Red Hat CEO Whitehurst Blasts Software Patents

Trends: expectations, cuts and the cloud

Users expect a lot from business IT, because consumer IT is delivering so effectively at the moment, he said: “For every CIO, Google is your competitor – in terms of the expectations your users have.”

School children get very good collaboration tools for free in Google Apps, he said, while enterprise CIOs struggle to implement those things with multi-milllion dollar budgets. “Google and Facebook are setting the bar.”

“Expectations are through the roof and there is a floor on the cost. It’s a doom loop for the CIO,” he said, where IT budgets are cut because of the preconception that “they can’t deliver”.

And finally the move to cloud may look like a fad or a fashion, but it is real and it is being driven by billions of dollars of investment. “The principle of recentralisation of IT is real,” he said. “Going from two percent to 90 percent server utilisation has massive benefits.”

“The client-server model costs more in support costs than in hardware or software,” he said, and cloud can change that.

The danger is that cloud could be “the mother of all lock-ins”, he warned. It’s important to make sure that you can move loads out onto the cloud and move them back in when you want to – and simple licence rules for software make that difficult with proprietary software.

Cloud would not exist without open source

All the public clouds are built on open source software – including Amazon and Google – he said. Without an open source stack, “Public clouds could not exist”. By using open source, Google’s is saving $20 billion in software licences for its ten million servers, he estimates, and clouds would simply be uneconomical without open source.

Queried on this, he conceded that Microsoft’s Azure is an obvious exception to his rule, but obviously Microsoft can afford to run a Windows-based cloud because it doesn’t have to pay for those licences. Even so, people at the briefing pointed out, Azure could well be eating into Microsoft’s revenue by cannibalising end-user expenditure on software licence.

How fast can Red Hat grow?

Two years ago, Whitehurst said that Red Hat would be a $5 billion company, but it is still some way off that. When will it get there, he was asked.

His answer went into the relative cheapness of open source as a replacement for proprietary software – providing an order of magnitude savings.

“We make up close to 20 percent of server operating system installations,” he said, “and the server operating system market is a $20 billion market. We have $750 million revenue. There is some JBoss middleware in there, but even if it was all operating system revenue, we generate nearly 20 percent of the installations with well less than three percent of the revenue.”

So to reach $5 billion, Red Hat will have to replace $50 billion of current server spend. He’s confident the company can get there but it will take time.

2011’s target is to gain $1 billion in revenue, and he thinks that is easily in reach, since the company tends to increase business from existing companies by 20 percent year-on-year, and put on new customers regularly.

And with hundreds of billions supposedly coming from the cloud, Red Hat expects a major share of this.