7 Challenges Red Hat Faces to Remain Open Source's Finest

When Red Hat (RHT) kicks off its annual customer conference today in San Diego, I will be watching closely. The company faces at least seven key challenges--and opportunities--as it tries to remain the open source industry's most successful company. Here's the rundown.

7. Don't Underestimate Oracle Linux: At first, I dismissed Oracle (ORCL) Linux as a yet another pretender in the market. But during a meeting I had last week, SugarCRM CEO John Roberts said he's taking Oracle Linux very seriously. And he believes customers will, too. Hmmm. It's difficult to argue with the CEO of one of the fastest-growing open source application providers. Red Hat will need to continue working closely with Oracle's database and application teams, even as the company competes head-on against Oracle Linux.

6. Rally Tech Consulting Partners: This week's Red Hat Summit focuses mainly on customers and software developers. Red Hat says it may launch targeted regional events for resellers, integrators and IT consultants. The sooner the better. Red Hat will need thousands of partners if the company intends to compete against Microsoft (MSFT) for small and midsize business customers... the focus of challenge #5...

5. Embrace Small and Midsize Business: Microsoft remains the SMB king. Many small business owners and entrepreneurs have never heard of Linux. But that could change as Red Hat and its partners continue to fine-tune their software for SMBs. Red Hat's best chance for SMB success is likely through hosting companies, which use Linux to run email and other applications for their SMB customers.

4. Figure Out Desktop Linux: How did Red Hat overlook this market opportunity? Here's the simple explanation: When Linux didn't gain share on the desktop earlier this decade, Red Hat retreated to the server. But Ubuntu and Novell quietly continued their respective desktop Linux efforts. And those initiatives are now paying dividends. Dell (DELL) plans to offer Ubuntu on some desktops. And Novell (NOVL) has won several big desktop contracts. Naturally, Red Hat wants a piece of the action and is -- once again -- ramping up its desktop initiatives. The sooner, the better (which is becoming a familiar theme inside Red Hat right now).

3. Keep Microsoft-Novell at Bay: I initially dismissed the Microsoft-Novell alliance as little more than marketing hype. But despite some protests from the open source industry, the Microsoft-Novell deal appears to be gaining momentum. Plus, Dell has now announced plans to support the Microsoft-Novell alliance. Sure, Dell continues to sell Red Hat servers in a big way. And Dell is sponsoring the welcome reception at this week's Red Hat Summit. But the Dell-Microsoft-Novell trio has to be unsettling.

2. Adjust to Open Source Applications: In recent weeks, application providers like MySQL and SugarCRM have held major customer and developer conferences. Clearly, the center of the open source universe is shifting from Linux to applications. Red Hat will need to make a big move to ensure it doesn't get eclipsed by these and other fast-growing application providers.

1. Drive Online Software Sales: This is the big wild card. The billion-dollar question. The make-or-break move. If Red Hat builds its online store correctly, the company could become the Amazon.com of online software sales. Partners and customers will be able to purchase third-party open source applications from a single location, managed by Red Hat. The company's so-called online exchange should be operational this summer. Expect an update from Red Hat later this week.

Despite these challenges, I remain bullish on Red Hat's long-term prospects. The company continues to gain momentum with technology consultants and integrators. And Novell's own challenges should allow Red Hat to remain king of the Linux market ... at least in North America ... for the foreseeable future. But that doesn't mean Red Hat can afford to rest on its laurels.

Comments

[Malkiel]

Shuttleworth's Ubuntu desktop Linux project will ultimately fail because he's a closet practitioner of the open-source religion, pushing a free version of the product that doesn't ship with codecs and drivers which desktop users expect to be there without configuration. But for the rest of the year Ubuntu will develop some Linux buzz and Red Hat would do well to borrow what's working from Ubuntu (such as easy set-up and partitioning and easy software downloading) and parley it up into a commercial desktop Linux that people will want to use. The goal should be to have a Linux OS whose users can expect to be as easy to use as Windows or Mac, going to sites for their favorite softwares like Realplayer or Adobe or whatever and finding a fully-configured downloadable Linux version which a Red Hat installation manager can install as easily as the Windows installation wizard. People are willing to pay for Linux if it lets them have all their favorite softwares, but won't be willing to take Ubuntu even for free if the only software they can ever use is the "Fisher-Price&quo... freeware available on its repositories right now. And before I get assaulted by Ubunteros let me point out that I am one myself and have been giving the software a fair try for half a year now. I don't much like being held hostage to Mark Shuttleworth's vision any more than I like being held hostage to Bill Gates' vision or Steve Job's vision, I just want to be able to use the best software I can get, even if it's proprietary, and the OS should allow me to do that easily...