Dell: Red Hat needs to lower prices

SAN FRANCISCO--Red Hat needs to lower its prices, or risk losing customers to free versions of the open-source operating system, the Dell executive who oversees the partnership with the Linux seller said Tuesday.

"We believe Red Hat Enterprise Linux 3, for the small and medium-sized business market, was out of the price range of these customers," said Judy Chavis, director of business development for Dell's enterprise product group.

And Dell has the marketing muscle to make its opinions clear. Indeed, Red Hat's pricing was instrumental in Dell's decision to sign its October pact to sell Novell's SuSE Linux. "It was definitely a factor in us working with Novell," Chavis said in an interview here at Oracle's OpenWorld conference. "Novell was able to step in and offer us that price point."

Red Hat declined to comment for this report except to say that Dell is a strategic partner.

High prices come with consequences, especially in a market where free alternatives are available for those who don't want as much support, software updates and certification as Red Hat offers. "We are working very closely with Red Hat especially to really be conscious about the fact that if we're not careful, we're going to lose these customers to other open-source projects," said Chavis, mentioning noncommercial alternatives such as the Debian effort.

Sun Microsystems, Microsoft, IBM and Novell showed the same attitude as Red Hat when their technology became popular. "You get overconfident. You believe you're the only game in town," Chavis said. "But you always have to be watching for the second in line."

The opinion puts Dell in the same camp as rival Sun, which is aiming its forthcoming Solaris 10 operating system squarely at Red Hat. Sun will offer Solaris 10 for free and will make the Unix version open-source software.

Sun in particular is working hard on a version of Solaris for x86 servers--those that use processors such as Intel's Xeon or Advanced Micro Devices' Opteron. "We do have some customers running it on Dell servers," Chavis said of the x86 version of Solaris, but Dell has no partnership with Sun for the software.

"They've got to get to the point where Microsoft and industry-standard operating systems are today, then we'll talk. But they don't have the volume or the customer demand for it," Chavis said.

[hutchike]

Novell and Red Hat both charge $349 per year

Having looked at the price lists at Novell (<a class="jive-link-external" href="http://www.novell.com/products/linuxenterpriseserver/pricing.html" target="_newWindow">http://www.novell.com/products/linuxenterpriseserver/pricing.html</a>) and Red Hat (<a class="jive-link-external" href="https://www.redhat.com/apps/commerce/rhel/es/?" target="_newWindow">https://www.redhat.com/apps/commerce/rhel/es/?</a>), they both charge $349 per year for comparable small server Linux systems. Here I'm comparing SUSE Enterprise 9 with Red Hat ES 3. What is Dell talking about?

[David Arbogast]

So lets think about this....

If support costs $349 per year, and an average employee makes say... $30/hour. Adjusting for overhead and profits, it seems to me that your money gets you, oh, about 6 hours of support per year. So, it would seem that RedHat is selling a product that is, in all other ways, FREE. And they are charging $350/year for 6 hours of support. Now I ask... if you only need 6 hours of support per year, do you really need to pay for support at all? And if 6 hours is indeed close to what RedHat spends per copy of Linux sold, then they would need to license almost 350 copies of Linux to keep one employee busy all year. Hmmmmmm..... Is it any wonder they don't want to lower their prices? I imagine they'd do a lot better if they were actually selling a product.

Factual error

Actually, Sun is open sourcing Solaris in all platforms, not only Unix, as they're all compiled from the same codebase.

[aabcdefghij987654321]

SuSe Pro $50 or RH ELWS $179? Duh...

And Dell gets different price breaks beyond retail pricing anyway.

DELL has a point

Set aside the fact that I despise the way DELL works, I think they have a point. First there was RedHat with a good distribution and installer, either you downloaded or bought the CD. Now you can only buy a year's support at a rate of MS-server versions. If I, being linux semi-expert, want to buy only the linux distribution for let's say 50 euro, this is not possible. So I went for other distributions, that are free. And in the end RedHat lost (a convinced user and advocate).

Pascal.