Red Hat: The money's in JBoss, not the desktop
The VAR Guy puts together a compelling argument for Red Hat's focus on JBoss middleware over the desktop. The net? There's a lot more money in JBoss than in the desktop, at least in the short term.
Red Hat's vice president of global channel sales, Mark Enzweiler, confirms:
JBoss middleware is like a central nervous system. It's so mission-critical that customers are willing to pay Red Hat or the company's integration partners roughly $11.12 in consulting fees for every $1 they spend on JBoss itself.
Contrarily, the desktop drives nowhere near that level of secondary income.
Here's the catch, though: if this is true of JBoss middleware, it's even more true of enterprise applications like customer relations management and enterprise resource planning. Why do you think Oracle has moved so quickly into applications, just as the storm clouds were gathering around the commoditization of the database? It's difficult to commodify an application because it runs a company's critical business functions.
Will this drive Red Hat into applications over time, just as it drove it higher up the software stack into JBoss? Perhaps. Red Hat managed to pacify partners like IBM for a long time by keeping out of the middleware fight, but its JBoss acquisition set it at odds with IBM and others.
IBM, in particular, has cozied up with Novell's Suse Linux more and more as a way of trying to neutralize Red Hat's growing power beyond the operating system.
Getting into applications will exacerbate that friction, but at some point, the friction is worth the return.
Matt Asay brings a decade of in-the-trenches open-source business and legal experience to The Open Road, with an emphasis on emerging open-source business strategies and opportunities. Matt is vice president of business development at Alfresco, a company that develops open-source software for content management. He is a member of the CNET Blog Network and is not an employee of CNET. Disclosure. You can follow Matt on Twitter @mjasay. 
As long as you have end users, you will always have a high demand for support and consulting.
So the world's most successful computer company, Microsoft, makes less money from software than consulting and support? I don't think so Dan.
So software makers deliberately break applications so they can have the cost overhead of additional support staff? I don't think so Dan.
The only people who want to pull cash via consultancy and support are the open source community who have to make their profits from ongoing support as they cannot sell the software itself.
However, it is also true that this business is dying quickly. The only people, at least in the direct enterprise sales model who can make money are those that can sustain quotas like Microsoft, Oracle and SAP do. Most other companies cannot and therefore going open source to reduce the cost of sales and marketing is the only option - and therefore making $$ out of consulting and support.
I guess Larry was right about consolidation of the software industry....
- by jaymeyer August 20, 2008 12:34 PM PDT
- The article is not about product vs. support biz models - instead its about desktop vs. server sales. RedHat has never seriously chased the desktop market, instead they chose to chase the server market. its a simple question of sales - IT operations folks spend big money on big servers and software from Sun, IBM, Oracle without batting an eye at a 6-digit check. Red Hat is selling to those people instead of the home users that spend $45 on a Windows XP Home upgrade.
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(5 Comments)So RedHat yields the desktop market to Ubuntu while they chase the big IT operations checkbooks. Its difficult to focus on both like Microsoft has done (but it took M$ a few decades to get established in servers), and so Red Hat focuses on the server market, and JBoss helps them sell even more products to their old customers they already know. I'm sure someday RedHat would love to own the desktop at big IT corps who buy thousands of laptops per year, but for now they are busy selling RHEL/JBoss.