Open Source

Red Hat's open source success story built on killing complexity in IT

There's never been a better time to make money from simplifying open source for the enterprise.

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Image: ZDNet

"There will never be another Red Hat" has become a common refrain—one that I've personally raised. In an era when consumers prefer to pay for services instead of software, Red Hat is an anachronism.

And yet, there's never been a better time for another Red Hat to arise. Maybe multiple Red Hats.

After all, though Redmonk's Stephen O'Grady correctly reports that "Red Hat remains the sole example of a pure play open source organization matching the revenue generated by even modest-sized proprietary alternatives," it's also true that Red Hat's formula—making complex open-source software safe and secure for mainstream enterprise adoption—has never been so critically required.

We live in a world awash in open source. So much so, in fact, that it's become difficult to appropriately place bets on which database, messaging system, or other software will win.

In sum, we don't need just another Red Hat. We need many.

Making money on complexity

The key to Red Hat's model is complexity. Years ago, then Red Hat CTO (now an executive with Google's cloud business) Brian Stevens explained to me how Red Hat makes money:

Red Hat's model works because of the complexity of the technology we work with. An operating platform has a lot of moving parts, and customers are willing to pay to be insulated from that complexity. I don't think you can take one finite element—like Apache—and make a business out of it [using our model]. You need product complexity.

Initially, this meant that Red Hat thrived in the rapid innovation of the Linux kernel, with thousands of moving parts and enterprises that wanted Linux, but not the headache of keeping pace with this innovation. For far less than they spent on their database, they could entrust Red Hat to manage the supporting operating system.

Despite some fits and starts, Red Hat later added app servers (JBoss), virtualization (Qumranet), and more—each time finding ways to make money by removing complexity from the enterprise IT stack.

Finding the next $3 billion

Looking forward, Red Hat CEO Jim Whitehurst sees more of the same, adding private cloud (OpenStack) and containers (Docker) and other open-source infrastructure to its mix. Doing so should add up to $5 billion in annual revenue. The difference this time is that open source is no longer the cheap clone of proprietary innovation. Instead, open source is driving innovation, as Whitehurst notes:

We built a nice multi-billion dollar business being a viable alternative [to proprietary software]. What's going to drive us to the next level is open source being the default choice. Our role is to make it consumable for enterprise customers.

What used to be a matter of "helping [customers] carve out costs" has become a matter of "building new architectures." I don't personally feel OpenStack has the same resonance as things like Docker, though Red Hat begs to differ, but the general point is correct: Open source increasingly drives innovation, and as more developers pile into open source, the complexity quotient keeps rising.

Which means, of course, lots of money for Red Hat but, perhaps, also for other "Hats."

A world filled with 'Hats'

This is certainly the Hortonworks dream, as it looks to stitch together complex and confusing big data projects to deliver a simplified, powerful data stack. Big data is ripe for a Red Hat model, given that the vast majority of innovative data infrastructure is open source, and generally not released by software vendors.

This trend toward open data infrastructure is only going to continue to accelerate, as Cloudera co-founder Mike Olson stated:

[For years we've witnessed] a stunning and irreversible trend in enterprise infrastructure. If you're operating a data center, you're almost certainly using an open source operating system, database, middleware and other plumbing. No dominant platform-level software infrastructure has emerged in the last ten years in closed-source, proprietary form.

The problem, however, is complexity. Few enterprises, for example, really want to futz with deciphering ActiveMQ vs. Qpid vs. HornetQ vs. RabbitMQ, or Spark vs. Hadoop vs. Storm vs. [Project Of The Week Here]. It's too much.

This is where the next Red Hat comes in.

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In one sense, we already have a powerful new Red Hat. It's called Amazon Web Services, and it has taken a host of open-source technologies and made them dramatically easier to install and operate, because there's nothing to install. Indeed, cloud computing giants like AWS and Microsoft Azure are arguably the biggest hurdles to another Red Hat rising, as they do much of the work of de-risking the complexity of open source, and actually go one step further than Red Hat does by hosting the software. (Though Red Hat now has stepped into this world with OpenShift.)

The challenge for any would-be open source vendor is two-fold: First, they need to stop trying to exclusively sell whatever project they first developed. Second, they need to stop selling software and instead sell subscription services around the software they corral.

This sounds simple, but in practice virtually no open source company follows both of these principles. As companies truly follow Red Hat's lead, the odds of them following Red Hat to $5 billion (and beyond) in revenue is increasingly promising.

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    About Matt Asay

    Matt Asay is a veteran technology columnist who has written for CNET, ReadWrite, and other tech media. Asay has also held a variety of executive roles with leading mobile and big data software companies.

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