Red Hat At $1 Billion

Congratulations to my former employer. Open source matters.

Based on the run rates of the current quarter, Red Hat will likely reach $1 billion in annual revenue in 2011. Only a handful of companies, probably less than 20 software firms, have ever hit this milestone. Red Hat will be the first open source-focused company to break the billion dollar barrier. Certainly Richard Stallman did not envision this when he created the paradigm of Free Software. Such an event may be more in tune with what Eric Raymond, Tim O’Reilly, and others had in mind when they reframed Free Software as Open Source.

It is easy to forget how important open source is now. Open source touches us every day more than we realize. SAP likes to point out that a huge percentage of the world’s commerce is tracked by their software. It’s a defensible claim because SAP knows its customers. Open source is harder to quantify. You can track downloads but that does not accurately reflect use. For web servers, it is possible to quantify use. The September Netcraft survey puts the open source Apache share of web servers at 57 percent. Estimates of operating system market share, including both servers and desktops, put Linux at 1 percent or so.

But the lack of a strong link to a reported commercial transaction makes estimates of market size from companies like IDC problematic. When IDC identifies a company like VMware as the market leader for virtualization, it means that companies spent the most on VMware products. But if you take into account the use of open source products like Xen and KVM in massive data centers, web server farms, and by web application providers like Google and Salesforce.com, the CPUs running open source virtualization likely dwarfs the commercial market. Open source has an unacknowledged footprint in many other markets as well.

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