Red Hat is making no secret of the fact that it’s trying to focus on revenue-generating enterprise customers, even if that means losing throngs of small users who provide little to no revenue. Many of the largest hosting companies use Red Hat Linux, but as the company changes its focus, that may change, especially if Red Hat is slow to release important patches for non-paying customers, says a Netcraft report.
Netcraft: Red Hat Poised to Lose Marketshare
2003-08-27 Red Hat 42 Comments
Sometimes I am real dense. Can anyone tell me how I am wrong?
Linux is a large body of work built by millions of people everewhere bit by bit. (for the most part) Red Hat is a company selling this to companies but thinks that the little people are taking too much of it’s resources? Isn’t it the little people who made Linux?
That’s the paradox of trying to sell Linux.
The part that I think is foolish about this is that they are ignoring the people who get them in the doors of these enterprise level companies. Sure RedHat has a sales force, but in the end the reason they get meetings and sales with these companies is because the company’s people (the “free” users) are giving prop’s to redhat for being a great distribution. If they ignore this market it will create a negative impact on the IT professionals making company wide decisions. Certainly it will not be overnight, but in the long term the positive buzz about redhat will slowly turn to negative buzz. To assume that neglecting the “free” users will have minimal impact on them is shortsighted I believe.
RHL is sill _free_ and its still the most polished disro out there. The only difference is that development and support for the free product is on shorter cycles.
Who needs support for Linux anyway? And who dosen’t upgrade every 6-12 months?
First of all, the version that has the great marketshare is not profitable. For people who are using this version in “the enterprise” or business don’t want to have to upgrade every 6 months. So RedHat offers several “enterprise” levels to pay for the long support cycle (I think 5 years now or something).
Meanwhile, we can still download redhat linux project for free. I think RedHat might lose SOME marketshare, but I don’t think it’s a forgone conclusion that they will lose their dominance. Why? Because the Redhat Project might support the releases longer that RedHat originally intended to.
Who needs support for Linux anyway? And who dosen’t upgrade every 6-12 months?
That’s too easy, it’s not even fun picking at that lame statement…
this site is boring since she left!
We need her BACK!
I’d say its a matter of Red Hat being a for-profit company and thus they have an obligation to be profitable or at least break even.
Simply put, the “basic” version of Red Hat (now refered to as the “community” version or “Red Hat Linux Project”) does not make them significant amounts of money. The Enterprise version does.
While I was not too happy with their decision to shorten errata life (after all, I am a sysadmin of quite a few Red Hat systems…) I can’t really get that angry with them.
Red Hat must know its decision is not too popular and it risks losing “mindshare” within the established Linux community and thus it created the Red Hat Linux Project. As Red Hat has specified in past SEC filings “good will” from the community is very important to the success of Red Hat.
They are attempting to encourage community envolvement in the “base” version of Red Hat (that Enterprise branches off of). My opinion is Red Hat is doing this for the following reasons:
– Attempt to reduce and/or reverse the perception that Red Hat is not community-friendly and risk losing mindshare as developers and users move to other distributions.
– By being open and inviting community particpation and comments Red Hat is attempting to harness community energy into improving the base Red Hat product
– Be able to shift employees (paid time) from its “free” community product to focus on its Enterprise products and customer support. The reduced number of engineers left on the “base” product will be supplemented by community workers (cynical viewpoint which I do not exactly subscribe to: “free” labor in exchange for putting up with the community).
– Community participation improves the base version, allows Red Hat to keep up and scale with advancements usually tried and implemented long before in more cutting edge distributions (in essence, labor costs are a “fixed” cost but the amount of fun toys out in the Linux camp is not fixed and is constantly increasing)
– Point out to buisnesses and governments that the basic version is a community playground and you should fork over money for Enterprise if you want anything resembling stability
The plan could backfire if the basic Red Hat product regresses stability-wise and community members and users find themselves unable to use the “free” product and unable to afford or justify the cost of the Enterprise version. In these cases, other distributions, such as SuSE, would then become the natural alternatives, not Red Hat’s commercial versions.
Another danger is that Red Hat’s developers focus on the Enterprise version internally to the deterement of the community version. In essence, if the bulk of Red Hat’s developers work exclusively on the Enterprise platform all of the “innovations” inside Red Hat will never reach the community version without a community member porting it for them.
