Friday Five — June 30, 2017

This week, Red Hat announced the availability of the latest version of Red Hat Cloud Suite. As cloud-native, containerized applications grow in importance to CIOs focused on enterprise digital transformation, IT infrastructure and management technologies need to adapt to the unique needs posed by modern applications, while still maintaining existing systems. Red Hat Cloud Suite enables organizations to more easily build cloud-native applications, deploy them and manage these workloads through a single offering, helping businesses to modernize without sacrificing existing IT infrastructure investments.

This week, Red Hat announced the opening of its new facility in the Seaport District of Boston. The space is home to Red Hat's state-of-the-art Global Executive Briefing Center, a new Red Hat Engineering Lab, and the first U.S. east coast location for Red Hat Open Innovation Labs. The decision to expand into the city of Boston was driven by the city's reputation as a premier technology hub, its history of computer science technology development, and the area's many world-class universities, which produce some of the nation's top technology talent. Visitors to the Executive Briefing Center - who are expected to include senior executives from many of the world's largest and most innovative organizations - can learn firsthand from Red Hat's executives, product leaders and engineers how open source can drive innovations across industries.

Red Hat's strategy of enabling CIOs to incrementally embrace full public cloud computing is clear to see. Until last week's significant earnings beat, however, it wasn't as clear that the company's pragmatic, hybrid approach would be enough to carry the open source giant to $5 billion in revenue. With Red Hat shares launching 10% on its break-out earnings news, we can safely put that question to rest. As financial analyst Bert Hochfeld wrote in his post-mortem on Red Hat's quarter, the blow-out earnings are a "validation of Red Hat's strategy and, in particular, its investments in infrastructure software for the hybrid cloud." [But] Red Hat's cloud business doesn't look like that of AWS or Microsoft Azure. Even its allegedly "legacy" Red Hat Enterprise Linux (RHEL) business has been humming lately, with new, cloud-centric workloads driving it, as Red Hat CEO Jim Whitehurst said on the earnings call: "As long as new workloads come online, and as long as more workloads are being modernized we think we still have kind of solid opportunity in the core [RHEL business]." This is so because, as CFO Eric Shander continued, "you still get Linux as part of the emerging technologies." In other words, the enterprise may want OpenShift, but RHEL is the built-in plumbing for it.

Open source is at the heart of much of the innovation transforming the global economy and society today. Open source provides governments access to the latest technologies at a reasonable price, for a predictable term. It also helps avoid lock-in. The freedom of choosing vendors and having compatible technology they can build on for the long-term, is a major reason for governments to choose open source technology. In addition, Red Hat solutions can prevent lock-in to a specific cloud vendor also. The cloud is making the traditional forms of lock-in hard because you don't have physical software in a physical location in an organisation. Mr. Dirk-Peter van Leeuwen, Senior vice president and General Manager, Asia Pacific at Red Hat, explains: "So, what is going to be the next generation of lock in if you are a proprietary vendor? It's going to be the cloud. You are going to offer your own cloud solution in a way that you can prevent your customers from moving from your cloud to the next cloud. Our role as Red Hat is elevated in that sense, because our solutions are developed and designed to be transferred across all clouds. For a customer who is wondering shall I go to Amazon or Azure or Google, they may as well use Red Hat technology for developing their solutions because the Red Hat technology allows them to move to all of those, at any time they wish."

For years, when Red Hat's clients and potential customers wanted to meet with software firm execs to talk about working together, they would drive out to Red Hat's nondescript meeting space in Westford. But now they'll get a different view. The North Carolina-based software firm this week opened a new global executive briefing center on A Street in the Fort Point section of South Boston. There, clients can touch wall-sized video screens to learn more about their Red Hat projects or the software development work the company has done for others. After a day of brainstorming or deal-making, they can relax in a "speakeasy" – a hidden room with a bar that will be managed by the operators of Drink, the Congress Street nightclub. Red Hat executives realized they needed to be in the city, not the suburbs, to attract the right employees. Red Hat initially opened in Westford about 15 years ago, in part to attract people who had worked for the suburban computer companies such as Digital Equipment Corp. and Data General. The urban location will help Red Hat chase younger workers. "In order for us to attract the next generation of technical talent, with many of them graduating out of the [Boston-area] universities, we knew we had to be here," Paul Cormier,
Red Hat's president of products and technologies said.