Where Red Hat (And Its Partners) Profit Most

Ever wonder why Red Hat spends so much time focused on the JBoss middleware market and so little time trying to make Linux a desktop standard? The answer involves some simple but startling open source math. Check out this little piece of Red Hat financial info, uncovered by The VAR Guy.

Here’s the simple formula: For every dollar a customer spends on JBoss (the product), that same customer typically spends another $10 to $12 on related JBoss consulting and integration services, notes Mark Enzweiler, VP, global channel sales at Red Hat.

“JBoss middleware is like a central nervous system,” asserts Enzweiler. It’s so mission critical that customers are willing to pay Red Hat or the company’s integration partners roughly $11.12 in consulting fees for every $1.00 they spend on JBoss itself, estimated Enzweiler.

In stark contrast, Enzweiler hasn’t been able to make a strong business case for signing Linux desktop OEM agreements.

Sure, Canonical’s Ubuntu Linux and Novell SuSE Linux (to some extent) earn headlines each time they win a new business deal. But during preliminary OEM negotiations, Enzweiler determined that PC companies “basically wanted it [desktop Linux] for free.” At such low prices, Enzweiler worries that Linux distributors may wind up compromising their support models to gain market share on the desktop.

Still, The VAR Guy wonders: Should Red Hat find a bit more time for desktop Linux? Remember, Microsoft used its desktop position in the 1990s as a springboard onto the server. Canonical hopes to do the same with Ubuntu Linux.

But so far, Red Hat doesn’t appear concerned. Indeed, Enzweiler continues to evangelize server Linux — and JBoss middleware — to Red Hat’s integration partners. So far, simple math shows that Enzweiler’s strategy is a good one.