Red Hat Execs Talk on Profiting from Free Software

They delve into the company's revised business model, touting incremental improvement to programs and a "certify, repair and maintain" message for customers.

ASHEVILLE, N.C.—Red Hats stock may have been troubled recently, but businesses still believe in the Linux distributor.

At a recent Blue Ridge Entrepreneurial Council meeting here of about 100 businesspeople, a trio of Red Hat Inc. executives didnt find questions about law firms seeking to file class-action suits against the Linux company because of its recent financial restatement. Instead, they found an audience eager to know how Red Hat had turned "free software" into profitable business.

There was no simple answer. First, "Red Hat believes in entrepreneurs," said Tom Rabon, executive vice president of corporate affairs. "We wouldnt be here today if it we didnt have that spirit in our own house." However, he added, with open-source, "Its not just all about making money; its about doing good."

But that isnt to say that open-source is just about sharing for sharings own sake. Michael Tiemann, the companys vice president of open-source affairs, explained that open-source makes great business sense by leveraging the efforts of more than a million developers, according to a recent Evans Data research project. That being the case, its no wonder that "open-source software is developed faster and its bugs are fixed faster than those of proprietary software," he said.

/zimages/2/28571.gifRead more here about Red Hats financial restatement.

But open source owes its success to more than simply a better way of developing software. Referring to former GE president Jack Welchs groundbreaking work with GE plastics, Tiemann noted that because open source doesnt put a barrier between end-users and the development community, developers quickly and transparently find out what users want. This results in software that meets customers needs as those needs evolve, he said.

In turn, Tiemann continued, businesses that adopt open-source programs will see constant incremental improvements to their programs. Thus, they avoid the kinds of problems that Nike, for example, faced when its legacy supply chain system broke and its next, massive supply-chain system couldnt do the job.

Tiemann said this incremental improvement approach, which is part and parcel of open source, also means, "Gone are the days of the three-to-five-years value proposition for IT purchasing decisions. You can now see gains from a single quarter with less risk."

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