Red Hat CEO on China quest

Von Steven Schwankert

At Red Hat Inc."s headquarters in North Carolina, a quote from Mahatma Gandhi adorns a wall: "First they ignore you, then they laugh at you, then they fight you, then you win." That seems appropriate for a company which started as a guerrilla movement among technophiles but has now blossomed into a full-blown conflict.

Nowhere is that conflict fiercer than China. Red Hat"s announcement in mid-November that it was opening an office in Beijing was "three and a half years in the making," according to the Linux firm"s CEO, Chairman, and President Matthew Szulik, a man who sounds like he"s ready to rally the troops.

The soft-spoken native of Boston (and proud Red Sox fan) does not dance like a monkey on stage, nor does he strike one as a wartime consigliere. And as the quote he chose for the Red Hat headquarters indicates, he is clearly resolved to lead his side to victory.

"Our entry [to China] is not to sell products," Szulik said. "This is the beginning of a journey lasting 10 to 25 years."

Selling products as a way to create a profitable Linux business was not Szulik"s strategy of choice. Upon taking over the company from founder Bob Young in 1999, he pushed the company towards a subscription model.

Trying to sell a product based on something that was at its core free and publicly available was not the way for a company, especially a publicly listed one, to go.

Instead, Red Hat"s focus is on delivery. While the company can"t charge for open source products per se, it can tack on charges for updating those products, servicing them, then delivering the new software versions to clients as soon as they are available, with updates enacted as often as hourly.

"Our strategic competitive advantage is not based on bits sold in a box, but on continuous improvement," Szulik said.

The company"s responsibility therefore, is application availability. "Two or three hours of downtime is no longer acceptable," he said. "Neither, in some cases, is two or three minutes."

He also said the company has focused not on the desktop, but on the server, where he felt most people would be likely to employ Linux. "We don"t believe that "my feature vs. your feature" is a technically sustainable advantage," explained Szulik.

He referred to China as "the most significant opportunity in our lifetime"-this from a company that"s already operated in India for five years. Red Hat already has customers in China including China Mobile and China Telecom, added Szulik.

His comments are based on an IDC estimate that the current size of the enterprise Linux market is approximately US$15 million, but growing. Szulik described his company"s initial investment in China as "modest" and gave no dollar figure, but said that he wanted to have 60 to 75 people on the ground in the next 12 months.

He was surprised at the awareness of Linux in China. "I have not had to explain Linux or open source to anyone I"ve met this week," he said.

Avoiding talk of Linux"s main competitor, Szulik said that he viewed Microsoft allowing governments to view Windows source code as a threat, but said it was "like going to a dim sum buffet but not being allowed to choose any of the food."