$332 Million (Or More) Awaits Red Hat Partners
So, how high will Red Hat’s partner sales climb this year? The VAR Guy spoke with Red Hat VP Mark Enzweiler on June 9, noted some facts and figures, and then did some quick math. Take a look at the results.
First, some background. Red Hat has stated that it expects to generate $665 million to $680 million in revenue this year. Also, Red Hat currently generates roughly 50 percent to 55 percent of its revenue from the channel. Enzweiler says he wants to push that figure closer to 60 percent. Now let’s do some quick math based on those variables.
- Worst-case scenario:Partners will generate $332.5 million in Red Hat-centric sales this year (logic: $665 million x 50 percent of all Red Hat sales).
- Middle-of-the-r0ad scenario: Partners will generate $368.5 million in Red Hat-centric sales this year (logic: $673.5 million x 55 percent of all Red Hat sales).
- Best-case scenario: Partners will generate $408 million in Red Hat-centric sales this year (logic: $680 million x 60 percent of all Red Hat sales).
The key takeaway: Channel-related revenue continues to climb for VARs that focus on open source. And the dollar figures above only focus on Red Hat software and services. All those sales will surely require server hardware, databases, email systems, backup systems and a host of other add-ons.
Translation: Red Hat-driven solutions are likely a multi-billion channel opportunity now.
Don’t Forget JBoss
Enzweiler says Red Hat is signing up roughly 8 to 10 new Advanced Business Partners per quarter. But this is more than a Linux story, folks. Roughly 40 of Red Hat’s top Advanced Business Partners now sell JBoss middleware solutions, and 29 of those partners focus primarily on JBoss and have yet to take the Red Hat Linux plunge, Enzweiler estimates.
Another key stat: The recent Red Hat Summit in Boston attracted 3.5 to 4 times as many partners when compared to the 2007 summit.
So, overall things sound good at Red Hat. But The VAR Guy can’t close this blog without pointing out a a key challenge. Truly dominant companies (examples: Cisco Systems, Microsoft) generate 80 percent and even 90-plus percent of their revenue through partners. At a 50 percent to 60 percent range, Red Hat may never really shake its addiction to a direct sales force.
Math? RH has a limited direct sales force. The “channel” in this case is not VARs it’s the Dell’s (they generated 30% of RH revenue in the past few years) and the CDW’s. The traditional VAR resells a spitball amount compared to the nationals.
The numbers are out there…re-do your math.
JP: So, I assume you’d offer the same math for MSFT, which generates a TON of its revenue thru PC preloads rather than true VARs?
VAR guy, let me put you on the spot, if I may.
What is your take on Red Hat’s new CEO, Jim Whitehurst?
I read an article about him (I follow the slashdot links from time to time!) taking over with little interest. Yet another CEO swapping industries *yawn*. Until I got to the part where they mentioned he used to hack around with Slackware. “Now you’ve got my attention!”
I watched Jim Whitehurst give his Keynote speech and I was amazed. His message was clear, given with confidence, and had very little “corporate speak”; I’m not only convinced that he knows what he’s talking about, but I really think he understands the ‘why’ of the Red Hat business model. Either that, or he’s a world class actor with an uncanny ability to use tech nouns and verbs correctly. But my vote is for the former rather than the latter.
Your thoughts?
Scott: The VAR Guy doesn’t know Whitehurst. But he generally respects the Red Hat management team. Particularly Michael Tiemann, VP, open source affairs. Fantastic evangelist and public speaker.