Giant slaying

Doug Woodburn speaks to Red Hat about the vendor's recent successes and its plans to bring the virtualisation fight to industry behemoth VMware - and win

Fresh from becoming the first open-source vendor to break the $1bn revenue barrier, Red Hat is on a partner push for its new virtualisation offering, putting it on a collision course with VMware. CRN caught up with Hitesh Patel, business partner manager for virtualisation, and Simon Williams, UK sales manager, to find out how the firm plans to topple the market goliath and make open source the default option for the enterprise.

What is the significance of Red Hat joining the $1bn club?

SW: It shows that open source is no longer down in the cupboard with the R&D guys. It is a mainstream, core technology that global enterprise wants to deploy because it gives them all the benefits without proprietary lock-in. But although $1bn is a great milestone, we are just at the beginning and virtualisation is yet another market we are entering that represents more opportunity.

You launched Red Hat Enterprise Virtualisation (REV) 3.0 in January. What are your ambitions for a market that is dominated by one proprietary player?

HP: IDC says there is a two-year window for new virtualisation players so you will see a race between Red Hat, Citrix, Microsoft and a few peripheral vendors to displace VMware and get customers that are not yet virtualised to virtualise.

Where is REV’s sweet spot?

HP: In the enterprise space Red Hat addresses, about 50 to 60 per cent of workloads are virtualised and broadly speaking, they are non-mission-critical applications. Just 10 per cent of the Red Hat customer base is virtualising. So there is an opportunity for us and our partners within our customer base and around mission-critical applications [such as SAP and Oracle], as that is where we have built our infrastructure business.

Why would resellers back Red Hat, rather than a more established virtualisation player?

HP: Red Hat is in the best position to exploit the addressable market I just outlined. If you look at the enterprise market, 84 per cent of customers who use Red Hat also use VMware so we will invariably go head to head. We match them in scalability and our performance is the best, and we can prove that. We are at least one seventh the cost of VMware over a singe year and that is born out of the fact that we do not have upfront licensing agreements.

Customers are also seeking a certain amount of wiggle room. VMware has introduced a ‘vRAM tax’ which means when a customer breaches a certain virtual memory band, they have to pay VMware to use the feature. This is unscrupulous and is driving a number of customers to investigate a dual-vendor strategy.

SW: We also give partners the opportunity to differentiate using their services and have a greater proximity of engagement with the customer.

How extensive is your UK channel and what are your recruitment plans for REV?

SW: We have 15 Premier Advanced partners in the UK, such as Computacenter and BT Engage IT, and in excess of 300 at the Ready level. They can specialise in infrastructure, virtualisation, middleware or all three.

HP: For REV, we are looking at partners that want to grow that market with us in a transformational way as we are not yet in the transactional phase. We will provide value-add at the initial proof-of-concept stage because customers are looking for someone to give them some real-world evidence of the cost savings.

Forty per cent of your sales globally go direct to end users. How do you manage conflict with your channel?

SW: We do not have a large direct sales force. We have a high-touch model that allows our customers to choose. The majority of the business is via our partner ecosystem. We have continued to have a share shift from direct to indirect and it is a stated goal of Red Hat to continue that.

Do you still encounter reticence among SIs because they have such a large business with proprietary vendors?

SW: Five years ago we were pushing and creating a market. Now the SIs see it as a massive opportunity because it is no longer considered second tier. The resource and sheer spend involved makes it a fully fledged commercial business.

HP: Don’t forget that the SIs are trying to compete with other SIs. Ultimately, the customer is not concerned about what it is built on so long as they get their application delivered in the way they want.

It makes sense for the SI to build it using open-source technologies as it reduces cost dramatically. That enables them to present a lower cost to the customer and deliver that project realistically by redeploying those cost savings to consultancy.

Is the government just paying lip service to open source?

SW: Maybe five years ago, but not now. Government is very conservative by its nature and takes time to change. Now some of our best reference sites in the UK - such as Camden Council - are in the public sector so we have seen a mind shift and rather than just talking about it, they are executing it.

Finally, given your recent diversification, how do you now position Red Hat?

SW: We bridge the gap between open-source and enterprise-class products. Whether it is in middleware, virtualisation, storage or the traditional operating system, we enable the customer’s vision rather than the typical vendor who says ‘this is our view of the world, you must subscribe to it’.