The VAR Guy

June 5, 2012

2 Min Read
Red Hat Enterprise Linux's Biggest Cloud Rival: CentOS?

As Red Hat Enterprise Linux (RHEL) attempts to connect with cloud services providers (CSPs), the operating system seems to be facing surprise competition from a fierce rival. Microsoft Windows Azure? Nope. Ubuntu? Wrong again. The second coming of Unix? Not quite. Actually, the cloud OS rival could be CentOS — the free, unsupported version of Red Hat Enterprise Linux. Here’s why.

GigaOm claims some CSPs are balking at new Red Hat support fees. The popular media site suggests that some cloud services providers are closing their wallets and opting instead for CentOS. According to GigaOm:

“At issue here is the way Red Hat has restructured what it charges service providers for support which, in my sources’ case, means paying per socket as opposed to per server, according to an executive with this provider. Existing customers can continue on their current plan for a year, but all new customers that come in above the current service provider license agreement, will be charged the new rate immediately. A second large cloud service provider confirmed the pricing changes.

The unnamed source’s options are to subsidize Red Hat Enterprise Linux for customers — which his company has been doing — or pass the price increase on to customers, which, he said will drive more of them to use CentOS, Ubuntu, or even Windows which he said is now price competitive.”

Hmmm… The VAR Guy is intrigued. At least since 2006, CIOs have viewed Red Hat as one of the world’s top software companies in terms of customer value, flexibility, and responsiveness. (Source: CIO Insight.)

Do cloud services change that equation? Hmmm… On-premises server sales apparently are shrinking as customers increasingly shift their apps, platforms and infrastructure to cloud services providers. And a large number of CSPs invest in their own support teams rather than paying open source companies for support.

An example: Ubuntu is the most popular Linux distribution running in the Rackspace cloud, The VAR Guy has heard. But does Canonical — the company behind Ubuntu — generate substantial support fees from Rackspace? The VAR Guy believes the answer to that riddle is no.

Still, Red Hat has a slightly different business story and business history. While Canonical is still seeking multiple ways to monetize the Ubuntu business. Red Hat, in stark contrast, recently become the world’s first independent open source company to achieve $1 billion in annual revenues. And Red Hat has branched out into virtualization, middleware and storage.

CIOs still love Red Hat, The VAR Guy believes. But our resident blogger will be watching the alleged per-socket pricing model, and the potential implications for Red Hat — and CentOS — among cloud services providers.

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