Red Hat CEO: Business Leaders See Digital Transformation As A Threat

Across the tech industry, digital transformation is a buzzword that promises unprecedented market opportunity. But for many business leaders, the term suggests uncertainty and risk, Red Hat CEO Jim Whitehurst said Tuesday in his keynote at the company's North America Partner Conference 2017 in Las Vegas.

A day after announcing earnings that sent Red Hat's stock soaring, Whitehurst told partners, who deliver more than 70 percent of Red Hat revenue, that they must understand those executives' concerns and learn how to address them.

Enabling customers to "surf the risks of digital transformation" will "require a greater understanding of their businesses, and that's not something that Red Hat can do alone," Whitehurst said. "You have to understand our joint customers' businesses better than we understand them."

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The problem is that digital transformation moves too fast to plan for, nullifying the strategic planning capabilities honed by executives running large companies, from banks to airlines.

"For large existing enterprises, digital transformation is threat," Whitehurst said. "CEOs don't generally talk about the concept in a positive way … There's real fear because their very strengths are now weaknesses."

But enterprise leaders understand they can't avoid the topic. While the term is broad, few businesses and industries aren't undergoing some related process, he said.

"Digital transformation is about retooling the capabilities of enterprises to exist and thrive and survive in a vastly different world than they have in the past," Whitehurst told partners.

At last year's partner conference, Whitehurst concentrated on the theme of how Red Hat, which at the time had just crossed the $2 billion annual revenue threshold, would scale to $5 billion.

He said he got some blowback from framing the discussion in those starkly financial terms, and for the 2017 conference abandoned further laying out that roadmap for sales growth.

"It's not that we won't achieve that $5 billion. That's an inevitability given the traction we have," he said. "But we don’t want just to be defined by the set of dollars that we generate."

Instead, the CEO focused his keynote on the distinct opportunities in the market created by Red Hat's comprehensive portfolio and unique business model.

Red Hat Enterprise Linux (RHEL) is not only the flagship, with almost universal adoption in the Fortune 500, but also a base from which to deliver other Red Hat open source technologies, he said.

The dominance RHEL enjoys in the operating system market is a differentiator that has helped Red Hat emerge as the leader in the OpenStack community, Whitehurst said, and is driving adoption of the company's OpenShift application container platform—two technologies deeply linked to the Linux.

OpenShift, a Platform-as-a-Service that offers Docker container-based development tools like Kubernetes, anchors a portfolio of emerging products, including the JBoss suite of middleware, that's growing by 40 percent.

Red Hat's embrace of OpenStack and the Docker ecosystem is part of a larger strategy to get involved in the best open source communities, contribute to those projects and leverage software that no one company could develop on its own. That collaboration allows Red Hat to "put out a technology that's light years ahead of our competitors," Whitehurst said.

"The greatest minds in technology" working on those vast projects are the reason "an open source stack is future proofed," he said.

"I hope this gives you confidence in making investments with us," Whitehurst told partners. "We're in the early days of helping customers in this digital transformation journey."

Tim Yeaton, executive vice president for corporate marketing, outlined for partners during Tuesday's session some changes in how Red Hat will promote those solutions.

Before, the tendency was to generate demand for individual products, which was "not necessarily speaking in the language of the customers," Yeaton said.

The most fundamental change in Red Hat's marketing efforts will be a break from a product-centric approach, he said. Sales conversations should be "about solving complete customer problems in the language the customer speaks."

Red Hat's campaigns will now focus on four patterns the company is seeing across its entire customer base: optimizing existing infrastructure, driving maximum productivity from applications, extending those resources to embrace cloud, and helping build cloud-native apps.

"We're going to spend a lot of money on these campaigns. We're going to spend a lot of money on the partners and with the partners," Mark Enzweiler, senior vice president for global partners and alliances, told attendees.

Jeannette DuVal, leader for group strategic initiatives and partnerships at Capgemini, told CRN after the keynote that Red Hat's product portfolio is unique in addressing a demand the global systems integrator is seeing in the market.

Customers increasingly are looking for open source solutions that enable DevOps practices, implement distributed infrastructure and microservices-architected applications.

"Red Hat combines these things together. Open source and the new technical capabilities. Red Hat unites all of them in itself," she told CRN.

That combination of open source products "provides for partners accelerated growth and accelerated opportunities and potential," DuVal said. "A lot of people still think Red Hat is just Linux and it's much more than that.