Red Hat CEO: Cloud Having Halo Effect on Revenues Today

Red Hat just announced another solid fiscal quarter, continuing a trend of increased operating system and middleware market share that carried on even through the worst of the current recession. How it has done this is no secret: especially compared with Windows, Linux is less expensive and often performs better, so many companies choose to roll out new workloads on Linux machines. Going forward, however, cloud computing will bring more dynamics into play than just which OS is cheaper, and Red Hat knows this. According to CEO Jim Whitehurst, Linux — and all things open source — give his company an advantage because customers know that buying Red Hat means “future-proofing” their IT investments.

Although “none of this [cloud software] is driving major revenue,” Whitehurst says Red Hat’s existing Linux software and increasingly full cloud portfolio “builds credibility that we’re a long-term player with a vision.” In terms of Linux, he explained, Red Hat and its customers win every time that massive-scale data center operators like Google, Yahoo, Amazon and Facebook contribute code back to the Linux community, because the idea is that if it works for them, it must work for everybody. Even if Red Hat is a year or two away from seeing significant revenue from any of its cloud-specific products, as Whitehurst believes, the company’s role as an open source player is bringing in OS and middleware customers that want an easy transition to the cloud when the time comes.

“A lot [of our cloud leadership] is not because we’re that brilliant,” Whitehurst quipped, “we just accrue all the benefits because all these other companies that are either running clouds or have massive internal data centers are contributing their code to solve their needs back into out code base.” In a sense, he noted, this forms a deep engineering relationship between Red Hat and a company like Google, regardless whether it’s actually a paying customer — and the engineering aspect is what drives Red Hat’s technology forward. Although, it doesn’t hurt that Red Hat counts cloud providers Salesforce.com and IBM, among others, as paying customers.

As I reported last month when Red Hat bought PaaS startup Makara, the company also thinks its overall push toward openness — even if not technically open source — will play a big role in its cloud success. “We are adamant,” Whitehurst said, “that if we don’t work toward an architecture that allows for application mobility, then we’re all going to be worse off than we are today.” It’s with this mantra in mind that Red Hat is advancing its software-stack certification program with cloud providers, and that it submitted its Deltacloud interoperability API to Apache instead of productizing it. If developers think it’s tough getting data out of proprietary database, he noted, it will be far tougher trying to get everything out of a single, walled-in cloud.

A noteworthy aspect of Red Hat’s vision — and one that distinguishes it from rival Oracle, in particular — is that Red Hat doesn’t fuse its products to create an all-or-nothing situation for customers. RHEL running atop RHEV might be preferable, but RHEL runs just fine atop VMware, too. “To me,” Whitehurst said, “Oracle’s vision of these vertical stacks is the antithesis of cloud.” That being said, Whitehurst cites VMware and Microsoft as Red Hat’s primary competition in selling holistic software suites for next-generation and cloud computing data centers, both of which arguably push their own brands of vertical integration.

Whitehurst also shared his thoughts on the acquisition front — specifically Novell’s acquisition by Attachmate and speculation (including from myself) that Red Hat is considering purchasing private-cloud startup Eucalyptus. Regarding Novell, he doesn’t see much changing, as Red Hat’s quarterly Linux revenues are about ten times Novell’s, and growing. As for Eucalyptus, Whitehurst repeated Eucalyptus CEO Marten Mickos’s stance that such discussions haven’t taken place, but he did acknowledge that a self-service IaaS capability like Eucalyptus provides would be valuable to Red Hat provided it could span multiple platforms, and he hinted that something along these lines is on Red Hat’s cloud roadmap.