Red Hat is hosting its annual summit this week - this year in San Francisco - where the company is seemingly basking in the glory of making more than a billion dollars off a free open source project.
But as successful as Red Hat Enterprise Linux (RHEL) has been for Red Hat - the company announced a new beta version of RHEL 7 this week - there's a question of how long the RHEL gravy train will keep growing, and what's next for the company after that.
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Is Red Hat in a rush to move on from RHEL? No. The company gets about 80% of its $1.3 billion in revenues from a category that's headlined by RHEL, and those subscriptions aren't likely going away any time soon, says Joel Fishbein, who tracks Red Hat's stock closely as an analyst at BMO Capital Markets.
But growth for the company's core business, which is centered around RHEL is showing signs of leveling off. The enterprise transition from Unix to Linux is fairly mature, with revenue from the RHEL-focused main part of the business growing 13% last year, Fishbein says. The company's other, newer products grew at a much faster 38% growth rate, but they're a much smaller portion of the business. A
The main area where Red Hat is looking for its next wave of growth is in the cloud. Projects like OpenStack and OpenShift, the infrastructure as a service (IaaS) and platform as a service (PaaS) projects respectively, are just getting started. "In order for the long-term growth and health of the company, they're going to have to execute on those other products," Fishbein says. Fundamentally, OpenStack is a platform for building IaaS clouds; OpenShift is a Platform as a Service (PaaS) or cloud-based application development.
Both of Red Hat's versions of these products are tightly integrated with RHEL.
But Red Hat Executive Vice President of Products Paul Cormier,says it's the early days for both. Red Hat sales executives aren't yet even measuring Red Hat sales staff on revenue related to OpenStack, instead they're measured by the number of deployments that graduate from test into production.
There's not an immediate urgency, but it does underline the importance of new projects like OpenStack and OpenShift for the company. Red Hat is not pursuing a mobile OS and it's not really playing in the public cloud arena directly. Instead, it's ensuring that RHEL software is available in public clouds from Amazon and Google.
Fishbein is optimistic about the company. Red Hat executed a strategy on Linux that took a free platform and packaged it into an enterprise-ready version of it for businesses. There's no reason the company can't do the same with OpenStack. But, there's also no guarantee that Red Hat will be the company that comes to the forefront to be the "Red Hat of OpenStack."
Senior Writer Brandon Butler covers cloud computing for Network World and NetworkWorld.com. He can be reached at BButler@nww.com and found on Twitter at @BButlerNWW. Read his Cloud Chronicles here. A
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This story, "For Red Hat, It's RHEL and Then...?" was originally published by NetworkWorld.