Before rushing off to watch the tennis at beautiful SW19, I enjoyed a half-hour phone conversation with Werner Knoblich, VP and general manager for EMEA at Red Hat. This is an unusual company in several ways, the most significant being that it is the one company focused on open source business software that consistently achieves serious profitability. I’ve met Knoblich before and I like him. He’s a very capable, shrewd operator and has something that’s missing from many enterprise software executives — a good sense of humour.
First up, I ask him what Red Hat’s biggest message for UK CIOs was.
“Due to the economy cost sensitivity is still on the agenda,” he says.
So it’s just the same old value message then?
“It’s the value message and ‘get me out of lock-in’.”
You might be forgiven for thinking that lock-in died with the client/server era but Knoblich contends that enterprise software stacks such as those of IBM and Oracle have brought it back.
“People are very, very concerned,” he said. “Oracle is still causing some real headaches.”
He cites the story of a German company that had agreed in principle to a purchase but terms changed to the extent that the whole value proposition was toast. A key strength for Red Hat has always been to act as a wedge between the giants and their tendency to play hardball with customers and Knoblich quotes a customer who told him: “Your best salesperson is Oracle right now.”
OK, so while we’re on the subject of Oracle/Sun, is uncertainty about Oracle’s stewardship giving Red Hat salespeople the smell of blood, particularly in places like the City of London where financial institutions have had strong Sparc/Solaris allegiances? Knoblich puts it this way:
“HP and IBM are very happy to come in with us and displace Sun. Unix-to-Linux migrations have always been our bread and butter and it’s now got accelerated.”
How about MySQL, the leading open source database that Sun acquired before itself being consumed?
“MySQL customers are for sure concerned,” he says, but reckons it’s too early to say what will happen with the product that was effectively ring-fenced in order to get the Sun acquisition past regulators.
I said at the top that Red Hat was unusual in having made complete financial sense out of the open source opportunity. It’s also unusual in that its 800-pound gorilla status in the sector hasn’t led it to buy up peers. As CEO Jim Whitehurst has often said, this company wants to be Switzerland: neutral and keeping the hell out of places it has no business to be in.
Red Hat could of course buy or develop a database, document management or email product but “we have enough on our plate”, Knoblich says. “We want to stay focused while filling in ‘white spots’.”
These white spots include the evolution of Red Hat’s cloud offering where its ambitions are, aptly enough, sky high. If the world and his wife move to the cloud computing paradigm, Red Hat wants them sitting on its own fluffy cloud. To that end, Knoblich says, the firm will fill in the gaps on systems management, middleware and other necessary cloud components.
We’re at Cloud Foundations, Edition One,” he says. “There are the components we already had with cook-books, implementation step-by-step guides and reference architectures.”
Sensibly, he swerves my question as to how soon cloud will generate real revenue for Red Hat, noting that if you want to play fast and loose with definitions you could chuck virtualisation in the bucket and come up with big numbers.
Speaking of virtualisation, Red Hat entered the game with its own offering late in 2009 although (again sensibly) it is not talking financial targets. For now, case studies are more important. Or, as Knoblich puts it, “We’d rather have $1m in revenue with 100 customers paying $10,000 each [than a small number paying more].”
Red Hat is looking at a three-cornered-hat for growth: OS, cloud and middleware which, after a difficult digestion in the period immediately after the acquisition of JBoss, is now growing nicely.
“We underestimated how hard it would be,” Knoblich acknowledges with characteristic frankness. “We got our act together and we have more people focused and there are only three alternatives [the rivals being Oracle and IBM] in Java.” And Oracle is “no Robin Hood, clearly”. Not in my remembrance of the story, no.
What about the UK’s glorious ConDem coalition: is the death by 1000 cuts budget strategy going to feed into open source procurement?
Knoblich says that Red Hat applauds moves last year to make contract bids simpler and believes that “disruptive, compelling events are good for us”.
Red Hat has already ridden one big wave in Linux. If it conquers cloud and makes serious inroads into government and public sector, its future looks very bright indeed.