Oracle Red Hat move shows open source vulnerability
By Stan Beer
Thursday, 26 October 2006 19:15
The short answer is nothing. Not because you don't want to respond but because you can't respond.
We are of course talking about Red Hat and Oracle. Red Hat makes its money by supporting its open source Linux distribution for enterprise customers. Now business software giant Oracle is going to market with Red Hat Linux support, offering the same services at half the price. Where are budget conscious enterprise customers going to go?
The market answered that question after hours by savaging Red Hat shares. Basically, Oracle has usurped Red Hat's business and there's not a thing that Red Hat can do because the nature of open source and Linux makes the software freely available. Provided that you have the people and the infrastructure to support that software - and Oracle has - you can simply go to market with the same offering.
In the case of a powerful company like Oracle, you can afford to drastically undercut a much smaller rival like Red Hat and offer a wider range of services to boot.
The problem for Red Hat is that the open source model upon which it has built its business is not about selling proprietary software. It's about supporting freely available software. The only barrier to entry is people with expertise - and Oracle already has those.
Oracle CEO Larry Ellison was correct when he indicated back in April that Red Hat was too expensive to buy. In fact, as analysts have pointed out, any price is too expensive for Oracle because it doesn't need to buy Red Hat. Oracle has already entered the Red Hat business without spending a penny.
The same thing holds true of any company that builds a business based on open source software. The business will always be about people and, unlike intellectual property, people can be easily bought.
