Even red hat is worried about open stack. Aivars Lode avantce
Red Hat Plays Hardball on OpenStack Software
Rivals Fear That Software Maker Is Using Linux Dominance to Block Use of Alternative Cloud Software
By Spencer E. Ante Updated May 13, 2014 7:43 p.m. ET
Software maker Red Hat Inc. RHT -1.38% has outrun dozens of companies over the past decade to become the dominant commercial provider of the open-source operating system known as Linux.
Now, Red Hat, which has built a nearly $10 billion company around Linux, is trying to expand by creating a new business in software that runs cloud-computing systems. But some Red Hat rivals, partners and customers fear that it is wielding its dominance in Linux to block organizations from using alternative cloud software.
At the heart of the issue is Red Hat's embrace of OpenStack, a new kind of open-source software that is expected to play a central role in the operation of data centers as companies consider whether to keep computing operations in-house or turn them over to external services known as public clouds run by Amazon.com Inc., AMZN +0.59% Microsoft Corp. MSFT +1.84% , Google Inc.GOOGL +0.58% and others.
Supporters of OpenStack say it can bring the ease of use and agility offered by cloud-service vendors, while using a company's own server systems. Besides Red Hat, Hewlett-Packard Co. HPQ +1.40% , International Business Machines Corp. IBM -0.20% and startups such as Mirantis Inc. are offering or supporting commercial versions of the software. This week, nearly 5,000 technologists and developers from those companies and others are discussing cloud software at the OpenStack Summit, an annual conference in Atlanta this year sponsored by Red Hat.
For Red Hat, OpenStack could help stem slowing revenue growth as the Linux market matures. In the latest fiscal year, Red Hat's revenue growth slowed to 15%, compared with 25% two years ago. About 87% of last year's $1.5 billion in revenue came from selling subscriptions to its Linux distribution.
The revenue from OpenStack is small today but research firm IDC estimates software from such providers used to build cloud services for internal consumption will generate $5.8 billion in revenue this year.
In its quest to sell OpenStack, Red Hat has chosen not to provide support to its commercial Linux customers if they use rival versions of OpenStack, according to documents reviewed by The Wall Street Journal. The company's support, which includes providing bug fixes and helping customers if they run into technical problems, is a key reason people use Red Hat rather than free versions of Linux.
Since Red Hat's Linux is used so widely in corporate computing systems, with a 64% share of the paid Linux market, according to IDC, some organizations say the lack of support can discourage them from using other versions of OpenStack.
One senior engineer of a prominent research institute wanted to use Mirantis OpenStack software because he believed Mirantis had more experience with the technology than Red Hat, but once he heard Red Hat would drop support of its Linux software, "Mirantis was out of the picture," said the person.
Red Hat says it would cost too much to support different versions of OpenStack, and that its cloud software needs to be tied tightly to its Linux distribution.
James Barrese, chief technology officer of eBay Inc.EBAY +0.49% 's PayPal unit, which uses the free version of OpenStack with Red Hat's Linux, says he doesn't think OpenStack necessarily has to be integrated with a specific operating system. "Ultimately for me it will be about who has the best solution," he said.
Even some of Red Hat's largest partners say its actions contradict the spirit of the open-source community. In contrast to proprietary software, open-source programs can be modified by users, and typically interconnect with competing programs.
"Red Hat has taken the art form of closed open-source to a new level," said Martin Fink, H-P's head of its cloud business. H-P sells and supports Red Hat's Linux software, but it also competes with Red Hat in the OpenStack and cloud-software market.
Last November, Red Hat ordered its employees to stop working with Mirantis, a startup that sells a subscription and support for a commercial version of OpenStack. Red Hat partnered with Mirantis and invested in the company last June. It tapped Mirantis consultants and tools to help Red Hat customers build cloud-computing systems using Red Hat's version of OpenStack.
But after Mirantis began selling OpenStack software last October, Red Hat deemed Mirantis a competitor and dissolved the services partnership, according to a confidential Red Hat memo reviewed by The Wall Street Journal.
"Do not work with Mirantis," said the memo to Red Hat employees. "We should not engage them jointly with any customers or leverage their services for delivery of our products."
Red Hat has also been asking some partners that resell its technology to not work with Mirantis, according to remarks on a reseller's voice mail reviewed by the Journal.
In February, one large Red Hat reseller told a Mirantis sales executive that it had received phone calls from Red Hat senior leadership "encouraging us very strongly to not partner" with Mirantis partly due to "some emotional feelings," according to the voice mail. "Right now I am not in a position to jump into this and throw resources at this because of the political climate."
Mirantis CEO Adrian Ionel said Red Hat always knew it had OpenStack software, but it didn't become a problem until Mirantis began marketing it more aggressively. "The customers will not have any of this," he said.
Red Hat President Paul Cormier said the company didn't know Mirantis was going to offer OpenStack and it isn't going to bring a competitor into its customer base. "It is too confusing for our customers," he said.
IDC analyst Al Gillen said Red Hat's behavior is somewhat aggressive but he understands its motivation to keep a lid on its support costs. Eventually, Mr. Gillen said the behavior may come back to haunt Red Hat because there are other Linux alternatives.
"It's not a great position for Red Hat to take," he said.