And Then There Was One: Red Hat

by Ostatic Staff - Dec. 07, 2010

There are only days left until 2010 is done, and this year is one that anyone interested in open source should remember for a long time, because it was the year that every single U.S. public company focused on open source lost its independence, except one: Red Hat. With the news of Novell's sale still fresh, and with Oracle's acquisition of Sun Microsystems fading in the rear view mirror, it's easy to forget that Novell and Sun were both once-mighty commercial open source-focused companies that are only shells of themselves now. Meanwhile, Red hat marches on to quarter after quarter of financial success with its own open source strategy. What has Red Hat done right?

How powerful was Sun Microsystems as a purveyor of open source and open standards before Oracle subsumed it? The Register has a good piece on former Sun CEO Scott McNealy up, which puts some of that in perspective:

"Founded in 1982, Sun raked in so much money that it broke the psychologically important $1bn sales barrier in six years. It took Microsoft 15 years to hit $1bn — six if your starting point is the date Microsoft was incorporated. Oracle — up the road from Sun — took 14 years. Sun was the fastest growing US company between 1985 and 1989, according to Forbes, and supplied the entire US government with more than half its workstations nine years after starting."

Novell was no slouch in its heyday either. It pioneered the loca-area network space, once had a very competitive operating system in Netware, was a market darling, and was ahead of companies like Microsoft in numerous technology areas. But both Novell and Sun have lost their open source clout, while Red Hat just continues to succeed--even thriving during the recession--with its unusual model of offering support for open source software.

One of the big lessons to learn from these seismic events is that Red Hat's unusual business model may have legs that other open-source focused companies can copy. Cloudera, focused on Hadoop, has a somewhat similar model as a small company. Acquia has a somewhat similar one focused on the Drupal CMS platform. There are other up-and-coming open source companies focused on support for free software, too.

Both Novell and Sun had lots of capital expenditures and operating expenses over time, and lots of fat of other kinds built into their business models. Red Hat's lesson is that a company can run lean simply supporting open source software and still fare well in the public markets. At the end of this year, in particular, it's worth noting that Novell and Sun were both much older companies with much broader product portfolios than Red Hat at one point, but their open source-focused business models weren't winners.