Software & Web Development

Red Hat CEO is Flying High

If Jim Whitehurst comes across as one of the most relaxed CEOs in the technology sector you might have to look to the skies to understand why. Before taking over leadership of Red Hat Software nearly seven years ago, Whitehurst was COO at Delta Air Lines, helping the company emerge from bankruptcy and batting off a hostile takeover.

Was moving to the often turbulent world of tech a case of “out the frying pan and into the fire”, I ask when we meet at Red Hat’s Baker Street offices in London.

“It was like jumping out of the frying pan onto a beautiful beach,” he laughs. “It’s profitable, our customers love us - they genuinely think we are on their side. Customers are scarred from being gouged over and over again.”

Airlines have created enormous value for society, he adds, but he quotes with relish Warren Buffet’s view of the industry: “If a capitalist had been present at Kitty Hawk back in the early 1900s, he should have shot Orville Wright.”

Extending the metaphor, he says that Red Hat might be seen as the equivalent of JetBlue, coming in with a disruptive model and superior value to incumbents.

It’s been a good journey at Red Hat for Georgia-born Whitehurst, who has more than tripled revenue at the company to an expected $1.8bn for the current fiscal year as more companies have adopted Linux and complementary open source technologies.

He seems genuinely surprised that more companies have not mimicked Red Hat’s model of providing commercial support, fixes and documentation for enterprises. Too many companies obsessively add features and dismiss the importance of stability, he says.

“We’re happy to talk about our business model but very few have followed it. Hortonworks [maker of Big Data tools on Hadoop] is probably the closest but frankly it’s expensive and really, really hard.”

Red Hat is a towering figure in IT today and by far the most successful company to have emerged from the flowering of the open source movement. Whitehurst says an underplayed strength is company culture.

“[The members of the Board that appointed Whitehurst] were most worried about culture fit,” he says. “We have no IP and we give away our technology. There was a real concern that bringing someone in from the traditional software industry could have been difficult.”

Whitehurst has just completed the draft of a book, The Open Organization that will be published in June 2015, reflecting that obsession with culture and neglected processes such as successfully ‘onboarding’ new staff.

“We have single-digit turnover on engineering jobs and over half of hires come from referrals,” he says. “We say that nobody knows a Red Hatter like a Red Hatter and the company at first seems like chaos but it’s not, it’s just nothing like a hierarchical structure. Making sure it’s special is a huge thing.”

However, Whitehurst admits that when he took the job he had some concerns.

“I spent a couple of years worrying ‘was our business model defensible?’. It’s a capabilities-based competitive advantage but what we do is really hard.”

Companies like Oracle have aimed their sights at Red Hat but nobody has been able to compete successfully with the nitty-gritty of what Red Hat does. That’s effectively doing the heavy lifting for customers, providing the support, the back-porting the fixes and the rest of the laundry list of necessary tasks to keep systems running reliably.

A key decision Whitehurst made early on at Red Hat was to focus, taking the company away from side projects in favour of zeroing in on server operating systems and middleware.

“My general observation was that we were a single digit player in the server OS category. If it was Linux OS, we were doing well; it’s how you define the market. Red Hat is almost the Kleenex brand for Linux, the default. You rarely hear about a company failing for focusing too much.”

Whitehurst repositioned Red Hat to focus on the enterprise operating system opportunity together with JBOSS middleware, canning or reducing in scale other projects like the Exchange app store, Mugshot social network and the desktop projects he said the company was “toying with”.

“Today if JBoss were not part of Red Hat it would be the second-largest open source company by a lot, but at the time it was bumping along because we were doing too many things.”

Others might have indulged in chasing acquisitions, he says, but that was never a serious temptation.

“People would say ‘Why aren’t you the Oracle of open source?’ There were a lot of companies but not many of them had revenues or customers. If we could have bought [real businesses] we probably would have gone on a buying spree, but they were just technologies. There was no revenue, brand or IP so what am I buying? The simple answer is people? But you can’t buy something for people and a year after they all walk out.”

Red Hat has made strides under Whitehurst and the impact of cloud means that open source is now deeply enmeshed in IT operations. That is positive for the Red Hat Enterprise Linux distribution but also for Red Hat’s virtualisation play and for the OpenStack cloud management platform where Red Hat is taking a leading role.

“It’s almost impossible to name an innovation in [for example] Big Data that’s not open source,” he says. “In the cloud/mobile era it’s the default choice. We are literally at a paradigm shift from client/server to cloud mobile. Applications are being written to run in centrally located datacentres communicating to thin clients. How are they going to be run? It will be OpenStack or this [VMware] vCloud stuff and, frankly, very few people want to be locked into one vendor. OpenStack is huge and one of the biggest reasons we’ve seen so much interest in OpenStack is people don’t want to build another Microsoft in the OS.”

If Openstack continues to progress and avoid politics and splinter movements, Red Hat will have another strong business.

“There’s value in having a standard. Unix started out as one thing and then the hardware vendors did their own ‘isms’.”

Avoid that kind of fragmentation and Whitehurst spies a $50bn market opportunity from which Red Hat can take a slice of the action if it repeats the trick of enterprise hardening the stack based on diligent engineering and attention to detail.

He’s also positive on globalisation, especially now that country-specific Linux distributions have fallen from favour.

“Red Flag shut its doors... nobody needs another distribution of Linux. We’re getting great contributions from Latin America, from China, India. We’re starting to see greater globalisation.”

He’s also pushing for more women to be involved in open source.

“One of the problems, frankly, is it started out as being a western white male thing,” he says. “There’s a cultural thing were trying to tear down.”

Having reaped the benefits of focus, Red Hat is now a part of the IT establishment with a towering $11bn-plus market cap and the ability to extend its remit a little further. It’s quite literally a world of opportunity for this unique organisation.


Martin Veitch is Editorial Director at IDG Connect


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Martin Veitch

Martin Veitch is Contributing Editor for IDG Connect

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