CRN Exclusive: Red Hat CEO Says Next-Generation Open-Source Technologies Will Propel Sales To $5B

As Red Hat welcomes its North American partners to New Orleans this week to discuss the open-source renaissance transforming enterprise IT, its CEO has his eye on growing the company to $5 billion in annual sales.

The open-source software pioneer is on the heels of having crossed the $2 billion threshold. After kicking off the annual Red Hat Partner Conference on Monday, CEO Jim Whitehurst sat down with CRN to share the roadmap he envisions for those partners — one involving growth through expanding their practices beyond Red Hat's flagship Linux distribution.

On Tuesday, Whitehurst will deliver partners a keynote address formally laying out that vision for how Red Hat plans to grow to a $5 billion company over the next five years by leveraging the reach of its channel, the only possible path to that level.

[Related: Rackspace Debuts Red Hat OpenStack For Private Clouds]

Next-generation open-source technologies — especially Docker containers and the OpenStack cloud operating system — will be the platforms that propel Red Hat into the future, he told CRN, and will enable partners to scale their businesses.

In the dozen years after the release of Red Hat Enterprise Linux in 2002, the software vendor, based in Raleigh, N.C., strived to prove that open-source solutions were capable substitutes for proprietary software, Whitehurst told CRN.

But the tectonic shift in recent years to cloud and mobile solutions has flipped that notion on its head; open-source has become the default approach for building enterprise technologies.

"We built a nice multi-billion dollar business being a viable alternative. What's going to drive us to the next level is open source being the default choice," Whitehurst told CRN. "Our role is to make it consumable for enterprise customers."

Innovation now typically happens in the realm of open source, allowing developers to take advantage of large communities and diverse contributors, according to the CEO.

"Before it was helping [customers] carve out costs. Now building new architectures is primarily an open-source question," Whitehurst said.

Red Hat, the first enterprise software developer to tie its fortunes to the commercial viability of open-source solutions, offers a Platform-as-a-Service layer focused on Docker containers, the Kubernetes orchestration engine developed by Google, and the OpenShift technology it developed in-house.

And the vendor has become a major player in the OpenStack ecosystem, catching up to early entrants by applying the company's knowhow around enterprise-grade data center platforms.

Adoption from the telecom industry is an important force driving those technologies, Whitehurst told CRN.

Last Week, Whitehurst announced in Red Hat's Q4 earnings call that the company recorded $2.1 billion in revenue in its last fiscal year.

In an opening session Monday at the New Orleans conference, D. Robert Martin, Red Hat's vice president of North American partner sales, told partners that 70 percent of Red Hat's North American business comes through indirect sales — higher than the company's historical norm.

For partners, growth opportunities are coming in the form of emerging technologies such as OpenStack and Linux containers, Martin told attendees.

Red Hat is also making the most of the rapidly changing market by forging technology partnerships with such companies as Rackspace, Accenture, and even Microsoft.

"Who'd have thunk Microsoft would be up on this slide at a partner conference a year ago?" Martin said, pointing to a list of technology partners. "Who'd have thunk they'd have embraced open source?"

But enterprise customers are looking to incorporate multiple platforms, Martin said, and earlier this year Red Hat found itself with a unique opportunity to mutually develop and support a solution with Microsoft.

"The customers are looking for multiple partners to deliver solutions," Martin said.

The way the channel delivers those solutions is also undergoing a major transformation, he said.

"The lines between what a VAR was, and will be, is changing," Martin said. The divisions between channel taxonomies are blurring, and the practices of VARs, ISVs and solution providers often look similar.

Modern channel partners are increasingly fitting the profile of "strategic services provider," Martin said.

The conference agenda will focus on what Red Hat is seeing in the industry, what products address that outlook, and what partners can do together to address the opportunities those products create, Martin told partners.