Red Hat (RHAT) CEO James Whitehurst led off the March 23, 2011 conference call announcing the operating system and middleware provider's annual results with the low key:
"Red Hat's growth indicates that we are continuing to gain market share."
Talk about understatement. I would guess so given that I doubt if any comptetitor of any size had more than Red Hat's 20% revenue growth (more to come as we begin to review the Gartner and IDC share tables that will be coming out in the next month).
But remember. Red Hat's stated goal isn't simply the mundane gaining "market share." It wants a 50% share (as measured by instances I think but it's been a while since I dug down on this) of both the operating system and middleware-stack markets by 2015. I didn't see any mention of how Red Hat was doing against that benchmark in the conference call. But I didn't see Red Hat backing off that goal either.
Looking at both sides of that ambition:
- On the operating software side..
- Red Hat wants to end up driving over half the world's servers by 2015. That seemed very doable in 2007 when announced because all it meant was mothballing a lot of Digital UNIX, AIX, Solaris and HP-UX systems. (Email to Microsoft (MSFT): You keep your Windows share and we'll take everything else.)
- That was both logistically and technically sensible. In the process Red Hat saw its products becoming a mainstay on the mainframe as well. Also contributing to reaching the goal: there will be a lot of justifiable double counting as stacks like Red Hat's (and so far it's the only real game in town) forms the underpinning of virtualized Windows and VMware servers.
- However Oracle's (ORCL) acqusition of Sun changed the dyamics. A very different player enters the mix offering a more intergrated approach up and down the stack. That doesn't mean the goal should be changed but it affects both the operating system and middleware-stack sides of the equation.
- On that middleware side, holistically, to reach its 50% goal...
- Red Hat would have to not only displace other potentially more popular open source middleware (e.g., Apache HTTP software) but billions of dollars of "closed-source" software currently in use across the world. (NOTE: The open-source vs. closed-source characterization is not meaningful in understanding or measuring the market but I use it because the open source zealots still insist on drawing this distinction. Red Hat is not a zealot but simply uses open source terms and conditions very effectively as research/development and marketing techniques.)
- To literally accomplish its goal, Red Hat would need to displace 50% of the $20-$30 billion worth of IBM (IBM) CICS and Oracle (formerly BEA, formerly Novell, formerly the real AT&T) TUXEDO shipped in the last 30 years, the $20-30 billion worth of MQ Series, TIBCO (TIBX), etc., shipped in the last 20 years, the $20-$30 billion worth of IBM WebSphere and Oracle WebLogic and Application Server shipped in the last 15 years, the $10-$20 billion of Oracle, SAP, IBM and so forth integration servers, development tools, ESBs, portals, and so forth. Now we're talking about a real challenge and that assumes you do not define middleware the way Oracle and IBM do, including business intelligence and collaboration software and just about everything else -- including databases -- except ERP and customer relationship management.
- No matter how you measure 50%, Red Hat would have to displace existing installed software at an astonishingly rapid rate over the next 6 years to reach its goal because the overall software market is only growing 5-6% (and the middleware market basically tracks the overall software market).
- In addition, competitively Red Hat needs a database product because as many times as not, that is where the decision is made and the operating system and middleware stack decisions flow from that. Monty, where are you?
But the good news. I don't think Red Hat lost any ground against its ambitious goal in 2010.
-- Dennis Byron