it became clear that his company’s offerings are most popular among high-tech companies that use IT for a competitive advantage – something he is working to change.
“We’ve been working to build a commercial ecosystem that almost mirrors our technical ecosystem…We make open source consumable for the enterprise by the testing we do, by the certifications, the performance testing, the Service Level Agreements, the documentation, the localization and ultimately the support. The obvious next step for our business model is to do an even better job at making that software easier to consume for less sophisticated customers.”
What Red Hat offers that other enterprise Linux distributions don’t, Whitehurst says, is an insistence that any changes to its OS make it upstream into the Linux kernel.
“There have been times frankly when we’ve had customers that are frustrated and say ‘we want this change just put it in’ and we’ll say no, because if we can’t get it upstream the next time there is an update of Linux you are going to be non-standard and it’s going to be a separate thing that you’re going to have to support.
“You can’t march forward if you’re not using something that got upstream. One of the things we pride ourselves on is we are 100 percent open source, we’re the largest commercial contributor to Linux and because of that we are more able to get things upstream than anybody else. So for sophisticated customers who have something that they want to see in later functionality, we’re the way to do that.”
According to Whitehurst one area Red Hat does particularly well is in military, security and intelligence agencies, because of the inherent securities built into Linux.
“Earlier in the year I was in Russia and RHEL is the most secure operating system certified by the Russian military, therefore there are applications for the Russian military and government that can only run on RHEL. The ironic thing about that is the reason it is so secure is because SE Linux, the core security technology for Linux, was written by the NSA in the U.S.”