One example I see is the gcc compiled version of Eclipse. I am amazed this is not already in the community version as this is of great interest to developers. Other examples include clustering technology in Tazoon which have not showed up in the community version. Red Hat has passed the community version off as its “testing” platform yet new technologies are showing up in the “Enterprise Stable” version without being in the community version ever. This could cause resentment over feature lock-in attempts and/or make other distributions with such features in their “cheap” or “free” distributions look much “sexier” to developers, sysadmins, and end users.
And another thing: Is the loss of market share for Red Hat a bad thing for Linux? Red Hat has quite a bit of market share and a slide in Red Hat could be very healthy for competing distributions and the Linux “market” as a whole.
[WARNING: The above are my opinions and impressions, treat them as such.]
what’s even funnier is the report … WHY in god’s name would a distrobution care about MARKET SHARE? Profits and profitability drive a company and keep it healthy … so the market share of a free distrobution are irrelevant – if most people like free, and freely supported distros, then they will get them, but if red hat can offer an affordable and compelling product for a price which sustains their operation, then they have succeeded … they do not need to be the only, or biggest distrobution … such goals only lead to evil giants trying to overcome others at all cost … they should try to be the most profitable maybe, or the most profitable within their desired domain … or even the largest in terms of MIND SHARE to increase the percieved marketability … but in a MARKET does not include free products, that’s simply a distrobution channel, a MARKET only includes trades and sales, where the giver and receiver both benifit … do you ever hear, the red cross is upset because they are loosing market share to the salvation army? Such ideas are obsurd, charity work does not seek to prevent other charity work from existing, as it is not loosing anything by the coexistance.
Redhat slow to release important patches!! IIRC Redhat always has updates on its ftp sites, and usually, one can subscribe to a list for notifications. PLus there is Fedora which always carries the Redhat patches. So what’s the point of the article.
I’m sorry if I’m a poor substitute for Eugenia (I know I am) 🙂
She’ll be back from her vacation in September.
“Who needs support for Linux anyway? And who dosen’t upgrade every 6-12 months?”
I find 12 months a tad too short. I personally would find 18 months to be perfect. Give people 6 months to shake out the version and then a good 12 months of deployment. There are also cases with large number of desktop deployments with complex schedules (such as class schedules at universities, etc) where the 12 month supported period would start and end at bad times for administrators. The “natural” choice would be to deploy the enterprise workstation version but the cost is way too much for some universities. (A windows solution can sometimes, depending on academic deals with university and college systems can be cheaper then paying for WS)
It should also be noted that as part of the Red Hat Linux Project, the Red Hat developers who have been responsive on the mailing lists have encouraged interested community members to help support older versions of the distribution. These Red Hat developers have basically said that if the community helps out the 12 month period could very well be extended. I’m not aware of anyone stepping up to the challenge yet.
WHY in god’s name would a distrobution care about MARKET SHARE?
Because historically, the IT industry has had network effects that strengthen you against competition as you gain marketshare. On the other hand, selling Gnu/Linux makes this effect weaker because you’re mostly packaging Free Software. We’ll see if RHAT eventually wants to screw the community by leveraging proprietary software for network effects.
Of course, having small marketshare makes it hard to screw the community this way, since they won’t be able to lock in too many people.
I for one appreciate the articles you post (and obviously the effort required to do so), but hey, I’m just a lowly ATTBI troll so I suppose it’s not much of a compliment. Keep up the good work.
I second that. You’re doing a great job, the site is up to its usual high standard. Let’s just hope the trolling will go down to a tollerable level now the summer holidays are almost over.
I had almost decided on sticking with Redhat because it seems that everybody and their grandmother is standardizing on it. There is a large userbase, most app vendors/writers have RPMs readily available for it, and it seems to be the most targeted by commercial vendors as well. (Ximian too.)
So if not Redhat, the what?
Its simple use a really FREE GNU/Linux distribution with a social contract. ie. GNU/Debian & Gentoo
Red Hat has lost touch with its community. The hobbyists made Red Hat, now the hobbyists will destroy Red Hat when they leave. I for one like showing support for the distributors, Red Hat is cutting its retail version and I have better things to do with my time and bandwidth then to sit in front of my computer downloading ISO’s. I am thinking of either going back to SuSE Linux or maybe going to Ark Linux. I will still have a Red Hat distribution on my G4 since yellowdog is based on Red Hat.
I don’t get this anger directed at RedHat. Their basic distribution has always been free and they aren’t talking about changing that.
