By just about any measure, Red Hat dominates its open-source competition and holds its own with big proprietary peers like Oracle and Microsoft, as this Wolfram Alpha analysis suggests. Though far smaller than Oracle and Microsoft, it continues to outpace rivals in year-to-date returns on its stock, among other things.
But where does Red Hat go from here? Or, more pertinently, where does it grow from here?
Red Hat's open-source business model has proved financially sound, but it's unclear that it applies beyond complex infrastructure software like operating systems and application servers. Red Hat's own CTO, Brian Stevens, once said as much:
I don't think you can take one finite element - like Apache - and make a business out of it [using our model]. You need product complexity.
This may prevent Red Hat from entering the most profitable markets like enterprise applications, focusing instead on being a leading infrastructure-only player. That's fine, and there's plenty of room in infrastructure, especially as Red Hat moves into cloud computing and other growth areas for infrastructure.
But it means Red Hat will never really compete with Microsoft, Oracle, IBM, or other big software vendors, all of which have strength in infrastructure but compete in applications, too.
This is by no means a bad thing for Red Hat, but it does mean it will always be more acquisition target than peer in this group of the Big Four.
It also means it will spend all its time fending off open-source upstarts in open source's primary hunting ground: infrastructure. It's therefore not surprising that Red Hat's new JBoss Choice program appears to be a thinly veiled attempt to crimp SpringSource's style, given the ubiquitous open-source Spring Framework and the threat it poses to JBoss Application Server.
If this is the future of Red Hat - duking it out with small (but growing - SpringSource grew subscription revenue by over 300 percent in 2008) open-source competitors? I think Red Hat is well-positioned to win this battle, but at what cost?
Red Hat's successful integration of JBoss into its product line suggests that it's competent to compete higher up the software stack than just the operating system, but it's still unclear that its business model can accommodate applications. Every significant open-source vendor - without exception - has eventually capitulated to a hybrid open-source model. While I don't personally have any problems with this, I suspect many within Red Hat would.
Red Hat has a choice. It can hold to its successful business model and focus on being the leading infrastructure vendor, and make a ton of money in the process. Or it can choose to embrace applications, which will almost certainly require a different licensing model, and take on a full enterprise software strategy, going up against Oracle, Microsoft, Cisco, and IBM.
Which would you choose?
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