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Red Hat Becomes First Billion Dollar Open Source Firm

Red Hat Linux
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Red Hat’s open source success is down to the cloud and large contracts

Red Hat has fulfilled its long-held ambition to be the first open source company to do a $1 billion in annual revenue.

The company, which provides servoce and support for Linux based systems to businesses,  has been aiming for this goal for several years, but announced in a conference call yesterday, that it had finally beaten that barrier with 965.6m in subscription sales and $167.5m in services sales over its financial year, which ended in February.

Open source consulting is up

Red Hat’s growth was particularly high, with subscriptions and services up 25 percent and 23 percent respectively, said CEO Jim Whitehurst in a celebratory conference call.

Red Hat’s model of converting users of free software into paying customers has played well in the recession, and increasing government support for open source has worked in its favour.

And these are not small contracts. The conference call revealed that Red Had has done more than thirty deals greater than $1 million in the last year, and even has three $5 million deals.

The large deals tend to include Red Hat’s JBoss middleware, and its enterprise virtualisation product RHEV.

Red Hat has done well from the cloud, given that its business model allows easy expansion. At the same time as its earnings announcement, the company announced service level agreements for OpenShift, its platform as a service (PaaS) product.

Red Hat is very much the exception on open source companies, and smaller brethren gathered to pat it on the back: “This is a huge milestone for the open source software industry, and signals the coming of age for the OSS business model,” said Tom Erickson, chief executive of Acquia.

“Reaching the billion dollar mark is a major achievement for any organisation, and today’s news demonstrates that open source innovation can survive and thrive despite challenging economic conditions. This announcement is also a tribute to the limitless talents of the developer community, proving that a collaborative approach can deliver, not only innovation, but also spectacular results.”

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