Red Hat links Linux with popular corporate software

Red Hat today announced new versions of its Linux operating system tuned to work with some of the most popular corporate software, the latest step in the company's ongoing quest to find ways for making money from free software.

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The four new "enterprise editions" of the operating system are designed to work well with Oracle 8i database software, Computer Associates Unicenter TNG computer management software, SAP's R/3 business operations software or RealNetworks' RealServer streaming media software, said Paul McNamara, general manager of Red Hat's enterprise business unit. A handful of other new enterprise editions are coming in the next six to 12 months, he added.

The Red Hat software comes with round-the-clock phone technical support, with ties between the support teams at Red Hat and the other software companies. Prices range from $2,995 for the first year for the RealNetworks package to $3,500 a year for the Computer Associates and Oracle packages.

Aberdeen Group analyst Bill Claybrook said the significance is not so much in the incremental service and support revenues. Rather, these new editions might encourage more widespread adoption of the operating system by otherwise resistant corporate customers.

"If they can do some support and services, that's fine. For me the big story is (that) this is more posturing for getting Linux into more mission-critical, or business-critical, applications in the enterprise," Claybrook said.

Linux is an operating system based on Unix and cooperatively created by hundreds of programmers. It competes with Unix and Microsoft Windows, but it's less established in businesses than those operating systems.

Another unusual feature of Linux is that it's available for free, leading companies such as Red Hat to business plans that aren't as dependent on sales of boxed software as traditional software companies. Red Hat, for example, is also counting on advertising from its Web site as a revenue source.

The rationale for the new versions is simple: a way to make more money from Red Hat's existing products and services. "This announcement is targeted at driving higher margins for software, service and support," Giga Information Group analyst Stacey Quandt said.

Red Hat's enterprise edition strategy resembles that of TurboLinux, which has been courting software companies such as Oracle for months. In addition, Caldera Systems is focusing on adapting its version of Linux for specific tasks.

Offering packages of software tuned to work together is nothing new for the computer industry. Such packages, often termed "solutions," have long been a staple of sales to corporate customers who have high demands for reliability and no desire to spend lots of time testing and configuring products.

But ultimately its attractive price is what will keep Red Hat ahead of competitors such as Santa Cruz Operation, Microsoft or Sun Microsystems, McNamara said.

Because Linux costs much less than competing operating systems, it could win a place in large companies developing new projects, where budgets are not so lavish, he said.

Development projects "often are unfunded or underfunded," he said. "Linux gains a lot of strength in that very early development stage. The operating system you develop it on tends to grow into the operating system you deploy it on."

The alliance between Red Hat and RealNetworks also means that a basic version of RealNetworks' software will be included with versions of Red Hat. Such distribution deals are important, especially given Microsoft's aggressive backing of its competing Windows Media server software, included as part of Windows 2000.

SAP R/3 generally is considered to be among the most complex software packages around, usually used by big companies that are more conservative about adopting relatively unproven software such as Linux. For that reason, R/3 on Linux is a "nascent market," Quandt said. "I have familiarity with a customer in Germany with SAP R/3 on Red Hat, but those implementations are still at the early stages."

Red Hat is among the most fervent advocates of the "open-source" philosophy, under which anyone may modify and redistribute software. But Red Hat doesn't reject the more traditional proprietary software model used by Oracle, SAP, RealNetworks and CA.

Foundation software such as the operating system should be open-source, McNamara said, "but as you start to go higher and higher, proprietary models start to coexist very well" with open-source software.

The Linux version of SAP is available to some German SAP customers today and will be generally available in April, a Red Hat spokesman said. Support is generally available in North America and Europe and will be extended to Asia later, McNamara said.

SAP and Oracle both invested in Red Hat before it went public in August 1999.