Matthew Szulik, Red Hat's former CEO and current chairman, has been in semi-retirement for the past two years, but you'd never know it from listening to his interview with the BBC's Peter Day. Szulik, ever the revolutionary, talks up open source's opportunity to disrupt conventional software and promote social reform.
As he does so, however, he inadvertently describes Red Hat's winning open-source business model as directly parallel to the Web 2.0 business models deployed by Google and others. While this isn't surprising (I've written about it before), it was the first time I've heard Red Hat state it so baldly:
Think about [open source] like mining. There's all of these natural resources buried under the ground.
But unless you have a large aggregator to pull it out of the ground; to take the gold or the coal or the copper and turn it into something usable, then it's really not useful for mankind.
[Day interjects, "But Linux was usable before, wasn't it?"]
It was usable by the 14 people that are sitting in Cambridge or Oxford right now. It was really not a mainstream technical activity.
Red Hat develops some of the open-source software it distributes. It is the primary contributor to the Linux kernel, writing 12.3 percent of the Linux kernel, and spends, by Szulik's estimation, "over $100 million per year to advance Linux and open source [development]."
But Red Hat, like Google, Facebook, and other "Software 2.0" companies that heavily employ open-source software, gets more than it gives to open source. It is a net beneficiary.
Sure, as Szulik goes on to explain to Day, Red Hat "puts all of that [$100 million worth of] intellectual property into the public domain," which differs from Google and others that write a lot of proprietary software that is never shared with external developers, but the core model of building upon open-source software and wrapping it with proprietary services is very much the same model employed by every significant Web company today.
I'm also willing to bet that Google contributes more than $100 million worth of intellectual property as open-source software every year, making it an even bigger open-source company than Red Hat, at least in terms of lines of code contributed.
I used to complain that the Web companies pick and choose where to contribute back, but it all seems to work out in the end. Yahoo works on Hadoop while Red Hat releases KVM while Google releases Gears while...you get the picture. Different companies releasing and "free-riding" on different open-source code, with the entire industry growing and benefiting in the process.
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Once a missionary, always a missionary.
That's the thought I had while reading Red Hat chairman Matthew Szulik's recent op-ed piece on improving North Carolina's economic competitiveness. Szulik, who led Red Hat for over a decade, was known for an almost evangelical zeal for open source.
I found it inspirational; Red Hat competitors found it unsettling.
It's perhaps not surprising that Szulik is still preaching the open-source gospel, this time to his home state of North Carolina. Seeking to rejuvenate his state's financial prospects, Szulik "demand[s] new and innovative strategies from our elected officials," centering on an open-source approach:
The rapid pace of innovation in software and hardware technologies reduces the economic value of these patents to the university system when these innovations could be fully monetized by the private sector. I propose that North Carolina "open source" the university technology and intellectual property portfolios into the public domain and place these assets in the hands of entrepreneurs who can create jobs. North Carolina has an opportunity to take the lead in creating authentic public partnerships through open source and open, collaborative and innovative models.
Why not? What does a state stand to lose by opening up its technology to its citizens? Little to nothing, and much to potentially gain.
In similar ways, enterprises have little to lose from open sourcing all the software they write to run their businesses. Imagine the increased productivity we could squeeze from our financial services industry if more of the code they write were shared amongst Bank of America, Citigroup, Morgan Stanley, etc.
Open source is not an excuse not to compete. It's a way to compete more efficiently, focusing on real innovation rather than everyone reinventing the same wheels.
Szulik recognizes this, and has proposed a way for North Carolina to improve its financial prospects. Let's hope the state listens, and that others, including other industries, listen in.
Follow me on Twitter at mjasay.
I was talking with a friend this morning who used to work at JBoss. He made an interesting point: Rob Bearden, the COO at JBoss, was perhaps the biggest reason for JBoss' success. Not because he was out proclaiming freedom to the world: that was Marc Fleury's strength and he did it extremely well, bringing visibility and downloads to JBoss. Nor because he was a Bob Bickel figure, thinking up the strategies that would take the company forward.
