Improving Red Hat's JBoss numbers
Red Hat needs to improve its JBoss business. Is it on the right track?
Red Hat is struggling to get the value its expected from JBoss. That was clear from its earnings report yesterday and Matthew Szulik's comments:
"The rate of JBoss bookings has not met my expectations," Red Hat CEO Matthew Szulik said on the company's second fiscal quarter 2008 conference call. "We expect it could double RHEL [Red Hat Enterprise Linux], so far it's about the same. We will accelerate JBoss growth in the second half of the year."
What can Red Hat do to boost its JBoss business? Is the sky falling?
The company seems to believe that letting JBoss flourish on its own is the best bet. It certainly seems to be a good short-term option, though it presents its own problems, as Jason Maynard of Credit Suisse cautions:
On the call management outlined in detail their business unit re-organization around products and marketing but also introduced a bit of wrinkle by suggesting they might consider adding a new overlay sales team at some point in the future. This could be a positive long-term change but in our view creates the potential for more transitional issues.
The company is now creating three different business units based on products: infrastructure, middleware, and online services. Each group will have its own development and marketing organizations, and will be led by a GM who will be responsible for P&L goals. We were surprised to hear that they were considering launching an overlay sales group for each business unit at some point in the future. We appreciate that each of the products requires different sales approaches, especially more consultative oriented developer products, however, we would have expected these changes to happen in conjunction with the re-organization. As we detailed in our 9/23 note, we think these changes could cause disruption to the business.
Yes, it will create transitional issues. But let's be clear: Red Hat needs to figure out how to properly integrate complementary products like JBoss for the long haul. Far better to figure those out now when its Linux business can carry a bad quarter or two for JBoss than in the future when lower performance from JBoss would be debilitating. The time to act is now.
Now is also the time because JBoss can afford a few missteps in execution. Not many, but a few. As Marc Fleury recently wrote:
For the foreseable future (5 years) no market share movement will unseat JBoss from leadership. Things just don't move that fast in middleware....
JBoss has some leeway, which means Red Hat some leeway. But not much. JBoss has little to no open-source application server competition, but this can't be expected to last, just as Red Hat Enterprise Linux is finally starting to get credible competition. So, Red Hat has a narrow window in which to figure out how to be a multi-product company.
Incidentally, now might therefore be the time for Red Hat to look for industry executives with experience in amalgamating acquisitions into a coherent whole. Maybe someone from Cisco? Or (shudder) Oracle? No one has done acquisitions better than these two companies.
Red Hat is under siege, and needs to do better in figuring out how to be a multi-product company. But Red Hat, like all great companies, operates best when it's under pressure. It will be fascinating to watch the collision of Red Hat, Microsoft, and Oracle as each pushes the other to hit their peak performance. Customers should win in the bargain. But first Red Hat needs to demonstrate that it is more than a one-trick operating system pony.