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May 18 2016

A Fortune from Free Software: Red Hat at $2 Billion

As a Red Hat rep, you are often asked, “How does Red Hat make any money selling free software?”  Well the answer is multifaceted, but at this point the question seems moot. As of March 22, 2016 Red Hat Software officially announced they had surpassed $2B in revenue in FY16. That’s $2.05 Billion to be exact.  Red Hat is not some Silicon Valley unicorn, snatching up VC funding from every gullible investor between Redwood and Palo Alto. No. Red Hat is East Coast. Red Hat is old school, but in a good way, like OG hip-hop or 80’s arcades. With over 20 years in the making, the road to $2B has not been fast or easy, and it’s just the way Red Hat wants it.

Red Hat built the foundations of it’s Open Source Empire on the back of the now ubiquitous Red Hat Enterprise Linux. Brick-by-brick, sale-by-sale, Red Hat has grown from an outsider product used only by the uber-geeks to a key CIO initiative in both the private and public sector. Today over 90% of Fortune 500 companies, every branch of the US government, and countless countries and companies around the globe trust their IT environments to Red Hat — but they are not just stopping at Linux. In the past 10 years, the Red Hat portfolio has grown to include Enterprise Middleware, a robust Cloud Suite, and even solutions for mobile, all while maintaining their commitment to principles of Open Source, even when that means taking previously proprietary technology (Like FeedHenry or ManageIQ) and retroactively making it Open Source.  So where does Red Hat go from here?  

Although the Red Hat Tower is not moving to Bespin, the future for Red Hat is definitely in the clouds. At the precipice of the Private Cloud revolution, Red Hat OpenStack is leading the assault on the traditional datacenter.  With Red Hat OpenStack, organizations can build their own Private Cloud leveraging their existing hardware infrastructure while gaining scaling benefits and workload resiliency similar to Public Cloud Service Providers like Amazon Web Services and Google Cloud.  For private enterprises and governmental organizations alike, Red Hat OpenStack provides a secure and stable platform for implementing next-gen applications designed natively for cloud scaling resulting in greater efficiency for the enterprise, all while keeping the oh-so precious data securely behind a firewall. OpenStack is the new foundation, built with Linux to change the datacenter from the ground up. 

If OpenStack is the new foundation, then CloudForms is the mortar holding it all together.  Red Hat CloudForms is a comprehensive cloud management tool designed to integrate with existing virtualization technologies like KVM, VMware, and Hyper-v as well as cloud technologies like OpenStack, AWS, and Azure.  With CloudForms, organizations can empower Operations Teams to accelerate service delivery and reduce operational costs by leveraging self-service portal, cataloging with automatic provisioning, workload lifecycle management, and usage chargeback. Add in improved cross enterprise visibility, automated compliance enforcement & remediation, and you have yourself one powerhouse management console which would give the bridge on the Starship Enterprise a run for its money. 

So you have a modern, cloud-ready datacenter with OpenStack, a management suite to provision and run the whole shebang with CloudForms, and now all you need now is a few applications to run on top.  Enter Red Hat OpenShift.

In a traditional IT organization, Development and Operations teams stand at opposite ends of the spectrum.  Developers are stuck waiting on operations to build, secure, and provision the hardware necessary for them to roll out an application. Meanwhile Operations are waiting to fix all the problems that the developers seem to come up with once they get their hands on the box.  The whole thing is just a mess.  With OpenShift, developers are empowered to develop, Operations to manage, and never (well rarely) shall the two meet.  OpenShift is the shortcut to the DevOps graceland thanks to container based portability, a nearly endless list of supported languages and frameworks, and it is all designed to take advantage of the scalability of the underlying cloud infrastructure.  Now organizations can rapidly build custom apps, rollout regular updates, and even take risks like live testing minor feature changes without fear of crashing “the App”.

So Viva La Revolucion.  Red Hat is prepared, eyes focused on the clouds on the horizon.  As the first company solely dependent on Open Source software to hit $1B in 2012, and now the first to $2B in 2016—  one thing should be abundantly clear, open-source is here to stay.  While industry giants like Oracle ($38.2B in 2015) and Microsoft (a whopping $93.5 B in 2015) may dwarf them, make no mistake they have taken notice of the growing threat that Red Hat poses.  In fact, today Oracle offers a competitive Linux distribution derived from Red Hat’s own source code and Microsoft now offers Red Hat for use on Microsoft Azure,

The first $2.05 Billion may have taken more than 20 years to make but the next $2B...well I would venture to say we will be talking about that much sooner.



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