Red Hat still shaky in eyes of market

Stan Beer
Tuesday, 31 October 2006 15:29

Opinion and Analysis

In a recent article about the challenge Oracle has thrown at Red Hat, a couple of readers drew great delight in picking me up on a couple of statements I made. Both statements were intended to convey the vulnerable nature of Red Hat's position - something the market has recognized but a few zealots obviously haven't.

One statement was my contention that Red Hat can't actually sell Red Hat Linux as a product because it's open source. That wasn't saying Red Hat is prohibited by some law from trying to sell its packaged Linux distribution as a software license. That was stating the fact that this is contrary to the open source model which Red Hat itself champions.

On its website, Red Hat goes to great length to explain the difference between selling a software license for an upfront cost and its open source model of selling a subscription to Red Hat Enterprise Linux. The subscription model is all about selling support and services not a software product. The real value in Red Hat as a company is the expertise of its people and the associated support and services they provide not its Linux distribution.

Those who still wish to argue the point may do well to ponder the fact that a few words from Larry Ellison were enough to shear 25% of Red Hat's stock. All Ellison said was that Oracle will support Red Hat Linux at half the price of Red Hat. So if Red Hat is in the business of selling software products like Microsoft or Oracle or SAP, why should anyone worry?

Ellison also indicated that Oracle will market the Red Hat Linux distribution minus the Red Hat branding as the best version to run the Oracle database. This is another reason Red Hat doesn't sell its Linux as a product but as a service - it can't protect the product from being used by Oracle or anyone else.

At the moment, Red Hat's main advantage over Oracle, which it has stated itself, is its team of Linux experts. However, Oracle also has Linux expertise and more expertise can be acquired when you have deep pockets like Oracle.

Ellison outlined Oracle's plan to introduce bug fixes more regularly and Red Hat immediately countered with an emotive cry of "fork". Ellison explained that any fixes that Oracle introduced would be made available to the Linux community. Red Hat once again countered with the threat that untested fixes may not be incorporated into the Red Hat distribution. However, the Linux kernel does not belong to Red Hat. If Oracle submits a legitimate fix for a Linux issue, which is accepted by the wider Linux community, then there would be no fork provided Oracle plays by the rules.

The other statement I was pilloried for was my belief that cost conscious IT managers will buy support from whomever can provide it at the best possible price. I will now qualify that statement by adding the proviso that the support provider has reasonable market credibility. Given many Red Hat sites are running Oracle software, I would venture to say that an existing supplier like Oracle willing to offer Red Hat support at half the current price would be a very attractive proposition, as a number of users have publicly stated.

At the time of writing, Red Hat stock has had a bit of a bounce but the market is still nervous. The demise of PeopleSoft, a much stronger company than Red Hat, at the hands of a ruthless Oracle is still fresh in the minds of many.