Today, Linux and open-source software rule the tech world. Twenty-five years ago? It was an amateur operating system that only geeks knew about. One of the main reasons Linux got from there to here is Red Hat turned a hobby into an IT force.
Red Hat co-founder Bob Young — who had run a rental typewriter business — became interested in Linux. In 1993, he founded ACC Corporation, a catalog business that sold Slackware Linux CDs and open-source software.
Everyone knew, as Young remembered later, “Solaris was much better than Linux, but it was only by using Linux that he could tweak the operating systems to meet their needs.” Young realized that while he couldn’t sell Linux as being better, faster, or having more features than Unix in those days, he could sell one benefit: users could tune it to meet their needs. That would prove to be a key selling point, as it still is today.
So, he joined forces with Linux developer Marc Ewing, and from Young’s wife sewing closet, they launched Red Hat Linux. Like other early Linux businesses, Red Hat started out by selling diskettes, then servers, services, and CDs.
Today, in an interview, Young said, “What I love about the story is that it took many great contributors from the free software/open-source communities including Stallman to Torvalds. To Marc and I and our team-mates to Matthew Szulik, and now Jim and his vast team. None of us could have fundamentally changed the way software is developed and deployed without all the others.”
Young continued, “As my internet software developer son-in-law puts it: he and his colleagues couldn’t do what they do without all the free and open software that Red Hat is both a contributor to and a beneficiary from.” He concluded, “And then there is our families. I would not have been able to make my contribution if my wife Nancy had not been willing to bet our kids’ college education on building a software business on a model never done before.”
Today, that model is making Red Hat the first billion-dollar-a-quarter pure open-source company.
First though, Red Hat had to find the magic formula, which would bring it success while so many other of its contemporaries, such as Calera, TurboLinux, and Mandrake, were left in history’s ashbin.
Red Hat’s current CEO Jim Whitehurst told me in an interview, “The real contribution we’ve made, besides open-source software, has been the enterprise business model. It’s obvious now, but it wasn’t obvious at the time.”
I would say so!
In 2003, Paul Cormier, then Red Hat’s vice president of engineering and now Red Hat’s president of Products and Technologies, led the way to leaving behind its early inexpensive distribution, Red Hat Linux, to move to a full business Linux: Red Hat Enterprise Linux (RHEL).
Cormier said later that many “engineers at the time didn’t care about a business model. They wanted to work on Red Hat Linux. We had some level of turmoil inside the company with going to this new model. Some engineers left, but more stayed.”
Many users didn’t like it one darn bit either. They saw Red Hat as abandoning its first customers. Enterprise customers saw it differently.
Whitehurst, who took Red Hat’s reins in 2008, said, “Once RHEL was in the market we had to support it full stop to made it truly consumable for the enterprise.” They did so and the rest is history.
Red Hat grew and grew. In its latest quarter, Red Hat realized $ 772 million of revenue, which was up 23 percent year over year. Not bad for a company built around an operating system that people back in the day thought of as being only for the lunatic fringe.
Today, Whitehurst, remarked, “Linux is the default choice for open-source companies and enterprises. Ten years ago people still had doubts about open source. Now it’s the default choice for clouds, AI, and big data.” Indeed, “Are there even any important big data or AI projects that aren’t build on open source?” he asked.
The answer, by the by, is no.
It’s not just Red Hat, it’s all of Linux and open-source. “At a Red Hat development site,” Whitehurst said, “an engineer asked me about Microsoft competing with open source.” Whitehurst replied: “Microsoft is not the issue, Windows is a competitor to Linux and we’d love to kill it, but the largest enterprise software company in the world is pro-open source and that’s good for all of us.”
While Red Hat makes the bulk of its money from Linux, Red Hat is no longer just a Linux company. Its eyes are now set on the cloud. Red Hat is determined to use OpenStack to gain a place as big in clouds as the role it already has in Linux.
Red Hat realizes it’s not just the cloud. The company is also heavily invested in containers and container management. Nothing shows that more than its recent acquistion of CoreOS, a leading Kubernetes company.
Linux brought Red Hat where it is today. Moving towards tomorrow it will use open-source software to use the cloud, containers, and container orchestration to rise even further in its next 25 years.