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Connections key to Red Hat deal

The Intel and Netscape names will help open doors that may previously have been closed, says the Linux vendor's president.

It's not what you know, it's who you know.

Connections are at the core of the equity investments by Intel, Netscape Communications, and two venture firms into Linux vendor Red Hat Software, Robert Young, president of Red Hat, said in an interview with CNET News.com today.

With Intel and Netscape as backers, large corporate customers, as well as the multinational consulting firms and system integrators that serve them, will start to increasingly consider Red Hat and its version of the Linux operating system as an element of their overall computing strategies. Corporations use Red Hat software now, but mostly in a sporadic fashion.

The investments will allow the North Carolina company to build a technical and marketing infrastructure that will reassure corporate users that it has the personnel and expertise to handle large deployments, he said. At the same time, the Intel and Netscape names will help open doors that may previously have been closed.

"This round is much more important in terms of the partners we brought into Red Hat than it is for the money," he said. Later, he added by way of example, "We used to talk to [consulting firms such as Ernst & Young], but at a pretty low level. Their regional managers would call us up. Red Hat previously was not perceived as someone that they should spend cycles working with. With Intel's and Netscape's endorsement, we expect that to change.

"The big PC houses, people like Dell, have already announced an increased support for Linux. As a result of this announcement, you are going to see some very interesting things coming up."

In addition, Red Hat will move into the elite group of Intel and Netscape developers. Currently, Red Hat, like many other software vendors, only gets crucial information about Intel processors after the chips are released.

With the investment, Red Hat moves in with the Microsoft class of developers, which receive detailed processor information at an earlier time than others. With more advanced information, Red Hat, and by extension other Linux vendors, will be able to incorporate new technologies at an earlier time.

"We needed the relationship with Intel because the vast majority of our users are running on Intel processors. This opens the door for closer cooperation both for us and the whole Linux community with Intel," he said. "This is exactly why Intel is interested in investing. They want that ability to deploy their technology into the Linux marketplace on a much faster basis."

Similarly, the company will be on the early track with Netscape.

In a way, the investments could be looked at as the day Linux bought a suit and shaved. Linux, a Unix-like operating system, so far has mostly been an underground computing phenomenon. The source code for the Linux OS is distributed freely and can be altered by users. Red Hat distributes and supports a prepackaged version of the software.

The ability to improvise on the original source code has been at the root of Linux's popularity, said Young. By giving up control over the source code, users can tailor the OS to their needs exactly.

On the other side of the coin, the inherent mutability of Linux has made it suspect at large corporations, which praise stability above all else in their operating systems. System integrators also have been skeptical about pouring resources into Linux for the same reason. Linux has actually made its way into a number of large corporations, but information managers deny it.

The investments will essentially allow Red Hat to hire technical marketing personnel and engineers that will provide Red Hat with the support backbone that corporate decision makers demand. In a sense, Red Hat will be building itself into an institution.

"In order for us to be able to convince that MIS director to deploy Red Hat Linux systems on an official basis, we have to be able to deliver a level of enterprise support that, without denigrating our current support efforts, we simply don't deliver at this point," he said.

Going up the corporate ladder will also change Red Hat's business model, he added. Currently, most of the company's revenues come from software sales. An increasingly large portion, however, will come from "support services" or consulting.

Intel is an investor in CNET: The Computer Network, publisher of News.com.