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Red Hat searches for mainstreet in the City of London

Desperately seeking salesmen

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Red Hat's CEO said the firm has put together a five-year strategic plan for the first time in its history, which will see it jack up its sales management as it looks to expand beyond its traditional markets.

Jim Whitehurst is currently doing the rounds in Europe, as the firm gets ready to close on its fourth quarter and round off his first year as CEO of the company.

He spoke to journalists yesterday at the Baltic Exchange, a surprising choice of venue as most people thought the exchange had been destroyed by an IRA bomb in 1992. It was, and the organisation actually operates from new offices down the street from its old home. Which just goes to show how an organization can undergo massive changes without the outside world really noticing at the time.

Whitehurst said that since joining the firm from US airline Delta, he has been putting in place systems and processes, and put together the firm's first five-year strategic plan. Central to this to this is an extension beyond its traditional market of tech-savvy companies looking to leverage technology to gain competitively to more "mainstream" companies which use technology to support their business. Whitehurst has already described this as heading from Wall St to Main St. However, with Wall Street's ongoing implosion, the imperative is arguably all the stronger. And it also begs the question of just how tech-savvy Wall St really was is.

Whitehurst pointed to a number of trends which are supporting this effort. Not least is Microsoft's own white flag on Vista, with even Steve Ballmer effectively conceding that customers would be just as well waiting for Windows 7. Unsurprising, Whitehurst once again claimed the current financial climate played to Red Hat's strengths, as companies look to squeeze their IT budgets further. Red Hat claims that by buying subscriptions to its products and services, companies can free up IT budget to spend on genuine technology innovation that they wouldn't by tying themselves into, say, Microsoft's somewhat more expensive licensing system. Or, presumably, just hoard it as they plough through the recession.

As for its own financial position, Whitehurst claimed the firm was in an enviable position, with a strong balance sheet and positive cash flow, and no need to access the capital markets. The firm is due to unveil its figures in a couple of weeks and has not issued any warning to shareholders so presumably its P&L is in line with predictions. While the firm has already announced a share buyback program, it seems reasonable to assume it might be in the mood to buy other firms as they are squeezed the recession. The firm recently hoovered up Qumranet, the firm behind the KVM virtualization technology.

Whitehurst conceded that valuations had fallen, but said: "We don't need more technology." Rather, "We need to continue to build out our capabilities to go to market".

The firm had no shortage of engineering talent, he said, but seasoned sales people were thinner on the ground. "The competition," said Whitehurst, "is in the people market."

So it's no surprise that it's racking up its channel business and its efforts to work with ISVs. Red Hat said that while most of its US sales are direct, practically all of its Asia Pacific business is indirect, and about 70 per cent of its European business is indirect. Whitehurst highlighted the importance of systems integrators and ISVs in targeting the mainstream commercial market. While bleeding edge customers - such as those on Wall St - were prepared to go out on a limb and "self-integrate" in their quest for competitive advantage, mainstream firms simply wanted to buy an application, and weren't particularly dogmatic on what operating system they were running.

Whitehurst chose to emphasize one class of customers - those making up the cloud. This of course makes for good buzz-wordage, though Whitehurst is slightly hamstrung by the fact he was unable to name cloud or SaaS vendors who rely on his software, though he did say Red Hat used Salesforce.com, and that it liked to do business with companies that use its software.

Still, the move into the cloud gave him the opportunity to push the firm's take on virtualization. Red Hat recently bought the firm behind KVM. KVM is installed by default in Fedora 10, which would indicate it will quickly appear in the kernel of RHEL and Whitehurst confirmed that it was "highly likely" this would be the case next year. KVM would be part of the standard RHEL subscription, he said, though there will be "revenue events" associated with the introduction - ie add-on costs for tools and services etc.

He acknowledged this meant something of a dead end for Xen, Red Hat's previous choice for virtualization. But he said that while running a separate hypervisor might work for grid type systems, in a full cloud environment, this started throwing up issues, particularly around security and deployment. Putting KVM into the kernel meant Red Hat was able to take advantage of all the work that had been done around the technology over the last 20 years he said, particularly around security.

"Having it in the kernel just inherits all the advantages of Linux," he said. "If the hypervisor is separate, you've got have something to management security, allocation tasks, and so on."

For all its emphasis on the cloud though, Whitehurst was wary of getting into the business himself, or of dabbling in software, saying this would simply put it at odds with its most sophisticated customers. Not something he wants to do, even as he makes a grab for the rest of the world. ®

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