Rise or fall for Red Hat?

An analyst friend emailed me the other day to get my opinion on the analyst community's negative Red Hat pile-on. Bank of America, Global Equities Research, and others have recently been hand-wringing over Red Hat's future, suggesting that its JBoss business is stalling, that it's "losing momentum" in emerging markets like China, and (here's the one I find immensely laughable) that hardware vendors like HP are having to step in to fill Red Hat's failing shoes on support.

Trip Chowdhry of Global Equities Research tried to outdo this list, however, arguing that not only does Red Hat stink, but the entire LAMP ecosystem is rubbish, too. He declares that .Net is winning developers' hearts and minds while the LAMP stack is on its way to relegation to the dustbin of history. His bias exposed (just as mine is here: I'm an open-source believer and see rampant uptake of LAMP and open source throughout the enterprise), he has his 15 seconds of fame. Time to move on.

One thing, however, bears further investigation. JBoss. The consensus view from analysts seems to be that JBoss is Red Hat's Achilles Heel. Let's take a look at some data to get a better picture.

1. While JBoss isn't infallible, it clearly is the leading open-source application server. BEA as a standalone vendor doesn't have much of a future. Only IBM is a truly credible long-term competitor from the proprietary camp.


2. That said, what about competition from open-source application servers? Looking at the Google Trends comparison between Geronimo and JBoss, it would seem that interest in JBoss has declined steadily since 2004 while interest in Geronimo has remained steady (with a bit of a rise, though not much). Looking at news volume, JBoss seems to have flattened out in the past year.
   Against this data, however, consider the following:
   
   • In the time that interest in JBoss was supposedly waning (as measured by Google searches), JBoss revenue was exploding (as measured by ever increasing numbers of enterprises happily throwing money at the company, with revenue growth shown at the bottom of the chart below), even as downloads continued to rise. It's hard to make a compelling argument that interest in JBoss was slowing as downloads and revenue increased.
   
   
   • Want to know where most of the Google Trends Geronimo interest is? The Philippines, that source of untold billions in IT spending. Second on the list? Italy. Third? Argentina. Where was JBoss popular? In countries with a bit more cash to spend: United States, Belgium, Canada, France, Spain, etc.
   
   In other words, a picture may be worth a thousand words, but in this case it's not worth a thousand customers.


3. Even so, I suspect that there has been developer movement away from JBoss with Red Hat's transition of JBoss to its "Fedora" development/release model. I am sure there was plenty of developer angst about the move, just as there was when Red Hat originally split its Linux efforts into Fedora and Red Hat Enterprise Linux. If memory serves me well, however, this momentary frustration has not left Red Hat financially crippled. On the contrary, it weathered the initial storm and has ended up being far better off for the move.


4. More pertinently, I believe JBoss' biggest competitor is not Geronimo and in the short term it's not really IBM's Websphere or BEA's Weblogic. It's Tomcat (which, ironically, is also developed by JBoss).
   
   It would be convenient to think that Tomcat is not used for any serious applications. It would also be wrong. While just one data point, Tomcat is at the heart of a majority of Alfresco deployments. I don't have the data to know what percentage of these are mission-critical deployments, but I can tell you that Alfresco's open-source web and collaborative content management solutions are used in a wide array of mission-critical applications. Tomcat is the application server of choice for a significant percentage of these (of which I'm aware).
   We always push enterprises to use supported software because it's the wise thing to do. Enterprises still deploy a heck of a lot of Tomcat. This, of course, is a latent opportunity for Red Hat, but for now it's a potentially pesky one for the company. Even so, we're doing an increasingly large amount of business with the JBoss team. I doubt we're alone.

In short, I suspect that JBoss has suffered a bit in its business model transition, and it may well be the victim of its own success with Tomcat. But these are temporary setbacks that can fuel long-term growth.

The analysts are stampeding toward the exit, mindlessly bleating the same message of alarm. While Red Hat clearly can do better digesting the JBoss acquisition, I've seen nothing to suggest JBoss' best is behind it. For Red Hat and JBoss, the future is wide open. It just needs to continue to execute well as it generally has.