Red Hat Says It's Serious About Building Channel

Red Hat is adding a Premier Business Partner designation to its existing Advanced and Ready partner classifications. The new level offers VARs expanded sales training, lead distribution, and demand generation campaigns, as well as market development funds and technical support benefits, said Roger Egan, vice president of North American Channel Sales for the Raleigh, N.C. based firm.

Breaking out Infrastructure, Middleware, and Virtualization specializations gives partners a clearly marked path to higher program tiers, Egan said in an interview. "The way to get from one level to another is through specialization. We designed the program so as not to isolate JBoss middleware from infrastructure and virtualization, and we're now offering partners an opportunity to double down with certifications."

It's tough to find a solution provider that doesn't think Red Hat's products are solid. However, Red Hat has a history of making channel pledges that haven't amounted to much, according one longtime Red Hat partner.

The partner -- who says Red Hat's products are the best on the market -- notes that past Red Hat channel initiatives like the Red Hat Exchange, designed in 2007 to connect platform vendors, application ISVs, customers and service partners in virtual ecosystems, have faded from view.

"Red Hat really needs to go to Webster's dictionary and look up the definition of partnership," said the source, who asked not to be named. "We've gone through this many times before. Red Hat is always talking about how they're going to change things and work closely with the channel, and then nothing happens."

Red Hat has grown its base of channel partners from 250 three years ago to more than 1,500 today, and the company currently does about 55 percent of its business through the channel, Egan said. That's the same figure Egan offered in an April interview that focused on the Red Hat-led Open Source Channel Alliance, a group of nine open-source ISVs that have distribution deals with Synnex.

Red Hat wants a larger share of the midmarket and SMB, and Egan said Red Hat's goal is to boost its channel revenue north of 70 percent. "We don't like to be sitting in the fifties," he said. "And we understand that in order to achieve that growth rate, we will have to invest in the channel."

One sign of Red Hat's resolve is its decision to make deal registration available to partners on all three levels, while in the past it was limited to the top tier, Egan said.

Red Hat may be resistant to any significant business model changes simply because it has managed to weather the economic downturn better than many of its competitors. In its fiscal year 2010 first quarter ended May 31, Red Hat reported profit of $18.5 million, or $0.10 per diluted share, compared with $17.3 million, or $0.08 per diluted share in the year-ago quarter. Quarterly revenue was $174.4 million, up 11 percent year-on-year, and subscription revenue rose 14 percent during the quarter to $148.8 million.

Standard & Poor's in July added Red Hat to the S&P 500 stock index, a move that open source experts hailed as a major step forward both for Red Hat and for open source business models. In addition, Microsoft listed Red Hat -- along with Canonical, which oversees distribution of Ubuntu -- as a competitive threat in its recent 10-K filing.

Red Hat has to be pleased with how it's faring in a downturn that's sinking many competitors, but it's worth considering how much better its performance could be if it does manage to figure out a channel formula that works.