Red Hat faces stiff challenges to move beyond its core technology

In fact, Red Hat’s expansion efforts have resulted in a 73 per cent increase in its R&D budget from $40.9 million in fiscal 2006 to $71 million in fiscal 2007. And those numbers are likely to rise in fiscal 2008.

Last month, the Red Hat Developer Studio went into beta. It is a set of eclipse-based development tools that are preconfigured for the JBoss platforms.

“Linux as a server is going well beyond the fringe applications," says Paul Cormier, executive vice president of engineering at Red Hat. “It is going into the core and when you start to penetrate into the core of business applications you need a strong developer platform. That is what this is all about."

It’s also about giving Java developers their first serious Red Hat on-ramp.

The company also is offering a place for those developers to push their applications upstream to Linux users. In March, the Red Hat Exchange went online offering a marketplace featuring more than a dozen open source companies including MySQL, SugarCRM and Alfresco Software. The intent is to attract larger user companies that may have hesitated at open source for fear of dealing with smaller vendors and having to integrate disparate software packages on their own.

The big prise, however, may be virtualisation, which debuted in RHEL 5.

The virtualisation market, while in its infancy in terms of corporate adoption, is a hot topic in corporate data centres.

“One of the most important things for us is to be on the cutting edge with technology efficiencies," says Pete Waterman, principal engineer for Blackboard, which sells and hosts learning software for educational institutions.

The company has been testing RHEL 5 virtualisation for the past six months and is in the process of rolling it out.

“It will let us do almost instantaneous failover, stand up clones of our environment to help with things like fixing bugs, support on-demand dial-up and dial-down of capacity and help cut operational overheard," Waterman says.

These technology changes also mean other big changes that Red Hat will have to pull off in order to prosper.

“The big challenge for Red Hat is moving from an [operating system] distributor to becoming a distributor of an application platform, a virtualisation platform, an SOA platform. Moving into those spaces is not an easy transition," says Denny Fish, senior analyst for infrastructure software and services for financial services firm JMP Securities. “They are selling to different people within an organisation. The [operating system] is often an indirect sale, but with the middleware platform, for instance, you are selling to application developers and systems architects."

The trick, Fish says, will be making the platform attractive to people who have not traditionally been Red Hat’s customers.

What might make Red Hat different in a lot of its competitive situations, however, is that it is doing everything with a true open source commitment.

That attitude is not only appealing to many corporations that are now keenly interested in the benefits of open standards and open platforms, but it helps Red Hat maintain its dominant, and respected, position in the open source world as it provides a foundation to attract others and grow the open source community.

Taking on that leadership position for open source is helping fuel the company’s reputation, insiders say.

“Red Hat’s success is Linux’s success and vice versa," says Jim Zemlin, executive director of the Linux Foundation. “They are a pillar of open source. I’d love to see 10 or 20 more Red Hats."