Raleigh, NC: At the All Things Open conference, Red Hat co-founder Bob Young shared tales of the early days of Red Hat. The first billion dollar pure play open source company had a humble beginning.
Bob Young, who've I've known for 20 years, is not a technology guy. The "Linux" part of Red Hat Linux came from Marc Ewing. Still, if it hadn't been for Young, Red Hat (named after Ewing's grandfather's Cornell University lacrosse cap), might have just been another long forgotten Linux company.
Young's rise to success was an unlikely one. He admitted that "I became an entrepreneur because no one would hire me. So I went to Kinkos and printed business cards saying Bob Young, President. It made my mom proud."
Why did such a clearly bright man have so much trouble? He explained, "I had ADD before it was fashionable."
Before he came to Linux, Young had started a retail typewriter business. This was followed by a computer-leasing business. He then became interested in Linux and in 1993 he founded ACC Corporation, a catalog business that sold Slackware Linux CDs and related open source software. (Remember, in 1993, a V.32bis modem with a top speed of 14.4-bits per second was a fast modem, so there was a real market for mail-order Linux CDs.)
Even then, however, Young didn't really "get" Linux. It was only when he visited Goddard Space Flight Center and Don Becker invited him to see a neat project he was working on that he got it. Becker's project, was, of course, Beowulf, the first Linux supercomputer.
It wasn't much to look at. The first Beowulf was made of 16 already obsolete 486 DX4 computers connected by channel-bonded Ethernet. But Becker and his partner, Tom Sterling, had shown that with Linux you could make a powerful computer using commercial off-the-shelf (COTS) and free software. That night, Young realized that Linux was more than just a neat product.
In talking with other Linux users, Young was told time and time again that sure, "Solaris was much better than Linux, but it was only by using Linux that he could tweak the operating systems to meet their needs."
So Young got together with Ewing, and, from Young's wife sewing closet, they launched Red Hat Linux. It wasn't easy.
Young admitted that "I knew how to sell hardware, not software, and we were selling a concept that no one was buying."
Red Hat started out by selling diskettes, then servers, services, and CDs. "We would literally go and visit them one customer at a time. There was no magic bullet. We did a a lot of hard work staying up with our customers."
But Young also realized that while he couldn't sell Linux as being better, faster or having more features than Unix in the early-mid 90s, he could sell one benefit: users could tune it to meet their needs. That turned out to be a key selling point.
Soon after, Young figured out that he had to give the software away. As he explained, Richard M. Stallman, aka RMS, "can't figure out what to do with me because I'm a capitalist, and he still can't recognize that Red Hat is more committed to his vision than he is. We give customers control over the software."
That said, Young added, "RMS was a genius for his invention of the Gnu General Public License (GPL)."
Far from seeing open source as communism, as both Bill Gates and Steve Ballmer once claimed, Young said he realized "what open source could be. I'm a big fan of Adam Smith's free market. In Linux, we solve problems in the free market."
While Red Hat's early business model was to sell Linux in a box, his sales pitch was that, "Yes, I'm selling free software."
More seriously, he continued, "We sold people the way to solve their problems." The trick was to figure out what their problems were. "Customers are like your kids, they say they 'need' ice-cream, but that's what they want; what they really need is spinach. You need to understand the customers' needs better than they do."
No one got it at first. Young would go to company after company and have the door closed in his face. But with a lot of work, and by working with one customer after another, Red Hat started to grow.
His vision for this approach came from IBM. "Even when Marc and I weren't making enough to pay the rent, IBM inspired us. IBM was the very definition of a company going out of business, but Lou Gerstner turned it around in three years. He did it by by going out and talking to the customers and finding out that no one really liked IBM's products."
So why did people keep buying IBM? Gerstner was told, "You're the only company with offices everywhere. Gerstner got that what IBM was really selling was a service, not products." And, that's how Young saw Red Hat's path too. Today, Red Hat makes the vast majority of its money not from selling any "product," but by selling services.
To deliver those early services, Young also believed that Red Hat had to cooperate with its rivals. "I would partner with rivals. It's an ongoing opportunity. Your competitor isn't your enemy. If you can solve a customer problem by working with your competitor, then that's what you should do."
This may sound counter-intuitive even now as companies unite in open source foundations to tackle leading edge technology markets such as the cloud, OpenStack, Software Defined Networking (SDN), OpenDaylight, and the Internet of Things (IoT). In 1994, it was a truly radical idea. But it worked.
"Most business people treat their competitors as enemies, but they aren't," said Young. "They don't care about you. They care about customers." By focusing on this, Red Hat helped the early Linux companies from following Unix into the incompatible forks, which doomed Unix from ever rising to its full potential as an enterprise operating system.
By 2000, Red Hat, along with Caldera and SUSE, had become a leading business Linux company.
All good things must come to an end though. Young said, "Red Hat's board of directors fired me in 2000 and that's why Red Hat is so successful today. I had the skills for a startup. I didn't have the skills to grow Red Hat from 400 to 9,000 employees."
He has no hard feelings. He's glad he dreamed big because, "The bigger the problem, the bigger the reward. You should dream big because that's where the big rewards are."
Since then, Young has founded Lulu (in 2002), one of the first self-publishing sites, which foresaw the rise of ebooks. He's also the owner of the Hamilton TigerCats, a Canadian Football League team.
Recently, Young started coming back to technology. He's a member of the board of directors of PrecisionHawk a drone company. Just as Red Hat's business wasn't about Linux so much as it was about solving its customers' technology problems, PrecisonHawk isn't about drones so much as it is about the data that drones can gather, which can then be used by farmers for determining their agricultural resource needs.
Today, Red Hat dominates the Linux business and is trying hard to become the leading OpenStack company. The technologies may have changed since Bob Young's days, but Red Hat's focus on delivering what their customers really need remains the same.