Business Today

Cloud computing is a big opportunity

James Whitehurst, President and CEO, Red Hat, the iconic company selling subscriptions for managing open source software, thinks out of the box.

James Whitehurst        Print Edition: August 8, 2010

James Whitehurst, President and CEO, Red Hat, the iconic company selling subscriptions for managing open source software, thinks out of the box. His business, he avers, is similar to selling bottled mineral water - certifying and guaranteeing something that is essentially free. On his recent trip to India, Whitehurst took time out for a conversation with BT's Suman Layak. Excerpts:

BT: What is your business model? If the software is free, how does Red Hat make any money?

We have a business model that truly adds value to open source software. Eighty per cent of our revenues are from subscriptions. Now why would someone subscribe to our service if the software we provide is already free? It is because enterprises want stability and we take open source software and make it enterpriseready. We promise to support it over nine to 10 years. We also stay with the releases. If a stock exchange is investing $15 million in a new trading platform, it also wants to be sure that it will continue to work at the time of the next hardware upgrade. So, while we do not sell software, we sell subscriptions. And we have to be very good, or else why would you renew your subscriptions with us?

BT: Promoting open source was your mission when you took over. How much has been achieved?

We have made progress. Half the world's equity trade happens on Red Hat Enterprise Linux. Cloud computing and Web 2.0 - they would not exist without open source. Any web service you use, be it Gmail or Facebook, uses open source software. Open source is now becoming more pervasive. We are still in early days, but even two years ago we could not have imagined the way cloud computing has exploded. Open source and cloud will come together to reduce cost and speed of deployment of software.

BT: You have relationships with the IBMs and the Ciscos… but why not Google?

We have relationships with IBM, HP, Dell, Fujitsu and Cisco on the server side as well as with Oracle and SAP. With Microsoft, we do not compete directly, apart from the area of cloud, where they have a very different kind of an offering than us. Most importantly, we exist as a neutral player adding value. We do talk to Google a lot, too.

BT: Will cloud computing be the next big thing for Red Hat?

What do you think is the most important law in computer science? Not Moore's Law. It is inertia. It is the most important technological force. So, when people are adding new architecture that is when we get a look in. People start looking at clouds and all cloud service providers, except Microsoft, use Red Hat. IBM and NTT are all using Red Hat's virtualisations (where the software is separated from the hardware). As more of the computing moves to the cloud, it will be better for us. The potential is massive. Open source and cloud have commonalities. They are both pay-per-use with free software and have the benefits of modular and layered structure and ease of deployment.

BT: So, what does the future hold for open source?

You can see our website opensource. com. It is a forum for discussing the future of open source and we see it as a fundamentally new business model that can be applied to different areas. The best parallel of open source is the legal system. You cannot copyright a legal defence and any clever idea that you may come up with can be immediately copied or a new defence can be built around that.

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