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October 8, 2008

Jim Whitehurst, Red Hat's CEO says "boosting Linux adoption rates beyond core vertical markets is an important catalyst for our company's internal growth, which still remains steady even as one of our strongest customer sectors, financial services, is getting driven almost to the ground by the global financial crisis unraveling before us in the last two to three weeks."

Overall, Red Hat enjoys a healthy market share among other Linux services providers that focus on technology to drive their businesses, such as financial services companies and major movie studios, Whitehurst said.

At a recent Red Hat analyst event in New York, Whitehurst said that while his company does well with "companies that use technology for a clear competitive advantage," mainstream companies that don't care about being on the leading edge of technology adoption are still largely an untapped market for the Linux vendor.

He also added that while the entire market opportunity for IT infrastructure, which is where Red Hat plays, is worth about US $200 billion, according to IDC.

Overall, he conceded that Red Hat is still a "small-share player" in about $50 billion of that market.

But this is just a small part of the enterprise IT market, and Red Hat needs to "make sure that we are delivering the commercial capabilities required for the expansion into the mainstream," Whitehurst was quick to point out.

One of the various segments that was very early in adopting Red Hat Enterprise Linux (RHEL) was the financial services sector, which is currently being greatly affected by a huge and global economic crisis unseen since The Great Depression of the 1930s.

Still, for the most part, Red Hat has not yet been affected too much from that, something Whitehurst attributed to the subscription-based, open-source business model the company employs.

Red Hat continues to partner with independent software vendors and major systems integrators, such as Accenture, IBM and EDS, to help RHEL compete more effectively against Microsoft' Windows operating system.

Having a subscription-based model also means that the Linux vendor and system integrator already has revenue on the books going into a new fiscal year, so it can forecast accordingly and realistically for growth, Whitehurst added.

He also said "what we do is clearly an economically superior development model, making that consumable to the enterprise. It's certainly something we’ve done for years and something that someone else hasn't been able to duplicate, least not yet."

Another industry segment Whitehurst said is a real opportunity for Red Hat is organizations that are using the free community version of Red Hat Linux, called Fedora.

Yesterday marked the very first time Whitehurst spoke to Red Hat analysts on a very large scale, as he only took over for longtime Red Hat leader Matt Szulik in December 2007 when Szulik left Red Hat for health reasons.

Whitehurst came to the company from Delta Airlines, where he was chief operating officer.

He said "community to enterprise is a very big opportunity for us", adding that with the cost of deploying and maintaining Fedora, it would be more cost-effective for some of those customers to purchase a subscription from Red Hat.

"It's up to us to get that message out," Whitehurst said in the end.

Source: Red Hat.

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