Navigating Red Hat’s Open Commercial Enterprise Strategy

May 16, 2018

Navigating Red Hat’s Open Commercial Enterprise Strategy

I have been a Red Hat observer for many years. It has always been clear that Red Hat has been largely successful in being able to provide commercial support for enterprises that made the strategic decision to place their bets on the Linux operation system. Unlike many open source focused companies, Red Hat has been able to parlay its success to become an emerging enterprise powerhouse. Red Hat has acquired 26 companies since 2000 and has been able to turn many of these acquisitions into profit. Initially, Red Hat had sold each of these technologies as a separate offering. One of the most interesting changes is that Red Hat is creating more of a modular platform that incorporates many elements into larger offering.

There were many interesting nuances at the Red Hat Summit this year. To be expedient, I thought it would make sense to provide the top five observations from the meeting.

It’s the enterprise. Paul Cormier, Red Hat President of Products and Technology made an interesting comment during his keynote that encapsulated the essence of where Red Hat is today, “Red Hat is an enterprise-class software company with an open source development model.” By placing the emphasis on enterprise software Red Hat is positioning itself as more of a commercial software company rather than an open source contributor. As I commented in my blog from 2016, Can Open Source Companies Be Successful:

“In my view, successful vendors are finding that an open source foundation is a critical ingredient in a software vendor’s strategy. Innovation from software vendors combined with open source resources provides customers with the best option.” (See my blog on open source companies)

 

In reality, the market has caught up with Red Hat. Companies like IBM and Microsoft, for example, are now focusing their development and go to market strategies around open source and open technology. This movement actually puts Red Hat in a good position.

Doubling down on enterprise partnerships. Red Hat has always benefited from its partnerships. Partnering is a requirement for an open source operating system company and Red Hat has perfected the process of building relationships. At Red Hat Summit this year, Red Hat announced two high profile partnerships with IBM and Microsoft.

Microsoft and Red Hat has announced a managed service whereby OpenShift will be delivered as a managed service on Microsoft’s Azure Cloud platform. The service will be jointly managed by Microsoft and Red Hat with a focus of providing an enterprise Service Level Agreement (SLA). The agreement calls for the service to support both Windows and Linux containers.

The IBM partnership involves the entire IBM software portfolio and Red Hat’s OpenShift. Over the past year, IBM has re-engineered all of its software offerings with containers. By containerizing everything from WebSphere, MQ Series and Db2 through Kubernetes, these services are ready to be consumed as cloud services. One reason that IBM has made this significant change is so that its public and private cloud offers could offer customers a consistent platform. As part of the new agreement, IBM is porting its middleware stack to Red Hat OpenShift — a RHEL based container application platform that natively integrates docker (i.e. OCI-standard containers) and Kubernetes. Given the fact that Red Hat and IBM have an overlapping customer base, it makes sense for Red Hat to offer its customers integration with IBM middleware. The partnership removes the choice that many joint customers currently need to make when moving to the cloud – transition away from IBM Websphere and not use OpenShift or keep Websphere and not take advantage of OpenShift. It is not surprising that the focus of the partnership is based on IBM Cloud Private, which is a good match for Red Hat’s on premises implementation of containers. In addition, IBM and Red Hat will provide joint consulting services.

Valuing the Hybrid Cloud. Red Hat understands that its customers want a combination of public and private cloud services – not a surprise given the needs of most Fortune 500 customers who are not able or willing to move everything to the public cloud. The private cloud serves Red Hat quite well given that it sells most of its licenses within the data center. However, the company has increasingly focused on supporting customers with cloud services though the adoption of containerization and microservices. In addition, most of the public cloud vendors offer Linux distribution and many are based on Red Hat’s commercial RHEL.

Focus on Portfolio Management. One of the biggest changes at Red Hat is the movement away from offering individual product silos to managing an integrated portfolio of services. It is always a balancing act. On one hand, customers want to purchase one single platform rather than a collection of disconnected products. On the other hand, customers still want the freedom to continue to use the software they have already purchased within that framework. Red Hat has the benefit of having to rely on partners in order to survive and grow. Therefore, its openness means that it can both integrate offerings while still leaving its platform open to third party integration.

The Challenge of Remaining Open but Unique. Red Hat is unique in many ways. It is well liked by developers who appreciate the openness of the Linux platform. Community support has always been at the core of Red Hat’s DNA. Being able to maintain this attractive persona while remaining competitive in a cutthroat enterprise cloud environment is not easy for any vendor. Lurking in the background are competitors like Amazon, Google, VMware as well as emerging vendors in the market. Red Hat management seems to understand this challenge while at the same time staying true to Red Hat’s commitment to openness.

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About Judith Hurwitz

Judith Hurwitz is an author, speaker and business technology consultant with decades of experience.