Red Hat just proved you can make billions of dollars with open source

Red Hat becomes the first open source company to earn $2 billion in revenues

redhat 2
Credit: OpenSource.org/Flickr

Red Hat has become the icon for other companies to follow: they established that you can make money from open source. And they do it the old fashioned way, selling subscription and support.

What makes Red Hat an important case is that while they retain their business model they are an extremely dynamic company that continues to transform itself.

Red Hat made the right bet at the right time by announcing its transformation from a client-server company to cloud-mobile company. It invested in technology, either acquiring or developing open source components like OpenShift, Ansible, Jboss, OpenStack, Gluster, etc and it’s paying off. It shows in their financial results.

Red Hat yesterday reported that it generated $2.05 billion in revenue in 2015. Yes, that’s billion with a "b," purely from open source software. Red Hat earned over $544 million in the fourth quarter alone, which is up 17% year-on-year.

Jim Whitehurst, President and Chief Executive Officer of Red Hat said that those record earnings were driven by "enterprises increasingly adopting hybrid cloud infrastructures and open source technologies," adding that "the fourth quarter marked our 56th consecutive quarter of revenue growth, contributing to Red Hat’s first fiscal year crossing $2 billion in total revenue.”

The company generated $391 million of subscription revenue from infrastructure-related offerings for the quarter, an increase of 15% in year-over-year.

Subscription revenue from application development and other emerging technologies offerings for the quarter was $89 million, an increase of 38% in year-over-year.

If we look at the entire year, subscription revenue from infrastructure offerings got the lion’s share. It was $1.48 billion, an increase of 12% year-over-year. Full fiscal year subscription revenue from application development and other emerging technologies offerings was $323 million, an increase of 37% year-over-year.

The company is expecting revenues of $2.380 billion to $2.420 billion in fiscal year 2016. And as more and more companies are turning toward software-defined everything and open source that should not be a hard target to hit.

This article is published as part of the IDG Contributor Network. Want to Join?

To comment on this article and other CIO content, visit us on Facebook, LinkedIn or Twitter.
Download the CIO Nov/Dec 2016 Digital Magazine
Notice to our Readers
We're now using social media to take your comments and feedback. Learn more about this here.