Red Hat needs to get red hot to make these numbers

by Dennis Byron on February 14, 2008

Expand­ing on a plan it announced in Novem­ber 2007 by which Red Hat (RHT) said it would cap­ture 50% of the oper­at­ing sys­tem mar­ket by 2015, the com­pany announced on Feb­ru­ary 13 that it intends to also cap­ture “50% of enter­prise mid­dle­ware work­loads by 2015.” The goal comes as an inter­est­ing jux­ta­po­si­tion with the Alfresco Barom­e­ter Sur­vey announced Feb­ru­ary 12 at the JBoss user con­fer­ence. That sur­vey indi­cated that JBoss was not even the most pop­u­lar open source appli­ca­tion server. If the lat­ter is true Red Hat will have a tough row to hoe.

Let’s start with how Red Hat is defin­ing mid­dle­ware. The answer is very broadly (“more than just the appli­ca­tion server alone”). To accom­plish this goal using Red Hat’s broad def­i­n­i­tion of mid­dle­ware, Red Hat would have to not only dis­place other poten­tially more pop­u­lar open source mid­dle­ware (e.g., Apache HTTP soft­ware) but bil­lions of dol­lars of “closed-source” soft­ware cur­rently in use across the world between now and then. (NOTE: The open-source vs. closed-source char­ac­ter­i­za­tion is not mean­ing­ful in under­stand­ing or mea­sur­ing the mar­ket as spelled out ear­lier in this blog post but the open source devo­tees still insist on draw­ing this distinction.)

To lit­er­ally accom­plish its goal, Red Hat would need to dis­place 50% of the $20-$30 bil­lion worth of IBM (IBM) CICS and BEA (BEAS) TUXEDO shipped in the last 30 years, the $20–30 bil­lion worth of MQ Series, TIBCO (TIBX), etc., shipped in the last 20 years, the $20-$30 bil­lion worth of WebLogic, Web­Sphere and Ora­cle (ORCL) Appli­ca­tion Server shipped in the last 15 years, the $10-$20 bil­lion of BEA, IBM and so forth inte­gra­tion servers, devel­op­ment tools, ESBs, por­tals, and so forth. Add busi­ness intel­li­gence soft­ware (if you use Oracle’s def­i­n­i­tion of mid­dle­ware) and col­lab­o­ra­tion soft­ware (if you use IBM’s). Sorry but the air­craft car­rier just does not turn that quickly.

As for how Red Hat is defin­ing “50%,” the com­pany says it means of that year’s “deployments of mid­dle­ware technology.” Hope­fully us reser­achers will have some license-agnostic cen­sus soft­ware to mea­sure that num­ber by 2015 but to get there, do the math. No mat­ter how you mea­sure 50%, Red Hat would have to dis­place exist­ing installed soft­ware at an aston­ish­ingly rapid rate over the next 6 years to reach its goal because the over­all soft­ware mar­ket is only grow­ing 5–6% (and the mid­dle­ware mar­ket basi­cally tracks the over­all soft­ware market).

At the press con­fer­ence announc­ing its inten­tion, Red Hat said that its sub­scrip­tion model makes com­par­i­son with other mid­dle­ware sup­pli­ers impos­si­ble. That is not accu­rate and part of the litany of open source move­ment claims that can be mis­lead­ing to investors. Most of the cur­rent installed base of mid­dle­ware has sub­scrip­tion main­te­nance rev­enue asso­ci­ated with it just like Red Hat’s.

In fact, at the press con­fer­ence Red Hat showed an IDC esti­mate of $15 bil­lion of mid­dle­ware rev­enue in 2011; about 66% of that num­ber rep­re­sents sub­scrip­tion main­te­nance just like Red Hat’s (the other 33% in any given year rep­re­sents license rev­enue for totally new busi­ness and add-ons/upgrades to the installed base). The equiv­a­lent IDC num­ber for 2008 is prob­a­bly in the $11 bil­lion range, of which Red Hat’s total is less than $50 million.

(I am just guess­ing. The only access I have to IDC mid­dle­ware mar­ket share data is via its press releases. On the other hand, it is a very edu­cated guess since I poplu­ated that data­base for many years and still do IDC back­cast­ing and oper­at­ing envi­ron­ment splits in my sleep.)

– Den­nis Byron

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