I’m meeting Red Hat’s EMEA boss Werner Knoblich in a private room away from the hubbub of a conference in central London. He’s refreshingly frank when I ask him, by way of small talk, how the company-sponsored event is going. “You know the thing with marketing is that half is a waste of time and half of it is valuable,” he says. “You just don’t know which half is which.”
Ain’t that the truth, but the German, a 13-year veteran of the company, agrees with me that this is probably a good time for Red Hat to be investing anyway. It’s the 800-pound gorilla of Linux in the enterprise but to grow it probably needs to expand its portfolio of successful products and to find new audiences.
“We need to invest more in marketing than in the past because we are in so many more areas where we are not as known as the incumbent. If they don’t know us for Linux I might not even want them as a customer but if they’re thinking about storage…”
Knoblich has seen Red Hat evolve to become an established part of the enterprise IT order, a $2bn revenue operation that is still growing. The company has been the spearhead for business adoption of open source software but the next job is to go beyond Linux.
So what’s going to be the next big wave? He says it’s “not necessarily a big wave” that’s going to propel the company forwards but “a rigorous continuation of the path we’re on”. That’s fair enough. Red Hat took a big step to spread itself further as far back as 2006 when it acquired middleware firm JBoss. In the last couple of years alone it has picked up DevOps firm Ansible, API management firm 3scale and FeedHenry for mobile application platforms.
Being a transformer
Today, Knoblich says, the opportunity is in “helping companies become digital” with cloud-ready infrastructure. Red Hat’s PaaS play OpenShift will be a large component but so will storage and selling more products to the big telecoms providers.
“The biggest questions for any CIO or CTO are: ‘do you need to become cloud-enabled?’ and everyone will say ‘yes, I need to, I have no choice’; and ‘do you worry about being locked in?’ and the answer is clearly ‘yes I’m very concerned’.”
Red Hat seeks to be the fulcrum of this world, providing the tools companies need but without risks relating to proprietary stacks of the world’s biggest IT vendors.
Red Hat is openly showing off its own transformation, reporting “emerging technologies” subscription revenues separately from core infrastructure offerings. In its most recent quarter the first category ($427m) dwarfed the second ($104m) but the second is growing faster, up 33% in US dollar terms year on year compared to 18% growth for infrastructure. There are other positive totems: Red Hat’s recent second-quarter earnings announcement saw a record number of $1m-plus deals – up 60 per cent year on year. In what might be a sign of confidence Red Hat also announced plans to buy back about $1bn worth of stock.
Knoblich also sees another opportunity in becoming the platform for companies’ older systems, helping what the analyst IDC calls the 2nd platform (client/server) and 3rd platform (cloud/social/IoT and often wireless- and mobile-enabled) “nicely coexist”.
OpenShift is key here and Knoblich nominates it as “becoming the hottest product for Red Hat, not necessarily for revenue but in terms of interest, proofs of concept and net new customers. Here, Knoblich sees Linux becoming the common denominator underlying physical servers, virtual servers, private clouds and public clouds. There is a different buying audience for OpenShift where DevOps is at the heart of activity and it is one that the company is quite comfortable.
A related opportunity lies in JBoss middleware where Knoblich says some firms are swapping out BEA WebLogic for JBoss. In telecoms Red Hat is helping carriers virtualise their networks having created a unit that is focused purely on telco, and banking is another market where restructuring of the sector will lead to a requirement for agility.
What about other routes to growth? Some have suggested that Red Hat could become some sort of open source equivalent to Oracle, competing on core database and business applications for example, but Knoblich isn’t convinced.
“Is relational [database] the technology of the future? It probably is not. It’s not where the puck has been but where it is going that’s important.”
But what of the rising NoSQL databases, many of them open source?
“None of these open source database companies have been truly successful on a mass scale,” he says. “It’s not that the technology is not good enough it’s the data is so sticky. It’s not easy to rip and replace.”
How about services? Digital transformation has consulting outfits licking their lips but Knoblich can’t see Red Hat making a big play. Better to stay close to partners, he believes, and to “try and be as Switzerland as possible”.
Rather than chase every opportunity he feels that Red Hat is already making smart bets and as more sectors are disrupted and companies seek economical, flexible solutions, more opportunity is likely to come the way of the company that has its “secret source” in making open source software palatable to large organisations.
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