In a previous post I explained how Red Hat is earning money. It is the same way, like other staffing companies like Manpower are doing so. Let us investigate the principle in detail. The beginning of the business process is the decision for outsourcing opensource development. For example, IBM needs an operating system for the new Z/OS server. They can program the code by it’s own, or they can outsource the job to somebody how is an expert for it. Red Hat can be called the central hub for opensource development. All the major kernel hackers (Torvalds, Kroah-Hartman and Cox) have a contract there.
The question is: why is IBM not developing opensource software inhouse, why they are using an external staffing firm? It is the same reason, like Manpower and Adecco are so successful in business, because it is more flexible. The reason is, that IBM and other tech companies are not interested in hiring opensource developers inhouse. Because OpenSource is a risky business. It can destroy former closedsource business model and it is more healthy to separate between them. What Red Hat does is programming software for somebody other. Red Hat itself doesn’t need a Linux kernel, because they have no Z/OS machine, and they also have no android phone which they want to sell to the customer. Instead Red Hat has other companies as clients who have a demand for programmers. IBM made the specification, of how the next kernel will look like, and the experts from Red Hat are fulfil the job.
Let us investigate how to compete with Red Hat. Today, Red Hat is the only company who is developing opensource software. Or to be more specific, Red Hat is the only staffing firm who is specialized on employees who are familiar with Linux kernel development. Copying the business model is possible. At first, we need a tech company who has a demand for opensource software. For example, Microsoft. They can decide to develop the code for the new Visual Studio IDE inhouse, or they can outsource the task to an external Manpower-like company, who is specialized on programmers. This newly founded staffing firm would be the direct competitor of Red Hat. They have a client (Microsoft) and they have employees. And they can start to programming code.
Let us investigate what the unique advantage of todays Red Hat company is. It is not the sourcecode, it is the employee they have under a contract. The sourcecode itself can’t be protected, but the employees who are developed them are save. That means, Torvalds is working exclusively for Red Hat, and most of the other programmers too. That means, even IBM wants he can’t hire Torvalds. The business of making opensource and earning money with it, is grouped strongly around certain employees who are a technical expert on a certain field, for example for the storage subsystem of the Linux Kernel or the jboss sourcecode. It is not possible to train an average programmer in a short timeperiod to become familiar with the code. And this is the advantage of Red Hat. They have already people under contract who have written a certain piece of code, and they can easy extend it with new features.
On http://www.briteadvice.co.uk/outsourcing/outsourcing-your-open-source-development/ the concept of outsourcing opensource development is explained briefly. The surprising finding is, that it has nothing to do with programming or Linux, instead the advantage has to do with hiring of people. Outsourcing means, to recruit people in a certain way, use a certain contract with them, and minimizing the overall costs. It seems, that Red Hat is an expert for this niche. They have a talent pool in their database, which makes it attractive for clients to work with them.
Here, https://www.informationweek.com/red-hat-ceo-bemoans-state-of-education-tech-talent-pool/d/d-id/1044688? is detailed description of what Red Hat is in reality. It is not a tech-company, it is a headhunter. Red Hat CEO Matthew Szulik describes how difficult it is to find skilled programmers in the U.S. I’m referencing to the source, to make clear that Red Hat is not competing on the software-level with other companies, but on the talent pool of people they have under contract. The game, what Red Hat is playing is not about Kernel drivers and server software, it is about human-capital.
Let us take a look back in history, how Microsoft went big. The first operating system was an outsourcing project of IBM. IBM only shipped the hardware, and the MS-DOS software came from Microsoft. Later other hardware manufactorer like Compaq sold the computers, and Microsoft added the software which made the hardware more useful.
The problem with Microsoft is, that it is only possible to outsource closedsource software there. That means, if nvidia needs a proprietary driver, Microsoft is the right company for them. But if a hardware manufacture needs an opensource operating system, Microsoft isn’t able to deliver. They have not the right employees for the job. And this is the niche why Red Hat was founded. They are doing all the work, which has to do with software, and which is opensource. Fulfil this tasks, needs a different culture, a certain kind of people and a different business model.
At the end, let us investigate what Red Hat can’t do: everything which is apart from operating system and standard-software. For example, Red Hat is not able to deliver a SAP like business software, they are also not able to create a robotics-control-system. They can only deliver the base-system, which consists of Linux, GUI, desktop applications, and server software.