Red Hat lifted by increased free use of Linux

The economic downturn is punishing the technology industry as much as many other sectors, but it is already proving a boon for companies distributing and servicing free open-source software.

Red Hat, the top commercial company devoted to the free operating system Linux, this week said revenue for the quarter ended February 28 had jumped 18 per cent to $166m.

Red Hat's shares surged 17.33 per cent to $17.60, their highest since September, by the close yesterday.

In its most recent quarter, Linux-related sales at Novell, Red Hat's best-known competitor, Novellrose 24 per cent.

"The potential market for open source is clearly opening up because of the economy," said Mark Driver, analyst at Gartner. "If I'm a typical IT manager right now, I have to either cut costs or lay off five or 10 employees, so I want to cut costs."

About half of the technology managers at companies that already use Linux said financial worries were prompting them to speed up their adoption of what is now the second most important platform for servers, after Microsoft's Windows, market researcher IDC reported recently. Open-source projects, which benefit from the constant tinkering of thousands of volunteers, are also gathering steam from some of the hottest technology trends coinciding with the recession.

Social networks and so-called cloud computing - in which big companies or their suppliers store documents and crunch numbers at remote data centres before delivering results - are based largely on open-source programs.

Dell, which sells servers and PCs loaded with a choice of Windows or Linux variants, said Windows was still getting picked 80 per cent of the time.

"But I see a lot more tyre-kicking", by corporate customers weighing open-source, said Steve Schuckenbrock, who heads the Dell division responsible for selling to large companies.

Larger deployments of open-source to firms that already run the technology in a small way might be the most that happens, due to the fact that recessions make IT managers worry more about risk. For the same reasons, a recession is not the right time to switch an entire workforce to a new technology.

Microsoft is counting on that, while accepting that every leading company will soon be running at least some open-source software.

"It's a heterogeneous world," said Microsoft's Sam Ramji. While Microsoft continues to warn about the legal and economic perils of relying on Linux and similar systems, Mr Ramji's role is to make sure that open-source programs already in use can work in conjunction with Microsoft software.

That way, just because a company is using the increasingly popular MySQL open-source database, it will not feel so compelled to put it on top of the Linux operating system. By some measures, that defence is working well - Mr Ramji said 56 per cent of MySQL instances were running on Windows.

Then again, the easier Mr Ramji makes it for IT buyers to economise by putting open-source in more places, the more they will do just that and undermine his business in the longer-term.

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