Sure, they aren’t going to “support” these free versions very long, but why should they (I’m surprised they support it at all). Support costs money and most of you (us) aren’t paying for it.
RE: Try other really FREE GNU/Linux distribution
Hey, I use Libranet 2.8. I’ve updated to unstable and love it, but I wouldn’t exactly call it “simple”. Even the process of updating Libranet 2.8 to unstable is too hard for most users, much less actually installing Debian. However, for the hobbyists out there, Debian and Gentoo make a LOT of sense.
RE: Roberto J. Dohnert
What exactly has RedHat done to piss you off? Why is RedHat’s cutting of the retail version significant. You can still order the CDs from RedHat directly, right? You just can’t pick it up at BestBuy. Why must the hobbyists “destroy RedHat when they leave”. You make it sound like RedHat has done something wrong here. They are just trying to survive.
Exactly how I feel. This hate-fest against RedHat is just idiotic. They’re free (as in beer and speech), well-crafted, and really quite responsive to the community. Not only that, but they’re one of the big reasons Linux is taken so seriously by corporations and governments throughout the world. What else do you want?
This “RedHat should have more than 12 months support” thing is also equally moronic. Debian and Gentoo are constantly being _upgraded_ (not updated – there is a difference), and you can’t call it security fixes when you’ve got to an _upgrade_ of a package.
People hate RedHat because they’re big and successful. Nothing more. It’s amazing how petty some members of the Linux community can be sometimes.
 Addendum: a few people hate RedHat because they don’t like the version of KDE that comes with it. This is mostly overblown (*cough*Mosfet*cough*), but there are a couple valid concerns. Perhaps the RHL Project will fix this?
First of all, Red Hat has *NOT* said that they are cutting-off retail sales — they have just stated that they are no longer offering the community/consumer/project version of Red Hat Linux in retail channels. (I would suspect that they’re going to substitute some version of Enterprise Red Hat.)
Secondly, you get what you pay for. All the people out there whining because Red Hat is no longer *SPENDING MONEY* without recovering anything are just mad because their free lunch went away. When people say “I don’t need Red Hat for support” then that means or Red Hat Linux shouldn’t be a problem. You can do it yourself. If you depend on Red Hat for Errata (in which case you really *DO* need Red Hat, after all) then you should pay them for it, so they can continue to add benefits to the open-source community.
Red Hat contributes to the open source community all the code that it creates, and also has said that it will continue to contribute and host a distribution (bandwidth, storage, not to mention labor/enginerring all costs $$) so not supporting non-paying users of Red Hat Linux for free is not too bad.
The reality is that most users of Red Hat get the downloadable version rather than by a boxed retail version, and they run the latest release. Rather than fight it, Red Hat seems to be trying to work with it instead. For those who can pay, they’ll sell an expensive version version with expensive support, and to those who can’t pay, they’ll give away for free what they’ve been giving away all along anyway.
Seems fair enough to me. Hope it works for them.
Addendum: a few people hate RedHat because they don’t like the version of KDE that comes with it. This is mostly overblown (*cough*Mosfet*cough*), but there are a couple valid concerns. Perhaps the RHL Project will fix this?
I’m just curious .. what is wrong with Redhat’s version of KDE? Why do people hate it so much ? I realize that Redhat is a Gnome-centric distro, but what exactly did they do to KDE that has everybody up in arms ?
< What exactly has RedHat done to piss you off? >
Who said they pissed me off ? I get irritated with Red Hat because they do stupid crap like cut their retail channels, quick question, if a newbie goes into Best Buy and see’s SuSE Linux on the shelf and no Red Hat what is he going to do? He isnt going to say to himself, well let me go home and order Red Hat from the web. He is gonna buy SuSE, I went into Best Buy the other day and they only have 2 distributions, Red Hat and SuSE. According to the rep I talked to the third one, Mandrake decided to drop Best Buy as a retail channel
< Why is RedHat’s cutting of the retail version significant.>
The retail version is where they get the most exposure, retailing on the web, they will just be 1 website among billions except for their faithful user base.
< You can still order the CDs from RedHat directly, right? >
Right, but who is going to want to go through the trouble ?
< You make it sound like RedHat has done something wrong here. >
They havent done anything wrong they just have done something extremely stupid.
< They are just trying to survive. >
Then why are they commiting economic suicide ?
