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Red Hat bands with open-source allies

The Linux leader will sell partners' open-source software, sharing revenue and fueling competition with proprietary rivals.

SAN FRANCISCO--Red Hat, planning a new expansion beyond its core Linux operating system business, will launch a service later this year called the Red Hat Exchange to sell partners' open-source software.

The service, which the company announced Wednesday, marks a new stage both in Red Hat's competition with proprietary software companies such as Microsoft, IBM and Oracle, and in its alliances with open-source companies. The Red Hat Exchange is designed to help bring a much broader collection of open-source options to market, piggybacking on Red Hat's brand and customer connections.

Red Hat chose the approach even though it will increase competition with some of its business partners such as Oracle and IBM, said Paul Cormier, executive vice president of engineering, at an event here to launch Red Hat Enterprise Linux 5.

It's Red Hat finally exerting the kind of leadership it should have exerted years ago.
--Matt Asay
Marketing VP, Alfresco

"We can choose to stand in the way of these open-source technologies, or we can get on the bus and drive. We're going to choose the latter," Cormier said.

The Red Hat Exchange (RHX) is evidence of a more inclusive approach at Red Hat, said Matt Asay, vice president of marketing at Alfresco, an exchange partner and a competitor to EMC's proprietary Documentum document-management software.

"This is a big step in making Red Hat the hub of the open-source ecosystem, which I think is its rightful place," Asay said. "I think it's Red Hat finally exerting the kind of leadership it should have exerted years ago. (It) just a few months ago acted like it was Red Hat against the universe--open source or proprietary companies."

And MySQL, an open-source database supplier, gets to draft off Red Hat's clout, said Zack Urlocker, MySQL's executive vice president of products.

"RHX acts as a good housekeeping seal of approval. It shows that MySQL is certified and tested and works well with RHEL, which is by far the most important platform for us," Urlocker said. "And RHX gives us a broader reach and more direct penetration into the Red Hat installed base."

Other open-source software companies will be available through the exchange as well: Enterprise DB, JasperSoft, SugarCRM, Zenoss, Zimbra, Zmanda, Compiere, Groundwork Open Source and Centric CRM.

Under the Red Hat Exchange, customers will be able to buy support subscriptions for a number of open-source applications. Red Hat will market the software, provide support and distribute software updates through its Red Hat Network, said RHX Director Matt Mattox.

Red Hat aims to strengthen leadership role with new Linux release.

The exchange partners compete directly with various proprietary software companies, but Red Hat has already shown a willingness to tangle with those rivals even when they're also business partners. The most prominent case is Oracle, which sells Java server software that competes directly with the JBoss products Red Hat acquired last year. Later in 2006, Oracle struck back with its Unbreakable Linux product, through which it's trying to distribute a clone of Red Hat Linux while undercutting Red Hat's support prices.

Red Hat partners Oracle and IBM didn't respond to requests for comment.

Mike Evans, Red Hat's vice president of partner development, said the Raleigh, N.C.-based company will aggressively promote the exchange. "It's going to be big," he said.

Red Hat wouldn't say when this year the exchange will go live, but it's in limited release with some customers now. One possible launch date is the Red Hat Summit that begins May 9 in San Diego.

Red Hat will get a percentage of revenue from the partnerships, Evans added. The new software won't cost more than buying Red Hat Linux and the other packages separately, and they may cost a little less together, Mattox said.

Asay was happy with the revenue split. "They are being fair. They're doing most of the marketing, providing the infrastructure to take payments and process payments, and providing first- and second-line support," he said.

The company will use customer feedback mechanisms to rate the open-source options, similar to Amazon.com rankings, Evans said. Red Hat also will offer trial versions of all the products, Mattox added.

The Red Hat Exchange announcement accompanied the debut of Red Hat Enterprise Linux 5. That product will come in two versions: the basic RHEL 5 and the higher-end RHEL 5 Advanced Platform.

RHEL 5 costs $349 per year for a server with up to two processor sockets and basic support, which includes 30 days of phone support during business hours and a year of Web-based support. A standard subscription costs $799 per year and includes a year of phone support during business hours. Premium support costs $1,299 per year.

Red Hat charges a big notch more for the Advanced Platform version--$1,499 per year for standard support and $2,499 for premium.

The prices, which match those of the earlier RHEL ES and AS versions, may sound steep for open-source software that can be obtained for free. But Red Hat prefers to draw the comparison with the fees customers might have to pay for commercial software.

"The value that used to come from four or five vendors now comes in one open-source platform, saving tens of thousands of dollars for each server," Cormier said.

RHEL and RHEL Advanced Platform both include the Xen virtualization software, which lets a single computer run multiple operating systems simultaneously in separate partitions called virtual machines. But RHEL 5 Advanced Platform has some extra advantages: It can run as many virtual machines as desired, compared to a limit of four for regular RHEL 5, and its connections to storage are virtualized as well, letting virtual machines be moved from one machine to another more easily.

Red Hat's chief Linux competitor is Novell, which has kept its Suse Linux Enterprise Server product relevant even if it hasn't dethroned Red Hat.

Justin Steinman, Novell's director of marketing for Linux and open-platform solutions, believes his company is getting ahead. "If you look at the success over the last 120 days, you'll see Novell is growing our Linux business at a significant rate, and we're getting some very significant customer wins," he said. Among them are Peugeot, which is installing Linux on 20,000 desktop computers, and HSBC, which is standardizing on Suse Linux and obtaining the software through a Novell partnership with Microsoft.

But Red Hat believes it's on the right track. "For the past two years, we've engaged customers, partners and the (open-source programming) community in trying to get to the bottom of what they wanted and needed," Cormier said. "They want value in software."