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Red Hat steps up channel reach against Novell and Microsoft

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It takes money to make money, and commercial Linux distributor Red Hat knows this.

Red Hat has made no secret of the fact that it wants to get more of its sales through indirect channels. This is not just a matter of shifting the burden of sales to resellers, as is the case with most server makers, but is also a means of keeping Red Hat's overall revenues growing so it attains its long-term goal of becoming a $1bn, profitable software company.

Managing a channel is a bit like managing an open source software development project, inasmuch as both are meritocracies that reward the best performance. The difference is that big channel partners who bring in the big sales want the best commissions and other rewards, such as co-marketing funds, training, and input into product plans as well as the normal roadmap briefings.

IT channels tend to differentiate their partners by tier, and as a company grows, ain't it funny how there are more tiers and more hoops to jump through to get more benefits from the vendor whose products the channel partners peddle.

Red Hat is no different from any other IT vendor, so is beefing up its North American partner channel with the addition of a premier business level to give channel partners more "economic, sales, marketing, and technical benefits."

The software company also added three new specialties that partners can be certified to chase deals under, and these areas reflect the three main areas where Red Hat is doing business: infrastructure software, middleware, and virtualization.

Red Hat says that it is putting more money in building out its partner ecosystem, but declined to give out any specific figures regarding how much it was already spending on helping partners do their sales job and how much incremental money it was throwing at the channel. It also did not elaborate about what makes a premier partner different from an advanced one, or merely a ready one.

The company did say that the infrastructure specialization was aimed at partners selling Red Hat Enterprise Linux, the Red Hat Network Satellite patching system, plus its Global File System, Cluster Suite, and MRG real-time and grid Linux extensions. Partners with this specialization need to have two employees certified by Red Hat to do channel sales and one certified as a technician.

The middleware specialization is obviously focused on the JBoss stack - including sales of Enterprise Application Platform, BRMS, Operations Network, Developer Studio, SOA Platform, and Data Services Platform. Partners seeking this specialization need to have two certified middleware salespeople and one JBoss administrator on staff.

The virtualization specialization for partners is obviously focused on Red Hat's current Xen and KVM hypervisors and its impending Red Hat Enterprise Virtualization product, which is a standalone KVM-based hypervisor that went into beta in June and that is expected to come to market in its initial packaging later this year, with enhancements into 2010. Partners need to have two channel sales specialists and one Red Hat certified engineer on staff with expertise with virtualization to get this specialization.

Time to pull a Novell?

Red Hat's channel has grown significantly and is contributing more to sales, which is exactly what the company wants. A few years ago, Red Hat had only 300 channel partners in North America, according to a company spokesperson, and that number now exceeds 1,500 partners.

In its most recent quarter ended in May, the company's sales rose by 11.3 per cent to $174.4m, and 61 per cent of its bookings came through the channel. That is a five point shift in six months, which is huge. Five years ago, in the summer of 2004, the channel only accounted for 45 percent of sales at Red Hat, and interestingly, the company was projecting that the channel would account for 70 per cent of sales by the end of 2006. Red Hat has a ways to go before it hits this goal - probably closer to something like a year from now if current trends persist.

Of course, if Red Hat wanted to go crazy, it could pull a Novell and ink a deal with Microsoft to have Big Bill scarf up maybe $500m in Red Hat Enterprise Linux licenses and make one, big channel right into the relatively small part of the vast Windows installed base that wants Linux running side-by-side with Windows.

While such a strategy has enabled Novell to pad its financials over the past several years, it seems pretty clear that Red Hat, with its dominant market share in corporate Linux, is not desperate enough to make such a move. And, if the company does the hard work of building out a real partner channel, it probably won't be any time in the future, either. ®

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