Red Hat CEO Whitehurst On Soaring Stock Success, Open-Source Technologies And Being The 'Last Man Standing' In OpenStack

Open-Source Success

Red Hat CEO Jim Whitehurst welcomed partners to the Raleigh, N.C.-based open-source software leader's North America partner conference in Las Vegas with some good news.

On the first day of the summit, Red Hat released impressive fourth-quarter earnings that sent its stock soaring. Those better-than-expected financials were powered by strong subscription revenue, not just in its flagship Red Hat Enterprise Linux operating system, but across the portfolio of cloud-enabling technologies, with especially strong growth across an emerging application development platform.

Specifically, Red Hat reported revenue of $629 million for the quarter, up 16 percent year over year. That beat expectations of $619 million, sending Red Hat's stock up 5 percent.

The day after speaking to investors in an earnings call, Whitehurst sat down with CRN to discuss two prominent open-source technologies that Red Hat is championing: application containers and the OpenStack cloud operating system. Red Hat has leveraged its dominant position as a Linux vendor to become a driving force in delivering both collaborative projects to the enterprise.

You just released great Q4 results. What's driving this success?

One thing is that Red Hat has emerged as the leader in OpenStack.

Red Hat, in many ways, is the last man standing. We said in early days that OpenStack is so deeply tied to the operating system that you need an operating system vendor to be able to deliver that, and I think that's what you're seeing now.

We've said that three of four $20-plus million deals this past quarter were OpenStack so we're starting to see some real traction there. We have over 500 customers of material size running OpenStack. We've gone from saying our goal is to emerge as the leader, what we would have said last year, to now I would pretty much declare us the leader. Though I'm not saying we don't have competitors.

Has overall enthusiasm around OpenStack waned?

We're in the trough of disillusionment a little bit.

I think a lot of the really big players, the large OEM types, thought OpenStack is my solution to public cloud. They thought, if I'm going to lose infrastructure to public cloud, this is what I'm going be able to say is an alternative. And OpenStack is not an alternative to public cloud.

Public cloud has a whole set of features and functions and APIs and other things that for a set of workloads may be great, but for a different set of workloads OpenStack makes a lot of sense.

But I think the large hardware vendors who saw a lot of market share shift to Amazon, which was using commodity stuff, saw that as their savior. And it's not. It's not.

What else has held back OpenStack adoption?

I think it has developed a lot slower than people thought. Back when Linux was developed, it was this thing that kind of emerged out of nowhere and the vendors didn't get on board until later.

I think the vendors, bluntly, all got on board too early in OpenStack and so people wanted to try to deliver OpenStack out to customers because they didn't want to be late, and it was software that you would call early alpha software, not even beta. People were delivering things that just weren't mature enough.

So I think some customers stubbed their toe. Now we've gotten to a point where we don’t have that problem anymore because it's reached the level of maturity.

How has Red Hat helped mature OpenStack?

A lot of people kind of got out early on with immature technology. And you can't stop that, it's open source. But now you have a [Red Hat] distribution that everyone can certify to. We life cycle, the same thing we do with Red Hat Enterprise Linux. It becomes much easier to put it into production use and so we're seeing a significant uptick now in OpenStack.

For a large enterprise, it has a whole set of applications where you know their performance characteristics and therefore can have economic reasons to run them on-premises, or regulatory reasons. OpenStack is the default alternative for that.

Red Hat has also gotten very involved in the Docker ecosystem. Can container tech disrupt OpenStack?

No, containers is application-level impact. Microservices. But the reason I say no, when we go have a conversation about containers and OpenShift, our container platform, after we've gone through the benefits, do you land that on OpenStack or do you land that on Amazon or VMware is an implementation detail. It's an important detail, but it's almost a separate discussion. They're operating at a very different level. They're two separate opportunities.

We have customers running OpenShift on OpenStack, but we also have a lot of customers running OpenShift on VMware or anywhere else. I don’t see those necessarily as bumping into each other. The layers work pretty cleanly right now.

I think customers want that to happen to because you want to have application portability across public cloud and your on-premises infrastructure, and that requires a level of abstraction.

What gives Red Hat partners an edge in delivering innovative technologies?

All these new innovations, big data, microservices, machine learning, they all happen on a Linux platform. Containers are Linux containers. OpenStack is a Linux component. And Red Hat is the leader in that.

So I'd like our partners to think as they help customers on a digital transformation journey that Red Hat is the best possible partner because of where we stand in the nexus of all these components of innovation. And we deliver them in this safe, reliable, runs-nuclear-submarines-and-stock-exchanges kind of way.

What should partners be thinking about on their way home from this conference?

There is a massive opportunity right now to help our customers through this transition. There's the whole move from virtual to true scale-out architectures at the infrastructure layer, and I would argue, bigger but related, this move of application architecture to containers and microservices. And that is a massive challenge and a massive, massive opportunity.

I'd like them to think that Red Hat is the leader in thinking about that with the leading set of technologies. We're showing 40 percent growth in our emerging products last quarter. And I'd like to see 40 percent growth rates for our partners as well.