For all of these milestones, I have two simple words: thank you. Thank you to our customers, partners, the open source communities in which we participate, and Red Hat’s associates.
When Marc Ewing and Bob Young founded Red Hat in 1993, it’s hard to believe that even they could have imagined all of the ways open source - and Red Hat - would transform the technology industry. We continue to be awed by all of the incredible ways our customers are using open source solutions to grow and succeed and are looking forward to many more years of working with them to do this. We continue to be inspired by the innovations emerging from open source communities that are shaping the future of technology and are looking forward to continuing the contributions and collaboration that make us Red Hat.
This afternoon, we announced Red Hat’s Q4 FY18 earnings results, bringing another strong year to a close. Before focusing on the year ahead, I want to spend a few moments reflecting on the past year. Working together, we accomplished so much. If I had to pick one word to describe the last year it would be ‘momentum.’ Everything we did throughout the year has further solidified Red Hat and open source as a driving force in the technology industry.
I am really proud that we have established a leadership position around Kubernetes and with our contributions to OpenShift. But it’s more than just the technology. It’s the fact that we are now seen as leaders in containers, which are the next wave of computing and application architecture. Our recent acquisition of CoreOS is just Red Hat’s latest move on this front. While we used to be known as the Red Hat of Linux, we have now evolved into the Red Hat of the next generation of scale-out platforms.
Technology is a fashion business. It’s amazing how fast trends come and go. Going into last year, everyone was talking about cloud. Before that, it was virtualization. While the industry was focused on public cloud hype, Red Hat has been saying for a long time that the real focus should be on hybrid. We steadfastly believed that cloud deployments would be hybrid (or now, evolving into multicloud) because enterprise customers have always told us how much they value choice, flexibility, manageability, and security (all of the "-ities", really). To us, this translated into a hybrid future and we focused on building a broad portfolio with hybrid at its core.
Now, it’s like someone has flipped a switch and seemingly all everyone wants to talk about is hybrid. The industry has bought into the fact that hybrid, not public cloud, has become the world’s predominant computing model where the next generation of applications will run. Even though we anticipated this outcome, it’s still a surprise how quickly the dialogue switched. It is clearer than ever before that customers, not vendors, are leading the charge.
And this shift is pushing companies like Red Hat to think about the customer experience in new ways. I talked about ease of use and user experience last year, but they remain challenges (and opportunities) in enterprise tech. We have seen how Amazon, thanks to its retail heritage, has focused on making things drop-dead simple to use. It might not have the most elegant technical solutions, but they are easy for customers to learn, deploy and use.
This has set a new bar for us. Open source is known for its elegant technical solutions, but not ease of use. Yet technologies like Ansible have seen success by embracing simplicity and prioritizing the user experience. We are inspired to do the same across other technologies. That’s why Red Hat has, among other initiatives, invested significant resources to build up our User Experience Design (UXD) team to improve the look and feel, as well as the ease of use, of open source products.
Investments in areas like this are core to our commitment to help customers succeed. As they continue to be disrupted by agile, online-only or digital-first approaches, they are increasingly looking to us as a partner in the hybrid cloud. We are focused on continuing to build the capabilities that not only enable this digital transformation but give customers a more modern and flexible IT foundation that can meet their needs well into the future. This foundation is rooted in containers and microservices, whose power lies in enabling you to decouple applications from the underlying infrastructure. Kubernetes has the potential to become the equivalent of Linux for this distributed layer. Given our leadership position in these areas, I believe Red Hat is well-positioned for this next wave. It’s an exciting time to be a Red Hatter.
When I think about our customers, I immediately go to my favorite moment of the year: Red Hat Summit. Every year at Red Hat Summit we get to experience the impact we have on our customers and communities. Summit has also become a mecca for system administrators and developers from around the world who bring passion and energy for open source along with them. There’s an old adage that says that the best products are ones that make you feel better about yourself. I think Summit offers Red Hat, our customers, and the communities we are part of the chance to connect and exchange ideas in ways where everyone feels better about themselves. There’s nothing quite like peeking out from backstage before you give a keynote speech and seeing thousands of energized and passionate people who all share this amazing sense of possibility. We have big plans in store for Red Hat Summit 2018 and I hope you join us in San Francisco to experience it for yourself.
I can’t reflect on the past year without also reflecting on my 10-year milestone as part of Red Hat and the broader open source community. I’ve seen open source evolve from a viable alternative to traditional software into a leader in driving innovation. That has shifted the perception of Red Hat as well. We have gone from an alternative to a default choice for delivering infrastructure solutions and a trusted partner and advisor to the CIO. We have earned a seat at the table to help enable velocity of innovation inside a business. That’s a fundamental shift.
One of the reasons we have been able to evolve this way is that, unlike many tech companies, Red Hat is not associated with any one trend or product. We have been amazingly durable, delivering 64 quarters of consistent revenue growth, because a trend or a product does not define us. Rather, we are successful because of our amazing production system—open source—that allows us to tap into the power of community-driven innovation, ride the crest of each major shift as it comes along, and enter new categories as we see fit. Red Hat’s model enables us to thrive amidst these shifts. That’s something I hope our associates, customers, partners and shareholders are proud to be a part of.
Getting a little introspective, I’ve changed a lot over the past 10 years. (My hair has certainly gotten grayer!) Most importantly, I feel like I am continuously learning on the job. And every year, as I learn more and more, my appreciation for working with participative groups to come up with better solutions has only grown. I better understand the power of working proactively with participative communities to engage and orchestrate. My job is to build the context for people to do their best work, and I embrace that role.
Over time, you see the benefits of letting the process work; you learn to be patient because you know you will get better results. I am more convinced than ever that participative communities get better results than individuals working alone. But you have to commit to that idea. Too many executives lose patience with the process too quickly.
While we have seen tremendous momentum over the last year, and certainly across Red Hat’s 25 years, I truly believe the best is yet to come. We are on the cusp of a new wave of innovation and, over the next decade, I expect we will see entire industries based on the sharing of information and joint innovation become mainstream. We’ll see this impact in every sector, from non-profits, like healthcare, education and government, to global for-profit corporations who realize that sharing information leads to better outcomes. Scaling up open and participative innovation will become a key part of increasing productivity around the world.
It’s really exciting to think about how Red Hat can continue to play a pivotal role in that evolution.
As open innovation continues to drive major trends in technology, Red Hat is committed to remaining front and center in that movement. We have a capabilities-based model that I have seen no one duplicate. As a result, as the nexus of innovation continues to move into open communities, and as open source becomes more ubiquitous, I predict that Red Hat will become one of the iconic names in the technology world.
At the beginning of this post, I wrote that ‘momentum’ was my word of choice for the last year. I hope Red Hat ends our new fiscal year with even more momentum than we have today. Red Hat now has nearly 12,000 associates and we just reported $2.9 billion in total revenue. To put that in context, when I joined Red Hat in 2008, the company was about 2,200 associates and made headlines as the first open source software company to cross the $500 million mark in revenues.
With this level of growth, my focus will be on continuing to scale our open culture, as we continue to help support our customers’ desire for open source technology. To do that, we need to bring in people with different expertise, while teaching them about our culture and why we embrace the open source way. If you are passionate about open source and collaboration, I believe there is no better place to work than Red Hat.
Open source is a powerful force that’s changing the world. For 25 years, we’ve shown how defaulting to open can unlock the world’s potential. Here’s to many more milestones as we work with our partners, customers and the open source community to drive the future of IT.