I’m having a tough time seeing how Red Hat can remain independent and justify its current valuation of 1.2 Billion USD. They’ve admitted that their current business model wasn’t working very well. But I doubt they’ll be able to recover their R&D expenses through service revenues. An obvious alternative approach would be create a premium distro that included proprietary products, but an app server (for example) would compete head to head against their partners, IBM, Oracle, etc. Desktop productivity s/w (such as Word Perfect) would be perceived as competing against the OSS community.
Of possible merger partners, Novell has complementary technology but they can’t afford to buy Red Hat. Oracle, HP, Sun, or CA would be disasters. IBM is the one acquirer I can think of that might get it to work, if they could get past the potential legal liabilities that would come with it.
I get irritated with Red Hat because they do stupid crap like cut their retail channels, quick question, if a newbie goes into Best Buy and see’s SuSE Linux on the shelf and no Red Hat what is he going to do?
RHAT can find cheaper and more effective marketing in the US. They’re not really even competing against SuSE in that region.
You have to consider the costs of support when selling to some random guy. Just not worth it. You’d much prefer supporting a company of people who are willing to even purchase a bunch of machines specifically for RHAT, and are price-insensitive.
Hey, you’re doing a great job! I never cared for Eugenia anyway.
“The retail version is where they get the most exposure, retailing on the web, they will just be 1 website among billions except for their faithful user base.”
Thats just it. I don’t think the retail channel was effective for RedHat anyway. Linux doesn’t attract that many impulse purchases since it requires a fair bit of time and effort to use (not like a game). RedHat wouldn’t have cut the retail channel if it was making money. At $40 per box, if they weren’t making money, they weren’t selling many boxes.
The last time I purchased Linux in a store was in 1997. It was Slackware and it came with a book. Since then, I’ve only purchased online. Given that broadband use is increasing, ordering online or even downloading ISOs is only getting easier.
Look, RedHat has been profitable with it’s enterprise line. That’s basically the only place it’s been profitable. With yum and apt they can’t really make money off of consumer RedHat Network (especially since most people use the free demo accounts).
If you’re a business, then you can afford the Enterprise Products, unless you are like not good are running a business, to which the point is moot. If you’re a hobbyist, you don’t need 99.999% uptime and can afford to upgrade, SINCE IT’S FREEKIN FREE TO FREEKIN DOWNLOAD.
The other reason many people hate RedHat is that too many Linux users are socialists. They go around saying linux is going to prove the usefulness of Socialism and then Wonder why there are so few commercial titles for linux. The other people who hate RedHat have valid concerns. Redhat has priorities that they disagree with. THIS IS HEALTHY. It’s okay to diagree with RedHat and use another distro. That’s part of the strength of Linux, choice. Maybe a few too many choices, but I wouldn’t have it any other way. Competition is good.
The free distro business is basicly an entry level opportunity for a linux vendor. In the case of Red Hat, they’ve managed to transition that into a fairly profitable server business. So it only makes sense for them to focus their resources on efforts they earn a profit on, and expend less of them on efforts they don’t profit on.
This is a Good Thing. Red Hat’s distancing themselves from the home and hobbyist market will create a vacuum that will present other vendors an entry level opportunity. There are vendors such as Mandrake, Lycoris and Lindows just itching to fill the void, and use this market to bootstrap themselves into profitable niches, just like Red Hat did.
Red Hat wins, their competitors win, and ultimately, consumers win.
Major misunderstanding. Check out Linux, and other major projects like Apache, KDE, GNOME, GCC, etc. Guess what? Most of the contributors aren’t the little guys. Rather it is big companies like Red Hat, SuSE, IBM, Sun, SGi, etc.
Where did they lose all the short people? Lets start a search party?
If Red hat came with Crossover office, a decent version of Wine, i’d easily pay $150 australian for Red Hat, its such a great distribution.
Face it, how many people buy the boxes. I have not bought a single copy of Redhat, I downloaded it. I got it faster than I could actually do if I went out and bought it. There was almost no point in me buying it.
This is probably the same with most others. Redhat realises it will not sell too many boxes and decides to cut them, for the time being anyway. If the situation changes in the next 5 years, I am sure they will come right back into this channel. Right now its fighting a losing battle. They would much rather get massive enterprise deployments, which come with a support contract. People should stop slating Redhat. If you need boxes, buy Mandrake, or SuSE. Redhat is putting its money where its best opportunities are. That is good business. You can strip out the Redhat logos out of the product and sell it as a 100% compatible distro, in boxes if you like. Face it, Redhat has done more for the Linux project than any other Distro out there, and they still get more flak than they deserve.
