For Red Hat, the Cloud Beckons

by Ostatic Staff - Jun. 17, 2013

Red Hat has made a name for itself as the only U.S.-based public company that is exclusively focused on open source, and it has proven that its Linux-focused strategy is very profitable. In fact, the company is the first open source-focused company to hit the $1 billion revenue mark. That said, though, Wall Street has been questioning where else the company might be able to generate revenues in the future.

And, it's becoming clear that Red Hat sees cloud computing as the key to the next steps in its evolution. The company's OpenStack-focused strategy is getting more robust by the minute. 

Recently Network World reported on Red Hat Summit, noting the following:

"At the company’s annual Summit in Boston this month, Red Hat made what Red Hat executive vice president of products and technology Paul Cormier said was the biggest announcement in the nine years that the company has been running the show. Integrating OpenStack into its Red Hat Enterprise Linux (RHEL) operating system, the company hopes, will propel it through the next decade of growth."

 This is no small matter for Red Hat. The company has done well getting its corporate clients to renew subscriptions for its Linux support offerings, but growth has slowed at the company and cloud computing is all the rage now, with OpenStack rapidly gaining momentum.

As reported here last week, the new Red Hat Enterprise Linux OpenStack Platform can serve as the foundation for  cloud users who are seeking to build an OpenStack-powered cloud. And Red Hat has also announced Cloud Infrastructure, which can support organizations moving from traditional data center virtualization to OpenStack-powered clouds. 

Meanwhile, as we've reported, the Amazon Web Services (AWS) blog recenlty confirmed that the AWS Free Usage Tier, which lets users run applications and operating systems in the cloud, now includes 750 hours of Red Hat Enterprise Linux usage. This is a good tire-kicking opportunity for those who aren't quite ready to commit to an RHEL deployment.

The question everyone is asking is whether Red Hat can find the same kind of success in the cloud computing arena as it has found on the Linux front. The key to finding cloud success will be support, and support is what Red Hat is good at. Red Hat's business model has always been organized around charging for subscription support and its cloud offerings are also subscription-based.

Red Hat is strategizing around OpenStack at a time when a couple of high-profile supporters of the platform are showing signs of wavering. In a major announcement from Dell Computer last month, the company announced that its public cloud ecosystem and strategy will be centered on partners Joyent, ScaleMatrix and ZeroLag, and will emphasize recent acquisition Enstratius. Some saw this announcement as a retreat from OpenStack. Meanwhile, IBM--which has been firmly in the OpenStack camp--is spending billions to buy SoftLayer for its cloud computing infrastructure tools and services.