No, Rob Bearden's strength was in demanding that the trains run on time. Rob set up the sales processes (including JBoss' religious adoption of marketing automation software), set the quotas, etc. He was the machine behind the machine. Every open-source company is an online business that must outperform the rest of the industry's 20th Century business practices to thrive. Rob Bearden did that for JBoss.
Matthew Szulik is resigning as Red Hat's CEO to take care of his family, which is the right thing to do. But perhaps - perhaps - bringing in an operations-minded CEO to replace him is not a bad idea. I say "perhaps" because I thought Matthew did a great job of driving execution at Red Hat. Perhaps the board saw room for further improvement. Perhaps Jim Whitehurst is the right person to build an online marketing and lead-generation machine for Red Hat.
... Read moreRed Hat continues to demonstrate its dominance of the enterprise Linux market. The company reported a blow-out third quarter, with total revenue of $135.4 million, an increase of 28% from the year ago quarter and 6% from the prior quarter. Subscription revenue was $115.7 million, up 30% year-over-year and 6% sequentially.
The company also boosted its profitability, with net income for the quarter at $20.3 million, or $0.10 per diluted share, compared with $18.2 million, or $0.09 per diluted share, for the prior quarter and $14.6 million, or $0.07 per diluted share, in the year ago quarter. Red Hat continues to exceed expectations, but perhaps because analysts continue to foolishly second guess the company (presumably because few of the analysts really understand open source).
Szulik talked up the progress of RHEL in the quarter (e.g., ), but also emphasized the growth of the JBoss business:
I probably overreacted to Matthew Szulik's resignation as Red Hat's CEO. For me it's not just a business decision that Red Hat made. Matthew has been a friend and a mentor to me for several years. I've sat in his office on several occasions. I respect him deeply and can't imagine the open-source business community without his fire and intelligence.
Both are on display in a blog entry he just published. The voice comes across as quintessentially Matthew:
Through our actions, the open source community and the people of Red Hat are defining a modern economic relationship between developer and customer. Collaboration. Transparency and value delivered. Our customers and marketplace are responding as evidenced by our financials and strong market potential. What was once considered a joke in 1998, no longer is. Today governments and industry are responding to the values and practices of open source as evidenced by their support of OLPC and the broad open source education initiatives in India, South America and parts of Africa.
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Wow. If there was ever an industry that has little to nothing to teach the software industry, it's the airline industry. And yet that is precisely what Red Hat has done: Matthew Szulik, its long-time CEO, has resigned to be replaced by Jim Whitehurst, former COO of Delta Airlines, the paragon of disruptive and agile thinking.
This change heavily shakes my faith in Red Hat. Szulik was Red Hat. His competitive, sometimes combative spirit. His take-no-prisoners approach to competitors while treating customers with kid gloves. His obvious passion for open source.
Larry Dignan at ZDNet suggests that maybe Szulik will be the Linux ambassador to the world while Whitehurst focuses on operations. Possible, but isn't that what a COO is supposed to do? Why bring in airline dead-weight to manage something as disruptive as Red Hat? Did Red Hat really need a boring, old school CEO to manage its 21st Century software business? I don't think so.
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Matthew Szulik
(Credit: Red Hat)I spent an hour with Matthew Szulik this morning, wanting to get his input for my Open Source CEO Series. Matthew isn't the sort of person to seek the limelight for himself, so it was actually hard to convince him to answer questions. As became evident in his answers, though, Matthew firmly believes in the open-source model and the culture of personal excellence that makes it fruitful.
Red Hat is the defining technology company of the 21st century. Love it or hate it, this is the company to watch. If Red Hat succeeds, an entirely new way of developing, delivering and supporting software will come to dominate the IT industry. If it fails, well, what a long, strange trip it's been.
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