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Red Hat chief tells start ups to grow, not cash out

The romance is gone

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OSBC Red Hat chief executive Matthew Szulik today told startups to forget the "romance" of open source and build businesses that compete with proprietary vendors on services and value.

Opening the Open Source Business Conference (OSBC) in San Francisco, Szulik said [advocates of] open source no longer need to legitimize its existence by talking about lower costs or the actual technology components. The challenge now is scaling to meet customer demand.

Szulik urged startups to rip up the prevailing Silicon Valley business plan of exit strategy via Google acquisition, and focus on delivering value - especially to enterprise customers.

"It's about how do you create a culture - that's very, very different to how do you create a product and sell that to Google," he said. "There's more than enough venture capital to fund early stage companies, but [the question is] how do you grow beyond a $1bn company?"

He spoke of trillions of dollars of opportunity in liberating IT infrastructure and data locked up in enterprise legacy applications and platforms. That means potentially migrating applications, building composite applications or adding a web-front end to legacy systems.

"The enterprise can't simply unhook billions of dollars they've invested in Cobol and legacy environments. That's an enormous opportunity for some clever mind," he said.

With large enterprises already using Linux and open source in mission-critical deployments and their infrastructure, open source has arrived. So the discussion has shifted to what Szulik called new sources of value - or service levels.

"The software industry wasn't trained to create a high degree of services. If it were, 45 per cent of your budgets wouldn't be tied to services and maintenance. What makes open source work, is not the one and zero but developing service levels to compete with the proprietary space [vendors] and scale beyond that."

According to Szulik, building a scalable business is "something Red Hat continues to have to learn".

Continuing the theme of unlocking enterprise data from legacy and proprietary systems, he made his first veiled reference to Microsoft, on Office and the global move towards open standards around document XML formats such as ODF.

According to Szulik "someone" (i.e. Microsoft) wants remuneration for storing and retrieving personal information "at a time when search and indexing is evolving".

He also picked up on the debate re-ignited by Microsoft last week when again laid claim to unspecified patents that Linux and open source infringe. According to Szulik, open source is not a "renegade industry" and respects intellectual property. But companies will derive little business value from devising and registering patents, he argues.

"There's little emperical evidence between patents and innovation, especially in the infrastructure space... we see patents really being a challenge to innovation. The industry moves much, much faster than any remedying process. If you receive a patent injunction it will be years, and you will be out of business, before there's a remedy," Szulik said. ®

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