Red Hat Exchange: Strategic Shift for Linux Mainstay

By Steve Hamm
Red Hat Exchange will be much more than just an online product catalog; it's designed to function as a community where users of open-source software can read reviews, rate the products, and compare notes. When Red Hat Exchange goes live, Red Hat will guarantee that the other companies' open-source products work well with its own.

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Ever since its launch in 1993, Red Hat has kept a laser-like focus on one thing: creating software capable of competing with tech giants Microsoft Relevant Products/Services and Sun Microsystems. In fact, the No. 1 distributor of Linux -- the operating system for PCs and server computers -- has done quite well for itself.

Red Hat's revenues for the year ended Feb. 28 are expected to top $400 million, up 40% from fiscal 2006. And the Raleigh (N.C.) company just introduced the first new version of its flagship product in two years, which is expected to stir a fresh wave of growth.

Now the question is whether an outfit that has done so well as a lone wolf among "open-source" software providers can transform itself into the leader of the pack by helping companies that make open-source software products that run on top of Linux.

Red Hat signaled a strategic shift on Mar. 14 when it announced an initiative called the Red Hat Exchange (rhx), an online marketplace where it will sell products from more than a dozen open-source companies including Mysql, Sugarcrm, and Al Fresco Software. The exchange could make a wide range of software attractive to businesses large and small that have been put off by the challenges of buying from lesser-known suppliers and piecing it all together.

Community Center

In a sense, rhx is Red Hat's attempt to create an ecosystem similar to the one Microsoft has created for companies whose software runs on Windows (Microsoft declined comment on the development). It's also similar to more recent moves by Salesforce.com and Amazon to build communities of software developers to support their efforts.

When rhx goes live in the second quarter, Red Hat will guarantee that the other companies' products work well with its own, and the company will provide tech support for all of them. The marketplace will be much more than just an online product catalog. It's designed to function as a community where users of open-source software can read reviews, rate the products, and compare notes.

Open-source software is made collaboratively by developers from around the world and is available for anybody to use, free of charge. Red Hat and others sell commercial versions that include extra software, documentation, and support. Says Red Hat chief executive Matthew J. Szulik, "Rhx gives us the opportunity to be the flag bearer for open-source software."