I’ve just read the editorial at Netcraft and it seems that they are trying to link one thing with another. Interesting that they NEVER consider the fact that these companies could approach Redhat and come to an arrangement based on their ‘special circumstances’.
Regarding the home and hobby market, I can’t speak for the majority of people, however, I certainly didn’t move to Linux (many moons ago) because of the price. Sure, the price was nice, however, that wasn’t the only reason why I decided to move.
If I owned a PC today (I am now a Mac user), I certainly would be prepared to pay for Red Hat Enterprise Linux WS Basic Edition, considering the price is only US$179, which is around AUS$270, it is still a bargin in comparision to a full version of Windows XP Professional. Even if you threw on, hypothetically speaking, Crossover Office, it would still work out cheaper.
What I would do, however, is wait for Red Hat Enterprise Linux WS 3.0 is released so that one gets the latest stable version of GNOME and KDE.
<< Face it, how many people buy the boxes. I have not bought a single copy of Redhat, I downloaded it. I got it faster than I could actually do if I went out and bought it. There was almost no point in me buying it. >>
Alot more than you people think, when i used to work part time at CompUSA, Red Hat was the one that moved the fastest out the door. There are alot of good points about buying it, you dont have to deal with faulty ISO’s which seems to be an all to often occurence, it saves time, you get manuals and supprt and you are suporting the company. Without retail exposure, Red Hats dead in maybe 36 months, then and only then will Red Hat see just how important the retail channel actually is.
<< If you need boxes, buy Mandrake, or SuSE. >>
Thats exactly whats going to happen more people will be buying Mandrake and SuSE which will be revenue Red Hat will lose.
Redhat,Mandrake have both stated they don’t make money out of the personal versions. They really can’t win no matter what they do, can they? If they raise the price they will get abuse from people who think Free means no cost & the people who don’t support them, they just download the distribution because they couldn’t careless if the distributors servive or don’t. I think its sad because I like purchasing personal distribution packaged software instead of some shity burnt disk. In regard to loosing there market of no profit, thats just good business practice isn’t it, or is that not allowed. For those who want to bag out RedHat, I just wonder where Gnome would be today if they went under?
i am just a poor boy, so i don’t hve gobs of money to throw down on every little update or a subscription of up2date, i do like your product, as a RPM based linux distro ya cant beat Redhat, mandrake is atleast getting usable, i am still scared to try SuSE, so i do a custom install or Redhat & install apt-get or red-carpet just to keep the OS secure, i am no genius and i am no Linux guru, but i do have enough smarts to keep a OS & applications updated & secure…
maybe it is time to find another distro, (maybe JAMD) or (Maddrake can you trust the French) or (ALT-Linux but can you trust the russians)
i tryed Slackware & Debian & Gentoo, i had em installed & running, but i dont want to bother with all that configging & crap, i just want to slam a OS in a computer tweak the desktop theme to my liking and check my email, maybe play some mp3s while reading email & news
So if redhat is out of the Linux desktop, what do we have left? The only vendors left that can make “non-geek dist” are SuSE, Mandrake, Lindows, and Lycoris with the latter two are exclusively focusing on desktop.
My vote goes to SuSE!
I think you guys are confusing Apples and Oranges. Or Apples and Reds or something.
I re-read the article. It has NOTHING to do with Retail Sales. RedHat cut the support Cycle to one year well before leaving the Retail area. The connection to retail and support is that Support is down to one year and it’s impossible to sell an OS in Retail that is Obsolete in 6 months.
The reason the hosting companies might Stop using redhat is the support cycle, which has NOTHING to do with retail sales. These guys MIGHT be able to save money by selling their old servers, buy an 8 Processor system and host all sites off of that one Machine. However, problem lies in DEDICATED Hosting where an Enterprise Linux system increases the cost. The irony here is RedHat Enterprise is more cost effective for Hosting companies hosting smaller websites.
Netcraft is claiming that most customers of dedicated hosting will not go for an extra $350/year cost. I think they might if they get extra features/support.
Like Redhat is abandoning making it patches available to non paying customers, which is without precedent. Redhat has always made the patches available on its ftp site. What they are doing is saying no more free up2date accounts, which probably really hammers their servers. If you are a hosting company, you are probably better just getting the updates of ftp and applying them to each machine anyway, saves bandwidth costs too. Or get ximian’s red carpet, and manage your servers (installations and software that is) much easier. This free ride thing sometimes goes too far.