Open Source ISVs are Not Immune to Market Migration to Cloud Computing Options

On March 25, 2013, the US stock brokerage firm Raymond James downgraded Red Hat to “Market Perform”. The reasons for the downgrade included:

  • Signs of diminishing interest, from enterprise business, in the Red Hat Linux system, and,
  • Conversely, signs of greater interest in cloud computing alternatives from the same market

Red Hat will not report quarterly earnings until Wednesday, March 27, 2013. If the analysts at Raymond James are correct, the likely drop in revenue at Red Hat will signal a new freedom for enterprise business. In 2013, the costs associated with maintaining an on premises data center are no longer mandatory. On premises data centers present the most security method of enterprise computing, but elastic services like Amazon Web Services and Microsoft Azure are too compelling, from a cost perspective, for enterprise businesses to any longer ignore.

Improvements in virtualization technology are also likely drivers of this new direction. Products that not only virtualize servers, but also networks, themselves, promise substantial reductions in the cost of operating computing infrastructure. Early stage ISVs with solutions that contribute to the cost savings enterprise businesses can realize by implementing as much virtualization as possible are looking at a promising future.

Red Hat sells all of the components enterprise businesses require to build private and even public cloud services, but stops short of offering to host cloud efforts. Their web site promotional content looks to us a lot like what we used to see at VMware. But VMware has radically changed their message on this subject. Cloud products and services are prominently featured on their web site. They’ve even included a video presentation from Gartner on the topic to add authority to their message. Red Hat is likely to follow along the same path. Don’t be surprised if shortly you find a much larger section on cloud computing on the Red Hat web site, along with a new hosted services offer.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2013 All Rights Reserved

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