Red Hat claims headway in Asia, bets big on container and hybrid cloud

While the smallest in terms of revenue contribution, Asia is Red Hat's fastest growing region and is likely to continue its upwards trajectory as emerging markets roll out new infrastructure.

Developing nations in the region were embarking on many net new infrastructure projects, rather than replacement for existing technology, and open source would be involved in a large share of such projects. The decisions on which technology to deploy would rarely be between proprietary or open source, but rather on which open source vendor to go with or to do so internally, said Red Hat President and CEO Jim Whitehurst.

Because there were so much net new business happening in the region, the software vendor would likely continue to see rapid growth in Asia compared to the global average growth, said Whitehurst, in an interview Thursday with ZDNet. The executive was in Singapore for Red Hat Forum 2016.

Asia contributed roughly 12.75 percent of the vendor's overall fiscal 2016 revenue, ended February 29, while EMEA accounted for 21.26 percent and the Americas pushed 66 percent of total revenue.

Asia-Pacific saw year-on-year revenue growth rate of 11.3 percent, compared to 18.4 percent in the Americas and 6.3 percent in EMEA. Whitehurst noted that Asia's overall growth would have been much higher if it excluded Japan, which was seeing slower growth rates because its open source market was more matured.

Asked if Red Hat would be able to sustain its business selling support services when open source adoption became mainstream and commoditised, he stressed that the issue was not simply about skillsets. "You can hire a lot of people who know Linux as well as we know it, but building out the test harnesses to test every piece of hardware, and every time someone pushes up a BIOS upgrade to a NIC card in a server and all of that stuff, anyone can technically do that, but do you want to do that more than once for the industry? And who wants to maintain a security response team?

"It's not whether you have skilled people who know it. It's just about [asking yourself] is that where you want to invest in [and] that's going to take a lot of time and effort, and still not be as fast as we are in doing these things," he said.

He added that businesses in countries such as China and India were starting to realise it would be more expensive and risky, once they pushed open source software to production, to maintain the huge downstream costs.

According to September 2016 research from Forrester, 50 percent of IT decision makers in Asia-Pacific believed open source could help their organisation support new capabilities, while 60 percent said it would enable their company to engage an ecosystem of innovative partners. Commissioned by Red Hat, the the study polled 455 executives across nine markets in the region including Singapore.

Another 66 percent said open source was a cost-saving initiative for their organisation, said Dane Anderson, Forrester's vice president, research director and region manager. Speaking at the forum, the analyst added that 52 percent of respondents believed open source would play a key role in agile hybrid cloud infrastructures in the next two to three years, while 44 percent said likewise for enterprise application integration and API management.

Some 43 percent said open source would play a key role in application development and DevOps, while 42 percent pointed to Internet of Things (IoT), Anderson said.

Containers, microservices need management tools

With Red Hat the first open source company to hit revenues exceeding US$2 billion, Whitehurst said its business model remained durable and in good shape. Adding that it had more opportunities than capacity to address, he said the vendor's primary objective was to build enterprise versions of open source products and make these consumable.

Specifically, Red Hat aimed to take more market share in the datacentre market and ensure all its products supported all hybrid cloud environments and across the entire stack. It also was betting big on containers, which Whitehurst believed would pave the way future applications were built.

"In the architectural shift from physical to virtual, a new stack developed in management tooling for the virtualised world. [Likewise], in this move to containers, a new stack will emerge to manage these containerised applications and we're aggressively investing to make sure that's open source and, hence, Red Hat's relevance," he explained.

He pointed to the company's investments in Docker and Kubernetes as well as acquisition of Ansible, all of which focused on container and microservices automation and orchestration.

"There's still a long way to go in containers," he said. "If you have an app that is made up of 150 microservices and you're now running it at scale, you're going to have a million microservices running five large applications. So how do you diagnose a performance issue? There are application performance management software out there, but these are not built for microservices."

He noted that there were many growth areas in which to invest involving development tooling for DevOps and helping to simplify developers' work in a container era.